Should You Opt for Voluntary Registration Under GST?

You 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 person will similarly apply to you also, i.e. you will be treated as a normal taxable person.

Latest update on GST registration

21st December 2021
From 1st January 2022, CBIC made the aadhaar authentication mandatory to apply for revocation of cancelled GST registration under the CGST Rule 23 in REG-21.

29th August 2021
Taxpayers can get extended time up to 30th September 2021 to revoke cancelled GST registration if the last date for the same falls between 1st March 2020 and 31st August 2021. It applies if the GST registration is cancelled under Section 29(2) clause (b) or (c) of the CGST Act via CGST notification number 34/2021 dated 29th August 2021.

28th May 2021
Due date to file application for revocation of cancellation of registration falling between 15th April 2021 up to 29th June 2021 is 30th June 2021.

1st May 2021
The time limit to take actions, reply or pass orders as given under Rule 9 of the CGST Rules, 2017 that falls between 1st May 2021 and 31st May 2021 has been extended up to 15th June 2021.

5th March 2021
The Search ARN Functionality for Registration, post-TRN Login has been enhanced for the taxpayers.

What is voluntary registration under GST?

As the name suggests, anyone can register under GST even though he may not be required by law

For whom is voluntary registration available?

Certain businesses are required to register mandatorily under GST such as

• Having turnover more than 20 lakhs
• Selling inter-state
• Selling online

Click here for the entire list of businesses which are required to register mandatorily. 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.

Example: A small grocery dealer with a turnover of Rs. 12-15 lakh is not be required 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, the grocer might register voluntarily to pass on the benefit of input credit to his buyer.

Benefits of Voluntary Registration under GST

• Provide input tax credit to customers– Since your business is legally recognized, you can issue taxable invoices. Buyers, in turn, can take input credit on their purchases. This will help expand the customer base and make it more competitive.
• Take input credit– Voluntarily registered persons can take input credit on their own purchases and input services like legal fees, consultation fees etc. This will eventually increase their business margin and profitability.
• Make inter-state sales without many restrictions– Businesses registered under GST can make inter-state sales without many restrictions. Thus, it widens the potential market for SMEs. These SMEs can also opt for selling their goods online through the e-commerce platform.
• Be compliant and have good rating– Registration for GST will ensure that the business is compliant and scalable without any barrier of future registration. Also under GST, compliance rating will be maintained and if this is done correctly, it can attract additional business.
• Better standing– A registered business will find it much easier in other business areas such as getting bank loans, renting premises.

Negatives of Voluntary Registration under GST

We discussed the benefits of getting registered under the Goods and Services Tax, however, there is a flip-side to it. Businesses registering voluntarily under GST may have to face extra compliance and working capital liquidity. We are listing down some of these consequences:

• Technology– Once of the biggest challenges many small businesses are facing is the technology required for GST. GST registration, returns and payments (exceeding Rs. 10,000) must be made online. This becomes difficult for many small businesses who are used to manual methods.
• Multiple Return Filing – Businesses registered under Goods and Services Taxes are required to file three returns every quarter. These returns are GSTR-1, GSTR-2, GSTR-3 and include the details of all purchases, sales, and final tax liability after setting off Input Tax Credit. Failure to file these returns will not only deny the input credit to our buyer but also attract late fees, interest & penalty. Further Compliance rating will get affected negatively.
• Payment of Tax Liability – Once registered under GST, the supplier will have the additional responsibility of collecting and depositing taxes with the authorities. This will not only inflate the cost for the buyer but also leverage similar sellers who are not registered under GST.
• Loss of advantage- Once you are registered, you will have to collect GST from customers. Unregistered dealers can charge cheaper prices as they cannot collect GST and thus attract more customers.
• Compliance of GST provisions- Once you are registered, you are bound to comply with all the provisions of GST Rules, Acts and notifications. All provisions such as issuing GST compliant invoices, paying GST under reverse charge mechanism will start applying to you.
• Assessment and Penal Provisions – Once registered under GST, a business will also be legally bound by the assessment & penal provisions of the GST law. This can attract unnecessary interest and penalty to business due to lack of resources to fully comply.

Should you opt for voluntary registration?

Before opting you must consider the following-

• Who are your sellers?
• Who are your buyers?
• How much resources do you have?

Tips-

• If your buyers & sellers are registered then it may be beneficial for you to register otherwise you will break the ITC chain.
• If your end-buyers are unregistered it may be beneficial to not to register.
• If you are planning to expand your business, you might opt for composition scheme. There are lesser taxes to be paid and lesser compliances to be maintained. Registering will help you to get bank loans more easily.

Needless to say that small business must do their math around the cost-benefit of voluntary registration under GST. 

Is a voluntary registration permanent?

You cancel your voluntary registration anytime later on after one year. Any person who has taken voluntary registration but has not commenced business within six months from the date of registration will have his registration cancelled. Such cancellation will be done by –

• a proper officer OR
• requested by the concerned person himself *** OR
• on an application filed by his legal heirs, in case of death of such person

***However, application for cancellation of registration by the concerned person who has registered voluntarily will be only after one year from the date of registration. Please read our in-depth article on cancellation of GST registration. Click here to know the step-by-step process for GST registration. 

Be GST ready through ClearTax GST Software, an easy user-friendly versatile software which will help you to be GST compliant. 

Create GST compliant invoices using our free ClearTax BillBook.  

If you are a business looking to discover more, please read our articles on GST registration.

If you have further queries about GST and registration, please email us at gstsupport@cleartax.in or call us on 080-67458707.