Government considers centralised registration under GST

Ranjeet Mahtani & Stella Joseph 

Recent news-reports indicate that even under the GST regime the Government is considering the option for centralised registration for certain sectors including e-commerce, telecom and insurance. The peculiarity of these sectors is that their customers are situated throughout the country and potentially the place of supply for such sectors would be in each State / Union Territory. This will entail registration and other compliances in all States and Union Territories where the place of supply is. To explain further, filing of returns (and statements), which at present are at least 3 per month per State and one annual return, would involve preparing and making 1332 filings per year (for a company-taxpayer operating in all Indian States). The compliance and procedural requirements will need additional skilled-hands and other resources. 

It will only be beneficial to enable centralised registration for these sectors and some others such as banking and financial services. That apart the lack of a centralised registration facility could lead to a situation of accumulation of credit in one State and thus increased cashflow in the other States. For such situations centralised registration will support the ease of doing business, although there is the ability to obtain registration as an Input Service Distributor (ISD) and then transfer the credits to the other States. An ISD registration entails an additional registration (as an ISD), and consequential filings, but, the ISD facilitation is limited to only input services and not inputs (a problem of credit accumulation in relation to inputs cannot be resolved even by way of an ISD facilitation). 

The Draft GST legislation (circulated in November 2016) has some enabling provisions wherein a separate dispensation can be provided with regards to registration – by the Central Government, and this is not oriented to centralised registration – yet the decision to allow for Centralised registration cannot be taken by the Central Government unilaterally. It is crucial that the States accede to such a demand, even though convincing the States will be a herculean task. 

A system of centralized registration (and return filing) may be put in place such that State-wise bifurcation of details of supplies will be recorded and available to enable State-wise allocation of tax however, States may resist the concept as they will not have direct administrative control over such assessees, and be dependent on the Centre for the revenue allocation. Even if the system of central registration is enabled, it will have to be seen as to how assessment, audits, and control will be divided between Centre and States for such taxpayers. The issue of dual control has been lingering, and this concept (of centralised registration) will add to that basket.

One will need to wait and watch whether the imminent GST enables centralised registration ultimately, however, there are some indications of a variation to it – that of allowing it for large tax payers’ units only. Old wine, new bottle?