Even businesses that have no requirement to register under the Goods and Services Tax may opt for voluntary registration under GST even if you are not liable to be registered. All the provisions of GST applicable to a registered taxable per
son will similarly apply to you also, i.e. you will be treated as a normal taxable person.
Voluntary registration under GST has several advantages such as more freedom in inter-state sales, passing on of input tax credit, good ratings, etc. However, it is important to also have the technology ready for online payments.
As per the provisions of the act, following businesses are mandated to register under the Goods and Services Tax:
- Businesses that engage in Inter-State Selling
- Businesses that engage in Online Sales
- Businesses whose Turnover exceeds Rs.20 lakh
Small businesses with turnover less than 20lakhs can voluntarily register under GST.
Businesses with turnover 20 lakhs to 1 crore can opt for composition levy. But composition levy comes with additional disadvantages such as not being able to collect any tax from their customers or avail input tax credit. Such SMEs may also opt for to register themselves as normal dealers instead of composition dealers.
Eg. A small retailer like a departmental store having turnover of 10-15 Lacs is not require to register under GST. However, he is also supplying to a nearby restaurant which is registered under GST (having a turnover exceeding Rs. 20 lakh) .The restaurant is eligible for input credit and may look for a registered seller who can pass on ITC . In such a scenario, this retail small trader might register voluntarily to pass on the benefit of input credit to his buyer. It heads to a willing business scenario.
PROS OF REGISTERING VOLUNTARILY UNDER GST
The following are the advantages of registering voluntarily under the Goods and Services Tax:
- PASSING ON INPUT TAX CREDIT: Taxable invoices can be issued by businesses that are legally recognised under GST. As a result, buyers can avail input tax credit when they make purchases from such businesses. In turn, the customer base of the business can expand, and eventually, it becomes more competitive.
- INTER-STATE SALES CAN BE MADE MORE FREELY: Inter-state sales can be made more freely by businesses once they have registered under the new regime. Therefore, the prospective market widens, especially for small and medium-sized businesses. Such businesses can also choose to engage in online sales via e-commerce platforms, thereby widening their customer base.
- AVAILING INPUT TAX CREDIT: Persons who have registered voluntarily under the Goods and Services Tax have the option to avail input tax credit on the purchases they make as well as input services such as consultation fees, legal fees, etc., which will ultimately result in enhancing their profitability and business margin.
- BETTER STANDING: Renting premises, availing loans from banks and other such business areas will become easier for businesses that are registered under the Goods and Services Tax due to a good compliance rating.
- GOOD RATING: Businesses that are registered under the Goods and Services Tax will be compliant as well as scalable. Moreover, the compliance rating that is maintained under the new regime shall be beneficial to the business as it can attract more customers.
CONS OF REGISTERING VOLUNTARILY UNDER GST
The following are the probable additional compliance requirements of registering voluntarily under the Goods and Services Tax:
- Tax liability will be added compliance to the business unit as the voluntary registration is also deemed as a normal registration with tax liability. The threshold limit of 20 lakh is aggregate including every state of operation.
- Multiple registrations will be under the demand after the registration for all those business units who operate in various states for their trading activities. As known, that the GST is a destination based tax and in which the returns should be filed in every state where the business unit is expanded. The input tax credit will be available only if the dealer is registered in all those states where it is operational and all this registration will be resulting in higher cost of compliance for the business
- Penalty provisions are at the registrations rule-book and every business unit which is registered under the GST is bound to follow and comply with all the rules and regulations issued by the GST. Any failure in the compliance will lead to the penalty.
After all the discussion, it is assumed that voluntarily registration is not at all a bad option, it will give tremendous opportunities to the SME sector to grow and expand into the wider area of opportunities. However, rules and regulations are equally applicable but the benefits are way more feasible for business’s growth.
A COMPLIANCE DRIVEN BUSINESS MODEL IS A HEALTHY WAY TO DO OPERATION AND ADOPT ETHICAL BUSINESS PRACTICES.