The Goods and Services Tax Law has defined a ‘non-resident taxable person’ as any person who occasionally undertakes transactions involving the supply of goods or services, or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India.
In simple words, any and all the businesses which are supplying goods or services or data retrieval services from databases located outside India will fall under this definition and will come under the purview of the Goods and Services Tax law.
Section 24 of the GST law further specifies the requirement for registration for a non-resident taxable person. It mentions certain businesses and entities which are mandatorily required to register under Goods and Services Tax and are not governed by the minimum threshold limit of Rs. 40 lakh/ 10 lakh. Thus, irrespective of whether the business is involved in a one-time transaction or frequent taxable transactions, every non-resident individual or company will have to obtain a registration under the Goods and Services Tax
Registration Procedure for a Non-Resident Taxable Person
Every person or business that falls under the definition covered above needs to apply for registration at least five days prior to the commencement of business. Further clarification has been provided in case of a high-sea sale; the law says that every person who makes a supply from the territorial waters of India shall obtain registration in the coastal state or Union territory where the nearest point of the appropriate baseline is located. High Sea Sale (HSS) is a sale carried out by the carrier document consignee to another buyer while the goods are still being transported, or after their dispatch from the port/airport of origin and before their arrival at the port/airport of destination. Thus if any high-sea sale is carried out near the shore of Mumbai, the GST registration has to be obtained in the state of Maharashtra. A non-resident taxable person needs to electronically submit a duly signed application, along with a self-attested copy of his valid passport, for registration, using the form GST REG-09, at least five days prior to the commencement of business on the Common Portal. Application must be duly signed or verified through EVC, a new mode of electronic verification based on aadhar. The non-resident (if it is a company) must submit its tax identification number of its original country (whatever is the equivalent of our PAN in that country). A person applying for registration as a non-resident taxable person will be given a temporary reference number electronically by the Common Portal for making an advance deposit of tax in his electronic cash ledger and an acknowledgment will be issued thereafter.
Advance Payment of Tax by Non-Resident Taxable Person
A non-resident taxable person is required to make an advance deposit of tax in an amount equivalent to the estimated tax liability of such person for the period for which registration is sought.
In other words, registration rules circulated by the GST council have specified that every person registered as a non-resident taxable person is required to deposit tax in advance on presumption basis. This advance tax will get credited into the Electronic Cash Ledger and will eventually get adjusted against the actual tax liability at the time of return filing.
These rules further specify that in case a non-resident taxable person intends to extend the period of registration indicated in their application of registration, an application using the form GST REG-11 should be furnished electronically through the Common Portal before the end of the validity of registration granted to him.
Let’s understand these rules with the help of an example. Say, the company Kappa Ltd. based out of USA is manufacturing special class turbojet engines which are supplied to India for assembling. This is a one-time transaction for Kappa Ltd. and thus they have appointed an Agent Mr. Vijay in India to carry out all compliance related formalities. Mr. Vijay, in turn, is required to obtain registration for Kappa Ltd. by furnishing his own PAN number and pay advance taxes related to this transaction. Once the transaction is carried out successfully and the supply is made, Kappa Ltd. will need to file their GST returns and meet all GST liability from the advance tax paid at the time of registration. Any tax paid in excess will be refunded through the electronic mode.