GST Voluntary Registration

What is Voluntary Registration Under GST?

Every small Business or dealer, even if turnover is below Rs.20lacs for supply of service or Rs.40lacs for supply of goods, or Rs.10lacs in specified category States, can self-register under GST, to get listed within GST framework.

Are you a supplier of Goods below Rs.40Lacs or services below Rs.20Lacs, from Other than Specified Category States?

Are you a supplier of Goods or Services below Rs.20Lacs or Rs.10Lacs, from Specified Category States?

Then, you can Register Voluntarily under GST,

And Avail the benefit of Unified GST, Input Tax Credit, Boost Exports, Simplified Tax Structure, Automated, Ease of Doing Business, Legal status, Wider Base, Good Rating, and more business network.

Let us understand the meaning of Voluntary registration, voluntary registration comes under GST Section 25,

Voluntary registration means applying for self-registration, even if the turnover doesn’t cross the threshold limit nor are eligible for registration under GST law. You might as a taxable person, register suo moto.

Once you are registered under GST, all the GST provisions shall apply, and you will have to comply with all the provisions, as would be applicable to you, under normal GST registration, without any benefit of threshold limit.

GST is a PAN based number, so it is mandatory to have PAN before applying for GST.  GST registration is approved by the proper officer, after applying on GST portal.

GST registration is free of cost, as there is no statutory fee charged by the government for the same. Once you will apply for GST on the GST portal and after all validations and verifications, you will be issued a GST certificate within seven working days.

Income limit for GST 2022,

The turnover limit for GST finally decides as to who is eligible for GST registration and also the person who is supposed to pay GST, whether as a Supplier or Service Provider or as a Recipient in case of Reverse Charge Mechanism, of the Goods or Service or both except in the case of Compulsory registration supply such as Inter State Sales of Goods, Online Ecommerce Business, Casual Taxable Person, Reverse Charge Mechanism, income crosses threshold limit, NRI.

Aggregate turnover (Before being registered under GST),

To compute GST limit,

Turnover means aggregate value of

All taxable supplies+ exempt supplies+ Zero Rated Supplies + export of goods or services or both+ interstate supplies+ Goods sent for job work computed on all India Basis having the same PAN.

But Excludes: value of inward supplies on which tax is payable under RCM + Taxes including cess paid under GST

Example, if composition dealer takes lawyer services, then can’t claim ITC credit.

Difference between compulsory registration and voluntary registration under GST,

Every business has to get themselves registered under GST, after crossing threshold limit or by falling under 11 categories of Compulsory registration or may register voluntarily.

Threshold limit

Turnover based registration for normal, special states, composition schemes- If your turnover crosses threshold limit, you have to register compulsorily under GST.

Example; The aggregate turnover in the given case is Rs.42 Lacs. Hence registration under GST is compulsory

Compulsory registration

You have to register compulsorily, irrespective of your turnover limit, if you fall under any one of the following categories such as Inter State Sales, Casual Taxable Person, Online or Ecommerce Business.

Example; In the given example, since you have entered into Inter State Supply of Goods of Rs.5Lac, you have to register under GST compulsorily, even if the turnover is less than Rs.40Lacs.

Voluntary registration

If your Turnover is less than 20Lacs/10 Lacs or 40Lacs, then you can register voluntarily to claim the benefits of ITC credits, by getting within GST framework.

Composition Levy;

If your turnover crosses 20Lacs/10 Lacs or 40Lacs, but is less than 75 Lacs/1.5Crores, then you can register under composition levy with minimum GST compliances, with disadvantage of neither being able to collect GST from your customers nor claim a set off of any GST paid on purchases, but pay GST out of pocket on total turnover at lower GST rate.

Example; Based on your State and Turnover, you may opt for composition scheme with GST rate at 1% for traders and manufacturers, 5% for restaurant service providers or 6% for services.

As per the direction of the proper officer- If the officer is satisfied, and has reasons to believe on the basis of any survey, enquiry, inspection, search or any other proceeding, that you are liable for GST registration but have failed to do so, then he may issue a notice and register you on temporary basis, thereby giving you opportunity to register by submitting all relevant documents.

Before applying for GST registration voluntarily, you should know,

Who are your suppliers? – If your suppliers are unregistered, then you may not apply for voluntary GST registration, as you will not get the credit for any GST paid on purchases from such unregistered suppliers. But on the other hand, if your suppliers are registered, then it is beneficial for you to register under GST as well.

Who are your customers? – If you are the end supplier in the chain, who finally sells to the consumer, who may be an unregistered person, and also unable to take ITC credit of any GST paid, as it is meant for his final consumption and not for any further distribution.  

What are your resources available? – Once you are registered with GST, then you need to comply with all the provisions of GST and file multiple returns and pay GST regularly, thereby increasing cost of compliances and taxes. You might register under Composition levy with lower taxes, and compliances but better business opportunities and ease of doing business.

You must evaluate the Compliance Cost vis a vis benefits available before registering for GST. It should not result in loss to you.

Benefits of voluntary GST registration and the reason to obtain registration in GST for new business, small owners, sole trader or small service providers;

Collecting of GST, Claiming ITC, paying off GST- You being registered can collect GST on your sales or outward supply, by issuing tax invoice with GST, you can also claim a set off of the GST paid on purchases or inward supplies or input service, then pay GST or claim a refund depending on whether the outward GST collected is more/less than GST ITC paid on purchases or Input services.  

Inter State Sale or E commerce supply becomes easy without any restriction, with GST ITC credits flow set off available at each level of supplier, during inter state sales or import of goods or services or both.

Trustworthy, be compliant and have good rating- GST compliance rating maintained at the GST portal, further helps in building up trustworthiness of the business and helps in further expansion. On registering under GST, you will receive a certificate of registration, which is a valid legal proof of business.

Wider Scope and better standing- GST registration helps in many other areas in addition to business ITC set off such as easier and quicker bank loans, renting of premises, doing business with likeminded registered organisations. Larger organisations prefer doing business with registered dealers only.

Disadvantages for registering for GST,

Compulsory to pay GST after registration thereby increasing tax compliance cost. Necessary resources such as professionals to manage the GST compliances, Tax Payments, Software,

Technology- GST in excess of Rs.10,000 needs to be paid online. Small businesses may find it difficult to pay GST online either due to lack of Internet, or not having Net banking activated, or illiterate to make any such payments online.

Multiple GST returns to be filed once you are registered under the GST, even if your Turnover is below the threshold limit.

Denial of GST ITC set off or credit- If GST is not paid accurately and/or there are discrepancies in filing GST Returns, then offset of ITC will not be available to you and will further lead to Interest and Penalty been levied for late submissions or errors in filing.

Loss of customers- Many other unregistered suppliers, may sell similar products or service at lower price and make higher profits with wider customer base, as they don’t issue tax invoice with GST.

GST compliance cost further reduces your liquidity. Once you are registered, you have to issue tax invoice with GST, Collect GST, claim set off of ITC credit, pay GST, file Returns within due dates to avoid interest and penalty.

Exemptions from GST Registration,

Following persons are not required to register under GST,

Supplier or Service provider exclusively into selling goods or services or both, either wholly exempt or not liable to tax. Examples, Healthcare, Education, Charitable organizations.

Agriculturist for cultivation of land by own or family members skill or efforts.

Supplier of Notified handicraft items below threshold limit-

Interstate supply of service up to 20lacs or 10lacs in specified States such as Tripura, Nagaland, Manipur, Mizoram, in case of Inter-state supply of services, handicraft goods or A job worker.

Example; The aggregate turnover in the given case is Rs.17 Lacs. Since Inter State supply of service is below Rs.20 Lacs, hence registration under GST is not required;

Casual Taxable Person, not having fixed place of business, for supply of handicraft goods up to Rs.20lacs or 10lacs in specified States is exempt from registering for GST.

Supplier of service through E Commerce operator, exempt from registration under GST, if turnover is less than 20lacs or 10lacs in specified States such as Tripura, Nagaland, Manipur, Mizoram.

Supplier of taxable goods or service or both, where total tax is payable only on Reverse Charge Mechanism basis by the recipient. Example, Goods Transport Agency providing service to Private Company.

Commission agent for purchase or sale of agricultural produce.

Conclusion;

You may register voluntarily, even if your turnover is less than threshold limit, to get the benefit of Input Tax Credit of GST paid and continue the GST tax credit chain and avail various benefits by being a part of GST framework.