Section 8 companies are non-profit organizations registered under the Companies Act, 2013, designed to promote charitable objectives such as education, arts, science, religion, social welfare, or environmental protection. This guide provides a thorough walkthrough of the Section 8 company registration process, along with insights into related aspects like how to cancel GST registration and the GST cancellation process if required.
What is a Section 8 Company?
A Section 8 company is a legally recognized non-profit entity that:
1.Operates for charitable purposes without aiming to make a profit.
2.Utilizes any generated income to promote its objectives rather than distributing it among members.
These companies are often chosen by individuals or groups aiming to contribute to societal welfare while enjoying specific tax exemptions.
Benefits of Section 8 Company Registration
1.Tax Exemptions: Significant relief under Income Tax Act provisions.
2.Legal Recognition: Enhances credibility for grants, sponsorships, and partnerships.
3.No Minimum Capital Requirement: Flexibility to start with a modest budget.
4.Exemptions under GST: Depending on the nature of activities, some services may be exempt from GST, simplifying the GST cancellation process if applicable.
Eligibility Criteria for Section 8 Company Registration
1.At least two directors and two shareholders are required.
2.Objectives must align with charitable purposes such as education, health, or environment.
3.Profits should be used exclusively for advancing stated objectives.
Step-by-Step Guide to Section 8 Company Registration
Step 1: Apply for Digital Signature Certificate (DSC)
A DSC is essential for signing electronic documents during the registration process. Obtain DSCs for all directors.
Step 2: Obtain Director Identification Number (DIN)
File for DIN via the Ministry of Corporate Affairs (MCA) portal using Form DIR-3. This is mandatory for all directors.
Step 3: Name Approval Application
Propose a unique company name that reflects your objectives. Submit the name approval application via the RUN (Reserve Unique Name) service on the MCA portal.
Step 4: Draft Memorandum and Articles of Association (MoA and AoA)
Prepare the MOA and AOA to outline the company’s objectives, operational guidelines, and internal rules. Clearly state that profits will not be distributed among members.
Step 5: File Incorporation Forms with MCA
Complete Form Spice+ (Simplified Proforma for Incorporating a Company Electronically) on the MCA portal. Attach necessary documents, including:
1.MOA and AOA.
2.Directors' and shareholders' identity/address proofs.
3.Declaration in Form INC-14 (by a Chartered Accountant or Company Secretary).
4.Declaration in Form INC-15 (by directors).
Step 6: Obtain License under Section 8
After submitting the application, the Registrar of Companies (ROC) reviews the documents. Upon approval, a license under Section 8 is granted.
Step 7: Certificate of Incorporation
Once the license is granted, the ROC issues a Certificate of Incorporation, signifying the legal establishment of the Section 8 company.
GST Registration and Section 8 Companies
Many Sections 8 companies are eligible for exemptions under GST. However, if the company engages in taxable activities, GST registration online becomes necessary.
Steps for GST Registration Online
1.Visit the GST portal (www.gst.gov.in).
2.Log in or sign up as a new taxpayer.
3.Fill out Form GST REG-01 with details about the company and authorized signatories.
4.Upload required documents, including PAN, address proof, and bank account details.
5.Verify the application with a Digital Signature Certificate (DSC).
How to Cancel GST Registration for Section 8 Companies
If a Section 8 company is no longer engaged in taxable activities or qualifies for GST exemption, it can apply for GST registration cancellation.
GST Cancellation Process
1.Log in to the GST Portal: Use your GSTIN credentials.
2.Direct to Cancellation Section: Under the "Services" tab, select "Registration" > "Application for Cancellation."
3.Reason for Cancellation: Specify the reason, such as transitioning to exempt status or cessation of taxable activities.
4.Upload Documents: Submit supporting documents, like exemption certificates.
5.File Final Returns: Ensure all liabilities are cleared via GSTR-10 before cancellation.
Documents Required for Section 8 Company Registration
To register a Section 8 company, keep the following documents handy:
1.PAN cards of all directors and shareholders.
2.Aadhaar cards or address proofs of all directors.
3.copyright-sized photographs.
4.Utility bills (not older than two months) for address proof.
5.Property ownership documents or rental agreements for registered office.
Key Considerations for Section 8 Companies and GST
1.Compliance: Even with GST exemption, Section 8 companies must comply with regular audits and tax filings.
2.GST Returns: If registered under GST, timely filing of returns is mandatory to avoid penalties.
3.Exemptions: Verify exemption eligibility under GST laws for specific activities, such as education or healthcare.
Common Challenges in Section 8 Company Registration
1.Preparing error-free MOA and AOA to avoid rejection.
2.Meeting documentation and compliance requirements promptly.
3.Addressing GST cancellation processes for companies seeking exemptions.
Conclusion
Registering a Section 8 company is a meticulous yet rewarding process for individuals aiming to create a meaningful social impact. The process ensures legal recognition and access to tax benefits, making it an ideal structure for non-profits. Additionally, knowing the GST registration online process and the GST cancellation process can help Section 8 companies stay compliant and avoid unnecessary liabilities.
By following the steps outlined in this guide, you can simplify the process and focus on achieving your organization’s charitable objectives. For any legal or procedural assistance, consult the MCA portal or a professional advisor.