The introduction of GST led to a significant change in the way business is conducted. The first step that businesses had to take was to collect the GSTIN of their suppliers/recipients to ensure seamless flow of tax credits. Suppliers had to make sure that business-to-business (B2B) transactions were recorded accurately, and recipients had to ensure that they received the necessary input tax credit.
What is a declaration of GST Non-enrollment?
A declaration of GST non-enrollment is usually provided by a supplier whose supplies are not chargeable to GST under the GST law for any reason. It is generally prevalent in the case of freelancers, small service providers, labour contracts, contracts with small business, etc. where their annual aggregate turnover does not exceed the prescribed threshold limit for registration.
Applicability of the Declaration of GST Non-enrollment
The declaration of GST non-enrollment is usually to be given by suppliers who are not taxable persons due to several reasons, including:
- Aggregate turnover is below the prescribed threshold limit
- They are engaged in making any supplies that are fully liable to reverse charge
- They are involved in making only supplies that are exempt from GST
Read our article to get further information about a taxable person.
There are mainly three reasons for the recipient to obtain a declaration of GST non-enrollment:
- To know whether input tax credit should be claimed or not;
- To know if TDS/TCS provisions under GST are applicable. For example, certain e-commerce operators are required to deduct tax at source before remitting the amount due to the e-commerce vendors. However, if the e-commerce vendors are not registered, then the e-commerce operator will not have to deduct any tax.
- To protect himself against any penalties/losses that could be incurred due to defaults in GST payments by the supplier.
Format of Declaration of GST Non-enrollment
While there is no standard format provided under the GST law for this declaration, an illustrative format has been provided below. Note that this format may vary across various sectors, whether government or private.
In case a business entity obtains registration at a future date, they will need to inform the recipient and receive the GSTIN of the recipient for declaration in the invoices and their GST returns. Further, the agreement between the supplier and the recipient should contain an indemnification clause so that the recipient does not suffer a loss due to the non-compliance, failure or oversight of the supplier.
The following is to be printed on the letterhead of the business entity:
(Letterhead of the business entity) DECLARATION OF GST NON-ENROLMENT Dear Sir/Madam, Sub: Declaration of non-requirement of registration under the Central/State/UT/Integrated Goods and Services Tax Act, 2017 I/We……………………(Name of the service provider/business entity), do hereby declare that I/we am/are not registered under the Goods and Services Tax Act, 2017 as (select and fill below for the relevant reason) -I/We deal in/supply the category of goods or services …………………………………………(Describe the nature of the services/goods) which are exempted under the Goods and Service Tax Act, 2017. -I/We have the annual aggregate turnover below the taxable limit as specified under the Goods and Services Tax Act, 2017. -I/We are yet to register ourselves under the Goods and Services Tax Act, 2017. I/We hereby also confirm that if anytime during any financial year I/we decide or require or become liable to register under the GST, I/we undertake to provide all the requisite documents and information. I/We request you to consider this communication as a declaration for not requiring to be registered under the Goods and Service Tax Act, 2017. I/We hereby also confirm that ………………………(Name of the service recipient) shall not be liable for any loss accrued to me/us, due to any registration default with the GST. Signature of Authorised Signatory: Name of the Authorised Signatory: Name of Business: Date: Stamp/Seal of the business entity: