If you decide to register under GST, you may not only be eligible for many benefits, but at the same time, you will be bound by legal requirements and also have to maintain and submit periodic GST returns. For businesses looking to explore this path, understanding voluntary GST registration is the first step toward unlocking new opportunities.
Mandatory GST registration is only for businesses whose turnover exceeds the specified threshold limit, which is usually Rs. 20 lakhs for services and Rs. 40 lakhs for goods, whereas any individual businessman can opt for the voluntary GST registration irrespective of their annual turnover. In other words, voluntary registration means voluntarily accepting the obligations and requirements of GST, such as making the GST returns filing, etc., besides enjoying the privileges attached with being a registered GST taxpayer.
What Is Voluntary Registration Under GST?
Voluntary registration under GST refers to a scenario where a business owner voluntarily takes up the responsibility of fulfilling all the obligations of GST registration even when its yearly turnover is below the minimum turnover limit set by the government. According to GST law in India, the requirement is only on businesses whose turnover exceeds Rs. 20 lakhs (for services) or Rs. 40 lakhs (for goods).
So a business of any kind is free to register voluntarily even if its turnover is below the threshold limit. But this choice should be one carefully done as once the registration is completed and GST is collected, the business will become subject to all the GST obligations — like GST filing, proper record keeping, etc.
Key Benefits of Voluntary Registration Under GST
There are two main motivations for business owners to get their companies registered on the GST for no other reason than to be able and enjoy the benefits available to the registrants:
- Firstly, getting to know the tax implications, which in turn can help the businesses to better utilize and minimize the tax burdens
- Secondly, the companies can start developing their GST return filing and GST compliance skills to be prepared for when the company will eventually surpass the GST mandatory registration threshold
Claim Input Tax Credit (ITC)
Claiming input credit is the most important benefit of registering under GST. The tax paid when an entity purchases goods and services is a deduction from the total tax collected by the entity if the entity happens to be a business which is a registered dealer in the GST scheme. This is a key advantage of voluntary registration under GST that can significantly reduce your overall tax liability.
Build Business Credibility and Trust
From the customer view, a GST identification number is nothing short of a certificate, which guarantees the business legitimacy and professionalism. When you are selling goods or providing services to big companies, government departments, or even individual customers, a GST number is an indicator that your business is compliant and reputable.
This level of trust is often one of the conditions to be accepted as a supplier in the supply chain of well-established companies. Beside this, a GST registration is a stepping stone of getting the brand recognition among the consumers as some of them do not like to deal with unregistered traders.
Access to E-Commerce Platforms
Largely, e-commerce websites like Amazon, Flipkart, Myntra are the topmost platforms for Indian online market where a legal GST registration is compulsory for every seller. It means that the seller who is not registered under GST cannot list his products or services in these marketplaces. For more details, check out our guide on GST on e-commerce sellers.
If you opt to get GST registered voluntarily, this registration will be a gateway for you to get your products on these major platforms and so reach your customers anywhere in the country. That is a real opportunity for a small business or for a group of artists.
Seamless Interstate Trade
Voluntary GST registration is a big relief in interstate sales as it gives you the liberty to trade in all the states of India without going through any restrictions. If you are an unregistered trader, you face various hurdles in selling the goods in other states as apart from separate registration, penalty is always hanging.
Whereas a person with just a GST registration can not only sell his products in any state in India but can also issue the e-way bill and move his goods without any hindrance. This availability to the national market is very helpful for the companies that have a bigger vision of growth, to go far beyond their local region.
Eligibility for Government Contracts and Big Clients
GST registration is a prerequisite of many government contracts and company tenders for large purchases. A company doing voluntary GST registration gets its business qualified to get involved in these profit generating business opportunities.
For example, it might be providing stationery to a government agency or supplying services to a large multinational company, a GST number would probably be the initial requirement in the list.
Who Should Consider Voluntary GST Registration?
Voluntary registration is not necessary for every type of small business. The compulsion arises from the revenue threshold primarily. But the decision to get GST registered depends first and foremost on a business’ model and its aspirations.
- Businesses which aspire to get large clients, for which they need to showcase credibility
- Businesses looking to apply for Govt. contracts
- Businesses listing their product on E-commerce platforms
- Businesses doing Inter-state trade
- Businesses which are receiving money from outside India
The Difference Between Voluntary and Compulsory GST Registration
It is worth learning that both of them lead towards the same result, but the reasons behind are totally different. Compulsory registration is the one where, for instance, you are forced to comply because your turnover is more than the specified revenue limits. In addition, it will make you comply if you are making interstate sales or doing e-commerce or engaging in a business activity that comes under the other prescribed scenarios.
A business which is below those limits and doesn’t have one of these activities but still chooses to do the registration for some personal reason is voluntary registration. Post registration, the rights, obligations and responsibilities of registered persons of compulsory and voluntary are entirely the same — their compliance requirements and the legal status is also not different. To understand the complete process better, read our guide on GST registration in India.
What Is the Process of Voluntary GST Registration?
With voluntary registration, it is the same process of mandatory registration. You will be redirected to the GST portal (gst.gov.in). Fill Part A of Form GST REG-01 first. Then, Part B has to be completed after OTP generation.
Besides the form, several documents including PAN and Aadhaar cards, proof of business address, bank account details, and photographs of proprietor or partners have to be uploaded by the applicant. As part of processing the application, they get a registration certificate under Form GST REG-06.
The effective date to start registration must not be sooner than the application submission date. You also have the option of picking up an effective date from the period when the registration will be in effect for a voluntary registration. It typically takes around 7 working days for the whole process.
Can I Register for GST Without a Company?
Yes, it’s quite possible. It is a misconception that only a company can register for GST. Sole proprietorship firms, partnership firms, a Limited Liability Partnership (LLP) or Hindu Undivided Family (HUF), trusts, and societies also have the right to a GST registration.
An individual businessman as a sole proprietor can make an application under GST with his/her PAN and Aadhaar. Different types of legal entities recognized under GST law include business that doesn’t even have to go through the process of incorporating as a company. As long as you are doing a taxable supply, you can get a GST registration. You can also explore for sole proprietorship firm registration or LLP registration to understand your options better.
Quick Glance at the Benefits of Voluntary GST Registration
- Claim Input Tax Credit for the purchases for the business which in turn reduces the overall tax burden.
- Increase business’s credibility and trust level among the clients and partners.
- Eligibility to join e-commerce platforms as a seller and be able to bid for government tenders.
- Ability to trade between states without being restricted or requiring separate registrations.
- Select your registration effective date for tax liability.
Conclusion
To sum everything up, voluntary registration under GST is a very effective weapon in the hands of those Indian businesses that have the ambition to not only expand their business but also establish credibility and get their tax advantages in the best way possible. Of course, this option is accompanied by extra compliance tasks. Yet, the ITC advantage, broader access to the markets and professional recognition usually do surpass the associated costs.
Should you have a thought about GST registration, do a thorough evaluation of your business model, client base, as well as future plans before going with it. Foxtax as your guide partner, can help you get the best from GST registration and this way propel your business further. Don’t hesitate, get voluntarily registered and discover fresh avenues.
Frequently Asked Questions
What is the difference between voluntary registration and compulsory registration?
Compulsory registration refers to the mandatory case of registration when your turnover is above the prescribed threshold or a few other circumstances like inter-state supply. Voluntary registration is an option for businesses with turnover below the threshold who choose to register for benefits.
How to apply for voluntary GST registration?
Go to www.gst.gov.in (official government GST portal), complete Form GST REG-01 in two parts, submit supporting documents (PAN, Aadhaar, address proof, bank details), and send the application. Processing takes up to seven business days.
Can I register under GST without having a company?
Definitely. Sole proprietary, partnership LLP, HUF, trust, and society forms are valid for registration. A citizen can get the registration as a sole proprietor by using PAN and Aadhaar.
What is the effective date of registration in case of voluntary registration?
Registration effective date shall be chosen by the applicant. Registration effective date shall not be before the day of filing. The GST officer may sanction a different effective date.
What does “voluntary basis” in GST registration mean?
Voluntary basis implies the registration is done purely at our initiative. There is no legal compulsion or compulsion of law involved here. A choice is given and can register yourself as a taxable dealer even if the turnover is quite low, way below the limit.
What is the GST voluntary registration limit?
The upper limit is not defined for voluntary registration. The Lower limit for mandatory registration will be provided. Any business having a turnover of Rs. 20 lakhs (for service business) and Rs. 40 lakhs (for goods business) are mandated to register for GST.
What are the key documents required for voluntary GST registration?
One shall require a PAN copy, a photocopy of the Aadhaar card, copy of business address proof (rental agreement or utility bill), bank statement or post-dated cheque, and photos of the owner/partners.
Can I deregister GST later if I registered voluntarily?
Yes, you may cancel the registration after completing one year from the effective date of registration if you meet requirements such as completion of returns, no outstanding tax, etc. For a step-by-step process, refer to our GST cancellation guide.