Is GST registration required to get Udyog Aadhar or Udyam Registration? Can I apply for GST registration using Udyam Registration?

When it comes to starting and operating a Micro, Small or Medium Enterprise the government of India through its Ministry of MSME has laid down certain processes to facilitate ease of doing business in India. A major registration process being implemented by all MSMEs in India today is the Udyam Registration or Udyog Aadhar (as it was called previously).

We all know that the Ministry of MSME through its notification no. S.O.2119 (E) dated 26^th June 2020 published in the Official Gazette of India introduced the new and improved system of Udyam Registration and has since replaced it with the existing system of Udyog Aadhar Registration. While doing so it laid down some new pre-requisites which are now required by enterprises to obtain their Udyam Registration.

These pre-requisites or the required documents to apply for Udyam Registration are:

If any enterprise has the above pre-requisites they can apply for their Udyam Registration and avail the various benefits laid down under the MSME Scheme by the Ministry of MSME.

This brings us to our first question:

Is GST registration required to get Udyog Aadhar or Udyam Registration?

Though GST Registration was not mandatory for Udyog Aadhar, under the notification no. S.O.2119 (E) dated 26th June 2020 published in the official Gazette of India paragraph 6 elaborates the Registration Process of Udyam Registration.

Under this paragraph the sub-paragraph (5) states the following:

"In case of a Company or a Limited Liability Partnership or a Cooperative Society or a Trust, the organisation or its authorised signatory shall provide its GSTIN and PAN along with its Aadhaar number."

The paragraph (5) which elaborates on the Calculation of turnover also states the following under its sub-paragraph (3)

"The turnover related figures of such enterprise which do not have PAN will be considered on self-declaration basis for a period up to 31st March, 2021 and thereafter, PAN and GSTIN shall be mandatory."

What we can take away from these two sub-paragraphs is that with effect from 1^st April 2021 PAN & GSTIN will be mandatory to obtain Udyam Registration.

PAN registration is something which is obtained by every individual or organization upon its successful incorporation and is not a problem for anyone to obtain and provide while applying for Udyam Registration.

But what about enterprises which are exempt from obtaining GST Registration under the provisions of the Central Goods and Services Tax Act, 2017 (12 of 2017)? Will they also have to obtain their GST Registration just in order to apply for their Udyam Registration or Udyog Aadhaar?

Before we answer this question let us take a look at what the provisions of the Central Goods and Services Tax Act, 2017 (12 of 2017) under Chapter VI of this act which elaborates on the topic of Registration say.

Paragraph 22 sub-section (1) of the act under Chapter VI states the following:

"Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:

Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees"

As per the recent notification of the GST council the above information has the following addition:

"The threshold limit of aggregate turnover for exemption from registration and payment of GST for suppliers of goods is ₹40 Lakh (₹20 Lakh in the States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand) w.e.f. 01.04.2019."

Further, Paragraph 23 sub-section (1) of the act also states that:

"The following persons shall not be liable to registration, namely:—
(a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;
(b) an agriculturist, to the extent of supply of produce out of cultivation of land."

Getting back to our question, Will MSMEs who are provided exemption to obtain GST Registration under the above provisions laid under the Goods and Services Act 2017 have to apply for a GST Registration to avail their Udyam Registration?

The answer is NO.

On 5^th March 2021 the Ministry of MSME through its notification S.O. 1055 (E) published in the official Gazette of India has clearly stated the following which is to be added in the initial notification S.O. 2119 (E):

"The exemption from the requirement of having GSTIN shall be as per the provisions of the Central Goods and Services Tax Act, 2017 (12 of 2017)."

This notification comes as a big relief to new start-ups and new businesses who do not wish to avail GST Registration at the beginning yet wish to be covered under the benefits of Udyam Registration.

Let us now answer our second question:

Can I apply for GST registration using Udyam Registration?

Technically Udyam Registration or Udyog Aadhar are not the pre-requisites or the required documents while applying for GST Registration. Having said that your Udyam Registration document can definitely be used as a document to validate your Micro, Small or Medium Enterprise. Ofcourse this can only be done if your enterprise was not liable to obtain its GST registration at the time of applying for Udyam Registration. Any kind of mis-representation of attempt to suppress the self-declared facts will be liable to such penalty as specified under section 27 of the MSME Act.

So think wisely and make sure you have your GST Registration before applying for Udyam Registration if you are liable to be registered under GSTIN. If you are a new enterprise not having crossed the turnover thresholds as specified in the GST act then you are safe to first obtain your Udyam Registration hassle-free and then apply for your GST Registration whenever that is required.