Should you opt for Voluntary Registration under GST?

In the dynamic landscape of Goods and Services Tax (GST), businesses are often presented with strategic decisions that can shape their growth and success. One such decision that can offer significant advantages is voluntary registration under GST. Unlike mandatory registration thresholds, which compel businesses to register for GST once their turnover crosses a specified limit, voluntary registration provides a unique opportunity for proactive businesses to step into the GST realm even before hitting the threshold. This blog will explore the concept of voluntary registration under GST.

Meaning of Voluntary Registration

Voluntary registration refers to the option available to businesses to register for GST even if their turnover falls below the mandatory registration threshold to avail certain benefits or meet specific requirements. All the provisions of GST applicable to a registered taxable person will similarly apply to person, who takes the voluntary registration, i.e., you will be treated as a normal taxable person.

Voluntary Registration under GST – Who is it for?

The following businesses are the one that require mandatory registration under the Goods and Services Tax:

• Businesses that engage in inter-state selling
• Businesses that engage in online sales
• Businesses whose turnover exceeds Rs.40 lakh

But beside these three mentioned above anyone else can go for voluntary registration under GST. The GST voluntary registration procedure is same as normal registration procedure.

• Turnover below Threshold: Entities with a revenue below the GST registration threshold can register voluntarily. 
• Intent to expand: Businesses that anticipate exceeding the mandatory threshold soon may choose to register voluntarily to prepare for the transition and expedite compliance practices.
• Input Tax Credit (ITC) benefits: Businesses desiring ITC benefits on the GST paid on their purchases may choose to register voluntarily, as ITC is only available to registered taxpayers.
• Market credibility: Voluntary registration can enhance a company’s market credibility in the eyes of consumers, suppliers, and other stakeholders by demonstrating a commitment to tax compliance.
• Government Tenders: Entities tendering on government tenders may be required to register voluntarily for GST, as many government departments and agencies require suppliers to register.
• Tax compliance strategy: In accordance with the organization’s long-term aims and objectives, voluntary registration may be incorporated into a company’s tax compliance strategy.

Advantages of registering Voluntarily under GST

The benefits of voluntarily registering under Goods and Services Tax include the following:

• Transfer of the input tax credit: Businesses that are legally recognised for GST purposes can issue taxable invoices. Consequently, consumers can claim input tax credit when purchasing from these businesses. Consequently, the business’s customer base can grow, and it eventually becomes more competitive.
• Freer interstate transactions are possible: Upon registering under the new system, businesses can conduct interstate transactions more freely. Consequently, the potential market expands, particularly for small and medium-sized enterprises. These businesses can also partake in online sales through e-commerce platforms, thereby expanding their customer base.
• Utilization of input tax credit: Those who have voluntarily registered under the Goods and Services Tax have the option of claiming input tax credit on their purchases as well as input services such as consultation fees, legal fees, etc., thereby increasing their profitability and business margin.
• Better standing: Due to their high compliance rating, businesses that are registered for the Goods and Services Tax will have an easier time renting space, obtaining bank loans, and engaging in other business activities.
• Good Rating: Businesses that are registered for the Goods and Services Tax will be both compliant and scalable. In addition, the business will benefit from the compliance rating that is maintained under the new regulations, as it will attract more consumers.

Disadvantages of registering voluntarily under GST

The disadvantages of enrolling voluntarily for the Goods and Services Tax are as follows:

• Technology: Considering the new tax regime, the lack of technology is one of the primary concerns of small enterprises. Most small businesses maintain their books manually, but the Goods and Services Tax (GST) requires them to go online for payments and returns exceeding Rs.10,000.
• Tax liability: Suppliers who register for the Goods and Services Tax will be required to deposit and collect taxes, creating an additional burden for them.
• Filing of multiple returns: Businesses that have enrolled for GST are required to file three returns each quarter. GSTR-1, GSTR-2, and GSTR-3 include details regarding all sales and transactions made by a business, as well as the final tax liability after input tax credit is deducted. 
• Compliance: Businesses registered under the Goods and Services Tax will be required to comply with every provision of the Goods and Services Tax’s governing rules and regulations. Given the number of provisions, compliance may prove challenging for some enterprises.

Permanent registration of Voluntary status

After one year, businesses that voluntarily register for the Goods and Services Tax may terminate their registration. Cancellations are also possible if a voluntarily registered business does not begin operations within six months of the registration date. In such a case, the cancellation must be performed by a duly authorized officer or at the request of the individual in question. If the individual passes away, his lawful heir may file a cancellation application.

Takeaway

In conclusion, voluntary registration under GST emerges as a strategic choice that businesses can make to stay ahead in the competitive market and optimize their tax positions. Throughout this blog, we have unravelled the benefits and challenges of voluntary registration in GST. By willingly embracing GST registration, businesses can build a reputation for compliance, transparency, and accountability. Moreover, voluntary GST registration enables them to familiarize themselves with the GST framework, prepare for compliance requirements, and navigate the complexities of taxation. However, it’s crucial for businesses to carefully evaluate their individual circumstances, including the potential impact on pricing and compliance costs, before making the decision.