What is Voluntary Registration under GST?
Voluntary registration means applying for registration under GST(Goods and Service Tax) on a voluntary basis. The dealers who are not required to register as per the GST Act can apply for voluntary registration under GST.
- Collect GST on the outward supplies i.e. sales
- Claim the GST input tax credit on the inward supplies i.e. purchases
- Pay GST to the government.
A business will be required to Register under GST if:
- The aggregate turnover in a financial year exceeds Rs.40 lacs for goods (Rs.20 lacs for special category states) or Rs.20 lacs for services (Rs.10 lacs for special category states)
- It falls under the provisions of compulsory registration
Thus, a dealer whose aggregate turnover is less than the prescribed threshold limit does not fall within the provisions of compulsory GST registration. Such dealers can apply for voluntary registration under GST. He may apply for a voluntary registration under GST to avail the benefits available to GST registered dealers.
Who should opt for Volunatry Registeration under GST?
Whether a dealer should apply for a voluntary GST registration or not depends on various factors.
Apply for voluntary registration under GST for the following reasons:
- Claim ITC on purchases – If you are registered under GST, you can claim the input tax credit of the GST paid on your purchases. You can claim GST input tax credit if you are registered under GST.
- Status of the registered dealer – If you are a GST registered dealer, you will receive a certificate of registration that will act as a valid proof of legal status of the business.
- Competitive Advantage – Larger organisations and MNCs prefer to work with the GST registered dealers. A GST registered dealer can work with such companies to gain a competitive advantage.
- Inter-state sales – If you plan to sell goods or services outside your state in future, you can apply for voluntary registration under GST. By voluntary GST registration, you can avoid compulsory GST registration in future.
- E-Commerce sales – If you plan to sell goods or services on an e-commerce platform, you can apply for voluntary GST registration to avoid compulsory registration under GST in the future.
- Unutilised ITC of earlier taxes – Dealer who has unutilised input tax credit under service tax, VAT etc can carry forward this credit. This credit can be used for payment of taxes after registering under GST.
Do not apply for voluntary registration under GST for the following reasons:
- Sales to unregistered dealers – If your customers are not registered under GST, they cannot claim the credit of GST paid on the purchase. Thus, it would be beneficial to not charge GST from them. In that case, do not apply for registration.
- Purchases from unregistered dealers – If you purchase goods and services from unregistered dealers, you do not pay GST on purchases. Thus, you do not have any input tax credit to claim and registration may not be taken.
- GST compliances – Once you’re registered under GST, it is compulsory to follow the provisions of GST Act. To avoid complicated compliances like filing returns, payment of tax, maintenance of accounts etc, registration should not be taken.