A guide to voluntary and mandatory GST registration

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What is voluntary and mandatory GST registration?

Benefits of voluntary GST registration

Introduction

The Goods and Services Tax (GST) was established to bring all the taxes under one regime. GST Registration is compulsory for every supplier who makes the supply of goods and services or both and if his annual turnover in a financial year exceed the specified threshold limit. The GST registration is not mandatory for the businesses whose annual turnover is below 20 lakhs in a financial year. In this blog we will be discussing the difference between voluntary and mandatory GST registration.

What is GST?

GST stands for goods and service tax. The Goods and services Tax (GST ) is a value-added indirect tax levied on most goods and services sold for domestic use. The GST is paid via GST Returns by consumers, but it is remitted to the government by the businesses selling the goods and services. The list of taxes comes under the preview of GST:

Service tax

VAT

Luxury tax

Tax on betting, gambling, lotteries

Custom duty

Central excise tax

Central sales tax

Octroi

Entertainment and amusement taxes

For any transaction in India, there are 3 categories of tax imposed: Central Goods and Services Taxes (CGST), State Goods and Services Taxes (SGST), and Integrated Goods and Services Taxes (IGST). There are five slabs divided under the GST rate for various goods and services in India: 0% GST, 5% GST, 12% GST, 18% GST, and 28% GST.

Voluntary registration under GST

It is a self-registration by the business owners. If a person’s annual turnover is below 40 lakhs or 20 lakhs then it does not fall under the category of mandatory registration and it is up to the person to either register under GST or not. A person will receive some of the benefits stated below if they choose to voluntarily register under GST.

The buyer will prefer to buy or purchase things from the sellers who are providing tax invoices and that will increase sales. The tax invoices can only be issued by registered individuals.

Seller or individual who voluntarily registers under GST can perform normal interstate commerce without any restrictions.

The seller can claim an Input Tax Credit on the purchase of goods or services that will help to reduce expenditure costs.

GST authority provide ratings to taxpayers based on their compliance and regularity, which enhances the company’s reputation.

Liabilities of voluntary GST registration

For the person who is registered under GST, it is compulsory to collect tax and remit to the government. If a person or individual does not pay the tax, then they must pay from the total amount received, taking into account that the amount includes taxes.

The registered individual is required to submit quarterly and yearly returns on time. The Indian Government would impose fines if an individual fails to submit yearly and quarterly returns on time.

If there is a default in voluntary registration, fines may be imposed and the credit report may be impacted.

Mandatory registration under GST

GST registration is mandatory or compulsory for the person or individual whose annual turnover exceeds the established threshold. Some people or companies are mandated to register under GST, which are as follows:

If the turnover of the supply of goods intra-states exceeds Rs. 40 lakh except for Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand.

A person is mandatory to register under GST, if he is engaged in the supply of services and the turnover exceeds Rs. 20 lakh except for Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand.

Except for Manipur, Mizoram, Nagaland, Sikkim, Tripura, Arunachal Pradesh, Meghalaya, Pondicherry, Telangana, and Uttarakhand, a person engaged in the supply of services must register under the GST if their annual turnover exceeds Rs. 20 lakhs.

Even if the turnover does not reach the pre-defined threshold, an e-commerce operator that offers to purchase and sell goods and services must register under GST.

The registration of input service distributors is mandatory.

Anyone who needs to pay tax under the reverse-charge mechanism necessary to register.

A non-resident taxable person must register if that person falls under this category.

Anyone representing a franchisor or supplier as an agent must register under GST.

A GST registration is required for each individual who is deducting TDS or TCS in a GST return.

Anyone who offers online databases or information services in India from outside India must register.

Benefits of mandatory GST registration

The cascading effect of the tax is removed for the companies who is mandatory to register under GST.

Small companies can profit from the GST since it offers the composition plan as a way to reduce tax.

If a company comes under the category of mandatory registration, then they have to file a few compliances as compared to other companies.

Bottom line

We will conclude by saying that the businesses whose annual turnover is not more than 20 lakhs, it falls under the category of voluntary GST registration. The annual turnover of the business is more than 20 lakhs then it falls under the category of mandatory GST registration.

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