Impact of GST on Current Account Opening
GST – Goods and Services Tax is an indirect tax that applies to both the goods and services within the country. Many banks in India have made GST a mandate to open a current account with them. It is done to ensure compliance with the tax laws. It depends on the bank you are dealing with.
Why is GST Needed for Current Account?
GST (Goods and Services Tax) registration is often required to open a current account for a business because banks use it to verify the legitimacy and business status of the account holder. Here are the main reasons why GST registration is typically needed for opening a current account:
- Proof of Business Legitimacy: GST registration serves as legal proof that the business is operational and compliant with government regulations. It helps banks verify that the account holder is running a legitimate business.
- Regulatory Compliance: Many banks are required by the government to ensure that businesses meet certain regulatory standards. GST registration ensures that the business is following tax laws and is registered with the government for tax purposes.
- Taxation Transparency: GST registration helps banks and government authorities keep track of the financial activities of the business. Since current accounts are primarily for businesses, having a GST number ensures that the account is being used for business transactions, making it easier for tax audits or financial reviews.
- KYC (Know Your Customer): As part of the KYC norms, banks need detailed information about the business and its operations. GST registration helps in providing the required identification and verification for opening a current account.
For small businesses or individuals not required to register under GST (e.g., businesses below a certain revenue threshold), some banks might allow opening a current account without GST, though this can vary based on the bank’s policies.
Other Documents Needed to Open a Current Account
- Proof of Identity: PAN Card, Voter ID, Passport, Driving License
- Proof of Address: Electricity Bill, AADHAR Card, Passport
- Colour photograph of the applicant
- Certificate of Incorporation
- Memorandum of Association
- Cancelled Cheque of an existing account
- Proof of the company’s registered address
Read more: Documents Needed for Current Account Checklist
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