Businesses in India can voluntarily register for the Goods and Services Tax (GST) structure, even if they are not legally obligated to do so. When a business chooses optional GST registration, it is subject to all of the same regulations as a normal taxable person. This implies that the voluntarily registered business will be considered an average taxable person with the same obligations, rights, and responsibilities as a regularly registered taxpayer under the GST.
Related Read: Taxable Person Under GST – Who Qualifies As A Taxable Person?
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What is voluntary registration under GST?
Voluntary registration under GST refers to the option that allows people or businesses to register for GST even if they are not legally required to do so. The term “voluntary” means that registration is optional and not mandatory by law.
Who is eligible for voluntary registration?
Businesses that exceed the required level for annual revenue must register for GST. The following are mandated to register under the GST:
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Businesses having an annual turnover of over ₹20 lakhs (₹10 lakhs for special category states).
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Businesses engaged in interstate sales or supply.
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Businesses selling goods or services via e-commerce platforms
It is not legally necessary for businesses with an annual revenue of less than ₹20 lakhs (₹10 lakhs for special category states) to register for GST. However, these small businesses have the option of voluntarily registering under the GST framework.
As an alternative, businesses with turnover between ₹50 lakh and ₹75 lakh may also choose a composition levy scheme available under GST.
However, there are several drawbacks to using a composition levy, such as the inability to claim input tax credits or collect tax from customers.
Thus, rather than registering as composition dealers under the tax, SMEs can just register themselves as normal dealers to claim ITCs.
Related Read: GST Registration Limits: Threshold limit for GST Registration for 2025
What are the reasons to apply for voluntary registration under GST?
1. Claim ITC
One of the key advantages of voluntary GST registration is the ability to claim an ITC for the GST paid on purchases. This might help to increase the cash flow and profitability of the company.
2. Status of the Registered Dealer
You will be issued a certificate of registration. This document will act as official documentation of the company’s legal status, which can be crucial when dealing with bigger businesses and potential business partners.
3. Competitive Advantage
Voluntary GST registration can give a business a competitive advantage since many larger businesses and multinational companies prefer to engage with GST-registered dealers.
4. Enable Inter-State Sales
Voluntary GST registration enables businesses to conduct interstate transactions, which may be advantageous for future development and expansion strategies.
5. Enhance E-Commerce Sales
Businesses aiming to offer goods or services on e-commerce platforms might choose voluntary GST registration to prevent the requirement for mandatory registration in the future.
6. Make Use of Unutilised ITC
Businesses with unutilized input tax credits from prior tax regimes, like service tax or VAT, can carry them forward by voluntarily registering for GST.
Advantages of Voluntary Registration under GST
1. Provide customers with input tax credits
Since you are legally recognised as having voluntary registration under GST, you can issue taxable invoices. This allows buyers to claim input credits on their purchases, expanding your customer base and enhancing competitiveness.
2. Claim ITC
One of the benefits of voluntary registration under GST is that the voluntary registered people can claim input credit for their own goods and services, such as legal expenses, consulting fees, etc. This will eventually boost their business margins and profitability.
3. Make inter-state sales with a few restrictions
Businesses registered under GST can freely conduct inter-state sales, which gives SMEs an advantage in expanding. They can also choose to sell their goods online via e-commerce platforms.
4. Business Expansion and Scalability
Voluntary registration facilitates business expansion by enabling participation in government tenders and interstate sales. It ensures compliance and scalability, avoiding future registration hurdles.
5. Compliance and Reputation
A business gains credibility by becoming a GST-registered dealer, particularly when interacting with larger enterprises or entering into partnerships or contracts. It shows compliance with national tax laws and can support the maintenance of a high compliance grade.
6. Ancillary Benefits
A registered business will find increased credibility while getting bank loans and securing rental premises.
Disadvantages of Voluntary Registration under GST
1. Technology
Many small businesses face a significant challenge with GST due to its online requirements. GST registration, filing returns, and making payments (exceeding ₹10,000 per challan) must all be done online. This shift from manual methods poses difficulties for these businesses.
2. Multiple Return Filings
GST-registered businesses must file three quarterly returns: GSTR-1, GSTR-2, and GSTR-3. These returns show sales, purchases, and total tax liabilities after deducting Input Tax Credit. Failure to file results in buyers being denied input credit and incurring late fees, interest, and penalties, all of which negatively influence their compliance scores.
3. Increased Tax Liability
Upon GST registration, the supplier must collect and deposit taxes with the authorities. This raises costs for buyers and disadvantages unregistered sellers.
4. Loss of Advantage
Once registered, you will be required to collect GST from customers. On the other side, unregistered dealers can attract more customers by offering lower, GST-free prices.
5. Compliance of GST laws
Upon registration, you are required to comply with all provisions of the GST Rules, Acts, and notifications. This includes issuing GST-compliant invoices and adhering to the reverse charge mechanism for GST payments.
6. Assessment and Penal Provisions
When registered, you are legally obligated by the GST law’s assessments and penalty provisions. Insufficient resources to comply properly may result in unnecessary interest and penalties for the business.
Is voluntary registration the right choice for you?
Before you opt for a voluntary registration, you must consider the following:
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Who are your sellers and buyers?
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How many resources do you have?
Here are a few tips you should consider:
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Verify your suppliers’ and customers’ registration status. It’s essential to be aware of whether your sellers are registered and whether your buyers are eligible to claim ITC in order to maintain the ITC chain.
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It could be advantageous to not register if your end buyers are not registered.
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You can also use a composition scheme if you intend to grow your business. There are fewer taxes to pay and fewer compliances to follow. Registering will allow you to obtain bank loans more easily.
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Small businesses should conduct a cost-benefit analysis before opting for voluntary registration under GST.
Is voluntary registration permanent?
No, voluntary GST registration is not permanent. After a certain period of time, a business or individual that voluntarily enrolled under GST may choose to cancel their registration anytime later on after one year.
However, there’s an exception to the rule. If a person obtains voluntary registration in GST but hasn’t conducted business within six months of the date of registration, then their registration will be cancelled by:
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An authorised officer or;
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requested by the person concerned or;
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an application from their legal heirs in case of the person’s death.
Frequently Asked Questions (FAQs):
1. What is the difference between mandatory and voluntary registration under GST?
Mandatory GST registration must be done for businesses with annual revenues that exceed the required threshold. Voluntary GST registration, on the other hand, enables businesses to register even when their revenue falls below the statutory threshold.
2. Is a Permanent Account Number (PAN) mandatory for voluntary registration?
Yes, a PAN number is mandatory for voluntary GST registration. As per Section 25(6) of the CGST/SGST Act, every person shall have a PAN issued under the Income Tax Act to be eligible for GST registration. Without a valid PAN, voluntary registration cannot be obtained.
3. Is there a minimum turnover requirement for voluntary registration?
No, there is no minimum turnover requirement for voluntary GST registration. You can opt for voluntary registration even if your turnover is below the mandatory threshold.
4. How does one apply for voluntary registration under GST?
Businesses can apply for voluntary GST registration online via the GST portal. Once the application is approved, the business will be issued a GST registration certificate with a unique GSTIN number.
5. What documents are required for voluntary registration under GST?
Key documents required for voluntary registration under GST include:
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PAN card
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Proof of business constitution (like partnership deed or incorporation certificate)
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Bank account details plus address proof of the main business location.
6. Are there any fees associated with voluntary registration under GST?
There is no fee required for GST registration. Once registered voluntarily, the business is treated the same as any other registered taxpayer under GST. If you fail to pay the GST, a fine of ₹10,000 or 10% of the due amount will be levied.
7. What happens if a voluntarily registered person’s turnover falls below the mandatory registration threshold?
If a person voluntarily registered under GST sees their turnover fall below the mandatory registration threshold, they can continue to remain registered. They don’t need to cancel their registration due to reduced turnover but must still comply with all GST requirements.
8. Are there any special considerations for interstate supplies under voluntary registration?
Voluntary GST registration simplifies interstate transactions with fewer restrictions. It helps businesses, including SMEs, expand their market reach across state borders, facilitating seamless interstate supplies and allowing businesses to claim ITC on these transactions.
9. Can a voluntarily registered person later cancel their registration?
Yes, a person with voluntary GST registration can later apply for cancellation, but they must wait at least one year from registration. If the person hasn’t started a business within 6 months of registration, the officer can cancel it sooner.
Related Read: What Is a GST Clearance Certificate? How to Apply & Download It?
