GST registration in India is a critical step for any foreign business aiming to operate in India. As one of the world’s fastest-growing economies, India has a well-established tax framework that requires businesses to register for Goods and Services Tax (GST) to ensure compliance with local tax laws. 

This guide will help you understand the key aspects of GST registration for non-resident businesses in India, including the process, necessary documents, and post-registration obligations.

Why Foreign Businesses Must Register for GST in India

GST registration for foreign companies in India is essential for ensuring smooth business operations. Here are some key reasons why foreign businesses must register for GST in India:

  1. Penalties and Fines: Failure to register for GST in India can lead to severe penalties, including fines and interest on unpaid tax, making it essential for businesses to comply with the GST regulations.
  2. Blocked Sales and Delayed Transactions: Without GST registration, foreign businesses may face restrictions on their ability to trade in India. Marketplaces and suppliers may refuse to work with businesses that don’t have valid GST registration, leading to blocked sales and delays in transactions.
  3. Customs Holds and Delays: Goods imported by foreign companies into India will be held at customs if the business is not registered for GST. This can cause significant delays and additional costs.
  4. Reputation and Credibility: Having a valid GST registration improves the credibility of foreign businesses in India. It assures customers and partners that the business is compliant with local laws, enhancing trust and reliability.

Commenda can help simplify your GST registration process and ensure compliance, allowing your business to avoid the penalties and disruptions associated with non-registration.

When Does a Foreign Business Need to Register?

Certain conditions trigger the need for GST registration for foreign companies in India, such as:

  1. Local Inventory/Warehouses: If goods are stored in India.
  2. Remote Services to Consumers: Offering digital services to Indian consumers.
  3. Import & Local Sale: If a foreign business imports goods for local sale in India.
  4. Marketplace Facilitation: Selling through online platforms in India.
  5. Trade Shows and Events: Participating in business events requiring on-the-spot sales.

Note: It is important to understand that GST registration for non-resident businesses in India is typically required even if none of the triggers above are met, as foreign companies must register to conduct business transactions in India legally.

Registration Thresholds and Nexus Tests

For foreign businesses, GST registration in India is generally required regardless of turnover. Unlike domestic businesses, foreign companies don’t have turnover thresholds like ₹20 lakhs (for goods) or ₹10 lakhs (for services). The Indian government mandates GST registration for foreign companies in India as soon as they engage in business activities within the country.

Nexus Tests for Non-Resident Businesses:

  1. Permanent Establishment (PE): Foreign companies with a permanent office or branch in India must register for GST.
  2. Physical Presence: If the company holds inventory or operates a warehouse in India, registration is required.
  3. Digital Services & Low-Value Goods: Foreign companies providing digital services or selling low-value goods to Indian consumers must register for GST, even without a physical presence.
  4. Marketplaces: Selling through Indian online marketplaces also triggers the need for GST registration.

GST Number Format Explained

A GST registration in India results in the issuance of a unique Goods and Services Tax Identification Number (GSTIN) for each registered entity, including foreign companies and non-resident taxable persons. This GSTIN is essential in all GST registration guides.

Format:

The GSTIN is a 15-character alphanumeric code.

  • The first 2 digits represent the state code.
  • The next 10 characters are the PAN (Permanent Account Number) of the business.
  • The 13th digit is the entity code (number of registrations under a single PAN in a state).
  • The 14th digit is by default “Z.”
  • The 15th digit is a checksum character for error detection.

Sample GSTINs:

  • 27AAECS1234F1Z5
  • 07AACCM9910C1Z2

Common mistakes and issues:

  • Typing errors in the PAN portion or state code.
  • Omitting digits or confusing similar-looking characters.
  • Using an incorrect entity code when a business has multiple registrations in the same state.

Foreign companies should ensure their GSTIN is accurately recorded on all invoices, returns, and correspondence to avoid compliance issues and delays in customs clearance or tax credit claims.

Is a Local Tax Agent or Fiscal Representative Required?

Yes, appointing a local tax agent or fiscal representative is mandatory for non-resident companies seeking GST registration in India. According to Indian tax regulations, foreign businesses must have an authorized signatory who is a resident of India. This signatory must have a valid PAN and act as the point of contact for the company’s GST registration process.

The authorized signatory is responsible for ensuring compliance with Indian GST laws, filing returns, and managing communications with tax authorities. This requirement ensures that foreign businesses have a local representative to facilitate the registration process and ongoing compliance.

Special Schemes and Simplifications

India offers some special schemes and simplified processes that can make GST registration for foreign companies in India easier, especially for businesses involved in specific sectors or types of trade. Below are some of the schemes you should be aware of before registering GST in India.

  1. Simplified E-Services Scheme: This scheme helps reduce the complexity of compliance for businesses offering online services.
  2. Low-Value Goods Scheme: For foreign companies involved in cross-border e-commerce, there are provisions for simplified registration and taxation on low-value goods, which reduces the burden of compliance for smaller shipments.
  3. Consignment or Warehouse Programs: Foreign companies that use consignment stock or warehouse models may qualify for special schemes that defer the payment of GST until the goods are sold in India, easing the upfront tax burden.

These simplifications make it easier for foreign companies to manage their GST registration in India and remain compliant without overwhelming administrative efforts.

How to Register for GST in India: Step-by-Step

The process for GST registration in India for foreign companies is clearly mentioned on the official GST website. To register as a Non-Resident Taxable Person, you need to follow these steps:

Step 1: Access the GST Portal

Go to the official GST Portal and navigate to Services > Registration > New Registration.

Step 2: Complete Part A of the Application

How to Register for GST in India
  • Select Non-Resident Taxable Person from the “I am a” dropdown.
  • Choose the state and district for your business operations.
  • Provide the legal name of your business, PAN/Passport/TIN, and details of the authorized signatory (name, PAN, email, and mobile number).
  • Click PROCEED.

Step 3: OTP Verification

  • You will receive OTPs on the registered email and mobile number.
  • Enter the OTPs to validate your information.

Step 4: Obtain Temporary Reference Number (TRN)

Once verified, a TRN will be generated and sent to your email and mobile. This number is valid for 15 days.

Step 5: Complete Part B of the Application

  • Login with the TRN and fill in the required details in Part B, such as business details, principal place of business, and authorized signatory information.
  • Enter the period for which the registration is required (maximum of 90 days) and the estimated turnover.

Step 6: Generate a Challan for Advance Tax

  • Based on your estimated tax liability, a challan will be generated for advance tax payment.
  • Once the payment is made, the ARN will be generated and communicated via email/SMS.

Step 7: Submit and Verify the Application

  • Submit the application using DSC, E-Sign, or EVC (Electronic Verification Code).
  • Upon successful submission, you will receive an ARN. The registration status will change to “Pending for Processing.”

Note: Once your application is processed and approved, you will receive your GSTIN and GST Registration Certificate, confirming that your registration process is complete.

Required Documents Checklist

When you register for GST online in India, ensure you have the following documents ready:

  • Certificate of Incorporation: A copy of your business’s certificate of incorporation or registration.
  • Authorized Signatory’s Identification: Passport or PAN card of the authorized signatory who will represent the company in India.
  • Proof of Business Activity: Documents that prove your company’s active business operations, such as contracts or invoices.
  • Proof of Business Address: If your company has a business address in India, provide a Property Tax Receipt, Municipal Khata Copy, Electricity Bill Copy, or Legal Ownership Document.
  • Bank Details: You may need to provide your bank account details after receiving your GSTIN.
  • Letter of Authorization: If someone else is applying on your behalf, a letter of authorization signed by the company’s authorized signatory is required.
  • Passport Copies: For the non-resident applicant’s representatives, a copy of their passport is required.

Post-Registration Obligations

Once GST registration in India is complete, foreign businesses must meet several ongoing compliance requirements. They are required to file GST returns monthly or quarterly, detailing sales, purchases, and taxes due. 

Timely filing is crucial to avoid penalties. Additionally, businesses must maintain records of all transactions for 6-8 years. In some cases, e-invoicing is mandatory, requiring businesses to upload invoices digitally to the GST portal. 

GST payments must be made on time, and foreign companies must consider currency conversion rates when paying in Indian Rupees (INR).

Claiming Input-Tax Credits & Refunds as a Non-Resident

Non-resident businesses registered for GST in India can claim Input Tax Credits (ITC) on taxes paid for business-related purchases, provided they meet the necessary criteria.

  • Eligibility: ITC can be claimed on goods and services acquired for taxable activities in India.
  • Documentation: To claim ITC, businesses must keep detailed invoices and records to substantiate the claim.
  • Refunds: If the ITC exceeds the GST liability, foreign businesses can apply for a refund. The refund process requires submitting relevant forms and supporting documents to the tax authorities.
  • Reverse Charge: In some cases, the Reverse Charge Mechanism (RCM) applies, where the buyer (instead of the seller) is liable to pay GST.  

Penalties for Late Registration or Non-Compliance

Non-compliance with non-resident tax registration in India, specifically regarding GST, can lead to significant penalties and disruptions. Key penalties include:

1. Late Registration Penalties: If a Non-Resident Taxable Person fails to register on time, they may face:

  • Interest on unpaid taxes (18% per annum).
  • Late fees for delayed returns.

2. Incorrect Invoicing or Filing: Penalties for incorrect GST returns or invoices include fines for false claims of input tax credits or inaccurate tax reporting.

3. Customs Delays: Failure to comply with GST registration can lead to customs holds or delays in clearing imports, affecting business operations.

4. Risk of Suspension: Ongoing non-compliance may result in business suspension, particularly in online marketplaces, which may block sellers without proper GST registration.

5. Director Liability: In serious cases, directors or officers of foreign companies could face fines or imprisonment for non-compliance.

Conclusion

GST registration for foreign companies in India is mandatory for legal compliance and smooth business operations. If you are unsure about the registration process or need help with compliance, Commenda can assist you. Our experts provide guidance to ensure you meet all necessary requirements efficiently.

Book a free demo with Commenda today to learn how we can help your business get started in India without the hassle of navigating complex tax systems.

FAQs: Foreign Business GST Registration in India

Q. Do non-resident remote sellers need to register for GST in India if they only supply digital services?

Yes, foreign companies providing digital services to Indian consumers are required to register for GST in India.

Q. What is the sales threshold that triggers mandatory foreign business GST registration in India?

Foreign companies must register for GST in India regardless of their turnover, as there is no threshold exemption for non-resident businesses.

Q. How long does the GST number application process take for a company with no local branch?

The GST registration process can take anywhere from a few days to a couple of weeks.

Q. Can I reclaim input tax in India without a resident tax representative?

No, foreign companies must have a local tax agent or fiscal representative to handle GST compliance and claim input tax credits.

Q. What documents are required to open a non-resident GST account online?

Documents typically required include:

  • Certificate of incorporation
  • Passport or PAN of the business
  • Details of the authorized signatory
  • Proof of business address in India (if applicable)

Q. What penalties apply for late or missed GST filings by overseas entities?

Penalties for late filings include:

  • Late fees
  • Interest on unpaid taxes
  • Blocked marketplace sales or customs holds on goods

Q. Is there a simplified or low-value import scheme for cross-border e-commerce sellers?

Yes, India offers simplified GST schemes for low-value imports, making it easier for foreign e-commerce sellers to comply with tax laws.

Q. How do currency conversions affect GST payments from foreign bank accounts?

When making GST payments from a foreign account, businesses must consider the currency conversion rate at the time of payment to ensure the correct amount is paid in Indian Rupees (INR).

Q. Can multiple marketplaces share one GST registration, or must each seller register separately?

Each seller must have a unique GST registration. However, marketplace facilitators like Amazon or Flipkart typically require sellers to provide their GST number to list products.

Q. How do I cancel or deregister my GST number if my turnover drops below the threshold?

If your turnover falls below the mandatory registration threshold, you can apply for deregistration by filing a final GST return and receiving a clearance certificate.