What if someone who is required to register for GST doesn't register within 30 days of "liability to register" date, but registers on a later date? The reason of registration requirement is inter-stat

What if someone who is required to register for GST doesn't register within 30 days of "liability to register" date, but registers on a later date? The reason of registration requirement is inter-stat

Businesses must be legally compliant with the requirement to register for GST in India by law; therefore, when registering for an interstate supply of services, businesses should understand they are required by law, and that registering with an interstate supply of services will lead to greater success because, from an operational, financial and compliance perspective, they are legally required to do so. For example, many freelancers, consultancies, startups and businesses do not understand the timeline for registering with the GST, or they do not understand the implications of failing to register within the [30-day period]. Therefore, there is a serious compliance question regarding businesses that offer interstate services. For this reason, the present document provides a detail-oriented guide for answering these compliance questions from a practical, professional and compliance-focused perspective. It explains if someone who is required to register for GST doesn't register within 30 days of "liability to register" date, but registers on a later date? The reason of registration requirement is inter-state supply of services and also explain GST registration process, consequences of delayed registration, tax liability implications, penalties, impact on invoicing and input tax credit, and how businesses can mitigate risks with a reliable GST registration Service in India.

Understanding GST Liability for Interstate Supply of Services

As per the Goods and Services Tax Act of India 2017, certain persons must register as Goods and Services Tax registered persons; they include those Companies or Individuals who provide services between two different states (Interstate). It is important to note that even if the total sales are less than 20 Lakh (if in a special state, it'll be 10 Lakh) they still require an Indian GST registration as of the first Invoice they receive.

What is an Interstate Service Supply?

An Interstate Supply of Services takes place when:

1. When the Provider is located in one state or Union Territory.

2. When the Place of Supply is in another State or Union Territory.

Examples of such cases are as follows:

• An Individual Digital Marketer located in New Delhi and providing services for a client located in Maharashtra.

• A Software Consultant providing services to a Company registered in Gujarat while working from Bengaluru.

• An Online Service Company or Individual providing Services to International or Multi-State Companies.

Thus, the need for GST Registration starts on the very first Invoice raised, even if on a yearly basis they do not reach ₹20,00,000 or ₹10,00,000 for special category states.

What Is the “Liability to Register” Date Under GST?

A person has a liability to register for Goods and Services Tax (GST) on the date they first become liable to register for GST. In relation to interstate supplies of services, this is usually:

• The date of first interstate supply; or
• The date the supplier enters into an agreement or raises an invoice in relation to the interstate supply.

There is a maximum of 30 days from the date of liability to complete the registration process under GST. If a person fails to complete the registration process within this time limit, they will be subject to legal and financial consequences.

Legal Requirement to Register Within 30 Days

Section 25 of the CGST Act clearly states that every person liable to be registered shall apply for registration within 30 days from the date on which they become liable.

If a person:

• Is required to register due to interstate supply of services, and
• Does not apply within 30 days,

then the registration, even if granted later, will not protect them from past liabilities.

This is a crucial point often misunderstood by businesses.

What If You Don’t Register for GST Within 30 Days?

If a person who is required to register fails to do so within 30 days of their registered liability, the Goods and Services Tax ('GST') will consider the person to be in breach of the law, regardless of whether the breach was intentional or unintentional.

The following consequences will be experienced by the person.

1.The GST Registration will be Effective from the Date of Liability

If a person applies for GST registration late, the GST Authority may approve the registration retrospectively, i.e.

• From the date that the person became liable to register, rather than from the application date

This means that:

• The person will be legally registered for the GST from the date of their registered liability

• The GST must be charged on invoices raised during the unregistered period

• The GST must be paid even though the person did not collect the tax from the client.

2. GST Payable on Past Invoices (Out of Pocket)

The most significant impact of delayed registration is the tax liability for a period of time before the business registered for GST.

What This Means Practically:

• Business issued a tax invoice that did not include GST

• Business collected full amount from its clients

• Business is now liable to pay GST with its own funds

Example

If a business issued an invoice for ₹5,00,000 while not yet registered:

• The business would have to pay ₹90,000 (18%) for GST out-of-pocket

• Business cannot recover the ₹90,000 from clients

This will have a major negative effect on the cash flow and profitability of the business.

3. 3. Penalty for Failure to Register Under GST

The CGST Act (Section 122) imposes penalties for failure to register for Goods and Services Tax (GST), and if you haven't registered, you can face a penalty.

Penalty Amount:

• ₹10,000 or

• 10% of the total tax owed, whichever amount is the greatest

If tax evasion has been identified:

• Penalties could increase to as much as 100% of the total tax owed

Not registering after the due date isn't simply a late registration—it's a crime.

4. Interest on Delayed Tax Payment

Regulation 50 also concerns interest charges on outstanding taxes (which the registered dealer owes).

Interest Rate:

• 18% per year

• Interest is due from the time the tax was due up until the time the payment is made.

Interest charges also apply to:

• Instances where no GST has been collected

• Instances where the delay was because of ignorance of the law.

5. Input Tax Credit (ITC)

GST will not allow you to recover ITC during the period when you were not registered. One of the major reasons for losing out on recovering that amount is:

• GST only allows you to recover ITC after you are registered.

• Any purchases made prior to obtaining registration:

• All GST already paid will be considered an expense and you will not be eligible to recover any amount.

Even though the vendors charged you GST, you cannot claim ITC for those purchases.

6. Mandatory Filing of Backdated GST Returns

Upon obtaining your late registration, the department may will require you to

• Submit Your GST Return Due Date.

• Pay Your Due Taxes, Due Interest and Penalty; and

• Compliance with any further TDS filings and report back to the department as appropriate

Missing returns can further lead to:

• Late Fees

• Notices

• Suspension of GSTIN

7. The Risk of Notices for GST and Types of Scrutiny

The delayed registration of GST registrations can trigger a scrutiny by the department.

Typical triggers include:

• Mismatching income tax data.

• Bank transaction analysis.

• GST payments reported by clients.

• Tax Deducted at Source (TDS) under Section 194J.

The resulting action from a notice may be:

• Show cause notices.

• Audit proceedings.

• Assessment orders.

Using a professional GST registration service in India can help businesses prevent these situations proactively.

Departmental Action and Notices

If you've registered late, you may be at risk for receiving

• a GST notice,

• scrutiny of past transactions,

• a demand order, and

• recovery proceedings.

The GST department has access to:

• bank transaction data,

• income tax filings,

• TDS information, and

• third-party reports.

Interstate service providers may be flagged because of mismatches in reporting.

How to Regularize Past Non-Compliance

Steps to take if you are late in applying for a GST registration include:

1) Make sure to submit your GST Application as soon as possible;

2) Ensure that you declare your exact liabilities;

3) Pay all outstanding GST, including any related interest;

4) Make sure to respond to any notices sent by the department in a timely manner;

5) Keep all documentation (including any correspondence) relating to your GST application clear and accessible.

It is highly recommended that in these situations that you obtain professional support through a reputable GST Registration Service.

Step-by-Step GST Registration Process (Delayed Cases)

Let's break down the process of GST registration when completing the application happens after the deadlines have passed.

1 Identify your date of liability;

2 Collect documents such as PAN, Aadhaar, Address proof, and Bank details;

3 Complete filing for your online GST application;

4 The GST department will verify the details you provided;

5 You will receive a GSTIN that might have been effective at an earlier date;

6 Calculate the GST due for the period before you filed your GST application;

7 You will owe the GST, plus penalties and/or late charges on the tax amount;

8 You will need to file all prior "missing" returns for the period from when you started your business until you are granted your GST;

Be precise in your steps to prevent complications.

Can You Fix the Situation After Late Registration?

Yes— corrective compliance must be done with care, and also the following are the steps you should take right away to do that:

1. Get registered for GST,

2. Determine when your GST liability began,

3. Calculate the amount of GST payable for the period prior to your registration,

4. Pay the GST owned plus applicable interest,

5. Keep a complete record of all transactions that relate to your business,

6. If you receive a GST notice, be sure to respond promptly.

In such situations, we recommend that you use a professional GST Registration Service to assist you with the process in India.

Common Mistakes Leading to Delayed Registration

• Assuming the basis of turnover exempted
• Misunderstanding the rules of interstate supply
• Late documentation
• Faulty professional advice
• Ignoring early compliance with the legislation

It is critical to avoid these mistakes to maintain a long-term viable business.

Impact on Business Credibility and Compliance Rating

Delayed GST registration impacts:

• Business reputation from a client's perspective

• Vendor confidence in providing services

• GST compliance rating

• Government funding eligibility

• Ability to do business with corporates that are GST compliant

Many businesses are not willing to do business with vendors that are not compliant with GST, particularly when dealing with interstate transactions.

Can GST Registration Be Backdated?

Only in very few situations, may the GST Authorities:

• Register you back to when you incurred a GST liability,

• Especially if applied within a reasonable timeframe

However:

• Only because you wish to register back dated does NOT mean that you will be approved

• You must supply adequate documentation and/or support for backdating your registration

Having a professional GST Registration Service in India is invaluable at this stage.

Compliance Challenges After Late Registration

Businesses that register late will often receive the following types of notices and correspondence:

• Requests for Prior Period Reporting;
• Mandatory NIL or Standard Reporting;
• Reconciliation Problems;
• Challenges Related to ITC Claims;
• Risks Associated with Client Perception as non-compliant.

Conclusion

Delaying GST registration when you are legally required to register, particularly as a result of interstate supply of services, can be substantial financially and with respect to compliance. The consequences of being forced to pay tax from your own pocket and the potential loss of input tax credit, combined with the risk of penalties, as well as departmental audits, is often greater than the time and expense associated with complying with registration on time. Knowing your liability date, completing the correct GST registration process, and utilizing professional assistance through a reputable GST registration agency in India will help you avoid unnecessary risk to your business. Proactive compliance provides legal safeguards and creates long-lasting confidence and trust with your clients, authorities, and other stakeholders. Hence, GST registration is strategic in nature and should be viewed as more than just a statutory requirement.

FAQs

1. Is GST registration mandatory for interstate supply of services even below ₹20 lakh?
Yes. Interstate service providers must register regardless of turnover.

2. What happens if I register late under GST?
You remain liable to pay GST from the original liability date along with interest and penalties.

3. Can GST registration be backdated?
Generally, no. Registration is effective from the date of grant if applied late.

4. Will I lose input tax credit due to late registration?
Yes, ITC on expenses before registration is not allowed.

5. Is penalty mandatory for late GST registration?
Penalty may be imposed depending on facts, but interest is mandatory.