Is GST Registration Required For Small Businesses? Let’s find out

GST Registration for Small Business

In the business realm, we often come across a widespread query like – Is GST registration for small businesses mandatory? The answer is yes since all businesses undertaking fiscal transactions fall under the GST regime. However, it should be noted that the GST applicability depends on the nature of supplies and annual turnover rather than the size of an entity. To ensure a seamless business journey, it is vital to recognize relevant tax implications. The below-given sections in this article address this query with facts in the purview of applicable legislation.

Significance of GST registration for small businesses

A business entity in India typically attracts various taxes, such as VAT and corporate taxes, depending on its industry, earning threshold, and supply potential. GST is among the most prominent tax systems applicable to businesses that fit the underlying criteria. Introduced in 2017, GST aims to subsume a variety of indirect taxes, ensuring a nominal tax cut on business income. Hailed as a unified tax system, GST overcomes complex central and state taxation systems, empowering businesses to manage their taxes with ease.

Regardless of which industry your business belongs to or what is your operation threshold, knowing the GST implication can help with taxes.

With that said, let’s find out if GST registration for small businesses is important

The answer is Yes! All businesses performing fiscal transactions fall under the GST law regardless of their industry or income threshold. Product-based businesses earning more than Rs 40 lakhs annually fall under the GST law. Similarly, service-based businesses reaping more than Rs 20 lakhs annually attract taxes under GST. This limit has been reduced by Rs 10 lakhs for businesses in the northeast.

After registering under the GST law, the registered entities get a Goods and Services Tax Identification Number (GSTIN), a unique code that helps with tax payments and taxpayer identification.

You might be wondering why businesses with lower income thresholds need to abide by GST law. Well, it is mandatory as GST law necessitates filing nil returns for businesses that do not fit the above criteria. This helps tax authorities keep them aloof and impose taxes as and when required.

Benefits of GST registration for small business

Although skipping GST registration is easy for smaller entities, doing so can prevent them from leveraging the following benefits:

Unified taxation: GST serves as a unified tax that overcomes various taxes like service taxes, VAT, and excise duty. Nowadays businesses no longer experience the cascading effect of taxes or double taxation.

Composite scheme: GST also spans a composite scheme that limits the soaring taxes by introducing a flat rate ranging from 1-5 percent. It is accessible to businesses having annual income exceeding Rs 75 lakhs.

Transportation costs: GST has ensured minimal taxes on the interstate movement of goods, reducing the cost of raw materials procurement and product distribution.

Credibility: Having a GST number reinforces trust among peers, competitors, vendors, etc since it signifies that an entity is tax-abiding.

Easy access to credit: GST-abiding entities are most likely to get credit from banks and private lenders with minimal hassles and at lucrative rates.

GST Registration for Small Businesses: Underlying Key Documents

The following documents play a key role when it comes to GST registration for small businesses:

• Identity proofs such as Aadhaar cards, passport, or driver’s license
• Bank details provided via bank statements, passbook, or cancelled cheques
• Certificate of association for LLPs, OPCs, and private limited companies
• Partnership deed for partnership firms
• Passport-sized photographs of the owners

What is the process of GST Registration for Small Businesses?

The process of GST registration for small businesses is elaborated below in a step-by-step manner:

1. Open the GST portal and navigate to Services>Registration>New registration
2. Wait until a form appears on your screen. Fill out this form and click on Proceed.
3. Complete the OTP verification process.
4. Note down the TRN i.e. temporary reference number.
5. Relogin to the portal and head to the option called ‘New Registration’.
6. Navigate to the TRN option and enter the 15-digit TRN number.
7. Enter the captcha code and select ‘Proceed’
8. Enter the OTP code on the portal received on your contact details.
9. Click on Proceed to view the application’s status and undertake editing if required.

You may need to hold for 15 days after completing the above steps. Once you cross this timeline, you can proceed to complete the rest of the formalities. The steps involved are as follows:

• From the GST portal, head to the Business Details section and provide details including trade name, address, and business constitution.
• Provide information related to the date of commencement and tax eligibility. Selecting a taxable person option will lead to the generation of challans for advance tax payments.
• Provide a reason why you want a registration and enter apt details.
• Choose an apt registration type from options like sales tax, excise duty or service tax, then provide your registration id and date.
• Naviagte to the Promoters/Partners tab and provide the details of 10 promoter
• Provide information relating to the authorized signatory.
• Enter the business details and product information alonside theire HSN code. In case of services, provide the SAC.
• Provide the bank detail and enter your professional tax employee code, professional tax registration certificate number, and state excise licence number.
• Select the apt verification mode.
• Visit the verification page and via DSC or EVC upload the application.

Conclusion

The introduction of GST has a positive impact on all forms of businesses regardless of their size, industry, and income. Since it clubs all major taxes under the canopy, the resulting tax rate comes out to be lenient.  The implementation of a composite tax further sweeten the deal. So, it can be concluded that GST registration for small businesses is a boon despite being a mandate.

Read Our Article: Is Trade License Mandatory For GST Registration?