New and Small Businesses to Get GST Registration in 3 Days

December 26, 2024

The GST Council has recently approved a proposal to streamline the registration process for new and small businesses and aims to enable registration within three working days, reducing bureaucratic hurdles. It addresses issues such as excessive questioning by tax officials and fraudulent practices involving fake identities for Input Tax Credit (ITC) claims.

Objectives of the New System

The primary goal is to simplify the registration process for small businesses. The system intends to decrease the workload on tax officials, allowing them to concentrate on higher-risk cases. By facilitating quicker registration, the initiative aims to encourage compliance and enhance the ease of doing business.

Four-Tier Structure

The new system is organized into four tiers, each catering to different types of businesses.

First Tier – This tier is for new and small businesses that typically pass little or no ITC. Registration occurs within three days based on Aadhaar verification, with an ITC limit imposed.
Second Tier – This tier includes trusted, low-risk entities such as government bodies and compliant private companies. These businesses can also receive registration within three days without the need for biometric verification or physical checks, and they face no ITC limit.
Third Tier – Existing businesses wanting to pass higher ITC but not classified as trusted fall into this category. They may be required to pay a non-refundable fee, provide a fixed deposit, and obtain a No Objection Certificate (NOC) from a trusted business.
Fourth Tier – This tier is designed for businesses wishing to switch categories to access higher ITC amounts.

Next Steps for Implementation

Following the GST Council’s approval, the Law Committee will amend existing laws and draft guidelines for the new system. The rollout will likely occur in phases, starting with new and small businesses, to ensure a smooth transition. This structured approach aims to encourage a more efficient and transparent registration process.

GKToday Notes:
Aadhaar: Aadhaar is a unique identification system in India. It assigns a 12-digit number to residents. Aadhaar verification is crucial for various services, including tax registration.
ITC: Input Tax Credit allows businesses to reduce tax liability. It ensures that taxes paid on purchases can be claimed back. ITC is vital for maintaining cash flow in businesses.
GST Council: The GST Council is a constitutional body in India. It comprises the Union Finance Minister and State Finance Ministers. The council makes decisions regarding GST policies and rates.
No Objection Certificate (NOC): An NOC is a legal document. It signifies that one party has no objection to the details specified in the certificate. NOCs are often required in business transactions.

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