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What Happens If a Business Not Registered for GST?

avatar of saurabh agrawal
By Saurabh Agrawal
7 min read

What Happens If a Business Not Registered for GST?

Key Takeaways

  • Businesses with turnover above specified limits must register for GST.
  • Casual taxable persons supply goods/services without a fixed place of business and must register for GST.
  • Non-resident taxable persons supply goods/services in India without a fixed place of business and must register.
  • Composition taxpayers opt for a simplified GST scheme for small businesses with a fixed tax rate on turnover.
  • QRMP taxpayers file quarterly returns and make monthly tax payments for easier compliance.

GST (Goods and Services Tax) registration is a crucial aspect for businesses in many countries. It denotes that the government has accepted a company as a supplier of goods or services. Understanding GST registration can save businesses from penalties and help them stay compliant with tax laws.

What is GST Registration?

what is gst registration?

GST registration is the process through which a business or individual is recognized as a supplier of goods and services under the Goods and Services Tax (GST) system. When a business registers for GST, it is assigned a unique Goods and Services Tax Identification Number (GSTIN).

This number is used for all GST-related activities, including filing tax returns, claiming input tax credits, and paying taxes.

GST registration is mandatory for businesses whose turnover exceeds a specified GST threshold, which varies by country. It is also required for certain types of businesses, regardless of turnover , such as those involved in inter-state commerce or operating through e-commerce platforms.

Registering for GST brings several benefits, including legal recognition as a supplier, eligibility to claim input tax credits, and improved compliance with tax laws. It also helps in avoiding penalties and ensures smoother business operations.

Who Should Obtain GST Registration?

In India, businesses must register for GST if their annual turnover threshold exceeds a specific threshold. As of now, the thresholds are:

  • ₹40 lakhs for businesses dealing in goods (₹20 lakhs for special category states).
  • ₹20 lakhs for service providers (₹10 lakhs for special category states).

Meeting these business turnover limits is essential for compliance. Failing to register when required can lead to penalties and other legal issues.

Voluntary Registration

Some businesses opt for voluntary GST registration, even if their turnover does not exceed the mandatory threshold. This decision can offer several benefits:

  • Input Tax Credit: Registered businesses can claim input tax credit on their purchases, which reduces their overall tax liability.
  • Business Credibility: Being GST-registered enhances a business’s credibility, making it more attractive to customers and suppliers.
  • Competitive Edge: It can provide a competitive advantage, especially when dealing with larger businesses that prefer to work with GST-compliant partners.
  • Smoother Compliance: Voluntary registration can simplify compliance with tax laws and regulations, facilitating smoother business operations.

Documents Required for GST Registration

When registering for GST in India, businesses need to provide several documents for registration to ensure the process is completed smoothly. Here is a comprehensive list of the documents required

  • PAN Card:
    • PAN card of the business or the individual (proprietor) applying for GST registration.
  • Proof of Business Registration Certificate
    • Partnership deed (for partnerships).
    • Certificate of incorporation (for companies).
  • Identity and Address Proof of Promoters/Directors with Photographs:
    • Aadhar card.
    • Passport.
    • Voter ID card.
    • Driving license.
  • Address Proof of the Business Place:
    • Rental agreement, if the property is rented.
    • Electricity bill or property tax receipt for owned properties.
    • Consent letter from the property owner.
  • Bank Account Details:
    • Canceled cheque.
    • Bank statement.
    • The first page of the passbook shows account holder details.
  • Digital Signature:
    • Digital Signature Certificate (DSC) of the authorized signatory (mandatory for companies and LLPs).
  • Letter of Authorization/Board Resolution:
    • For partnerships: Letter of authorization.
    • For companies: Board resolution authorizing a signatory for GST registration.
  • Business Location Proof
    • Additional documents, like a copy of the municipal khata or a copy of the electricity bill.

Ensuring you have all these documents ready will help facilitate a smooth and efficient GST registration process.

GST Registration Fees

gst registration fees

In India, the process of registering for GST is generally free of charge. The government does not charge any fees for GST registration itself. However, businesses should be aware of a few potential costs associated with the registration process:

  1. Professional Fees:
    • While the government does not charge for GST registration, businesses may incur costs if they hire professionals, such as accountants or GST consultants, to assist with the registration process. These professionals can help ensure that all documentation is in order and that the registration is completed accurately and efficiently.
  2. Digital Signature Certificate (DSC):
    • For companies and LLPs, a Digital Signature Certificate (DSC) is required for the authorized signatory. Obtaining a DSC involves a fee, which varies depending on the provider and the type of DSC required.
  3. Compliance Costs:
    • Post-registration, businesses may face costs related to maintaining compliance with GST regulations. This includes filing regular GST returns, maintaining proper records, and possibly seeking ongoing professional advice.

While there are no direct fees for GST registration, businesses should budget for these associated costs to ensure smooth and compliant operations.

Penalty for Not Obtaining GST Registration

In India, failing to obtain GST registration when required can lead to severe penalties. According to Section 122 of the CGST Act, any taxable person who fails to register for GST must pay a penalty of ₹10,000 or the amount of tax evaded, whichever is higher.

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This means that if the tax evaded amounts to ₹2 lakh, the penalty will be ₹2 lakh, not ₹10,000. Additionally, such non-compliance can lead to further legal and financial repercussions​

Non-GST Account Has GST Against It

Business without GST registration | अब business के लिए GST लेना ज़रूरी नहीं ? CA Sachin

When a non-GST registered business mistakenly charges GST on its invoices, it is considered a serious compliance issue. This can occur due to errors in billing practices or misinterpretations of tax obligations. Charging GST without a valid GST registration number is illegal and can lead to penalties, including fines and interest on the wrongly collected tax.

Businesses must ensure their billing and invoicing systems are accurately aligned with their GST registration status to avoid such issues and potential legal consequences.

GST Claimed on a Bill Without a GST Number

Claiming GST on a bill that lacks a GST number is a significant compliance issue. Here’s why and what it entails:

  • Invalid Claim: Without a GST number, the claim for input tax credit (ITC) is invalid. ITC can only be claimed if the supplier is registered under GST and has provided a valid GSTIN.
  • Audit and Penalty Risks: During audits, if a bill without a GST number is found, it can lead to penalties and disallowance of the claimed ITC. The business may be required to pay back the claimed amount with interest.
  • Supplier Verification: Always ensure that your suppliers are registered under GST and that they provide valid GST-compliant invoices. This includes checking the GSTIN on the invoice and verifying it on the GST portal.
  • Corrective Actions: If you’ve already claimed GST on such a bill, correct the mistake immediately by reversing the ITC claim and ensuring future claims are compliant with GST regulations.

By ensuring that every GST claim is backed by a valid GSTIN, businesses can avoid penalties and maintain compliance with GST laws.

Catching GST Issues Before They Affect Your Cashflow

Proactively managing GST compliance is crucial to ensuring smooth cash flow for your business. Here are detailed steps to catch GST issues early:

  • Regular Audits: Conduct periodic internal audits to identify discrepancies in GST filings, invoices, and tax credits. This helps in early detection and correction of errors.
  • Reconcile Monthly: Reconcile your GST returns with your books of accounts monthly. This ensures that any mismatches between the GST portal and your accounting records are promptly addressed.
  • Automated Systems: Use GST-compliant accounting software to automate GST calculations, invoicing, and return filings. Automation reduces human errors and ensures timely compliance.
  • Training and Awareness: Ensure that your accounting and finance teams are well-trained in GST regulations and updates. Regular training sessions can keep them informed about the latest changes in GST laws.
  • Vendor Compliance: Verify the GST compliance status of your suppliers. Ensure they are registered and their GSTINs are valid. This helps in claiming input tax credit accurately.
  • Proper Documentation: Maintain thorough and organized documentation of all GST-related transactions. This includes invoices, purchase orders, and payment receipts. Proper documentation simplifies audits and dispute resolutions.
  • Professional Advice: Engage GST consultants or tax professionals to review your GST compliance periodically. Their expertise can help identify and rectify potential issues before they escalate.
  • Timely Filing: Ensure all filed GST returns and payments are made within the time limit. Late filings can attract penalties and interest, affecting cash flow.
  • Monitor Notifications: Keep an eye on any notifications or notices from the GST department. Promptly address any issues raised to avoid penalties.
  • ITC Reversal: Regularly check and reverse ineligible input tax credits to avoid penalties during audits.

Eligibility Criteria for GST Registration

eligibility criteria for gst registration

Turnover Criteria

Businesses must register for GST if their annual aggregate turnover limit exceeds the specified limit. In India, the thresholds are:

  • ₹40 lakhs for businesses dealing in goods (₹20 lakhs for special category states).
  • ₹20 lakhs for service providers (₹10 lakhs for special category states).

Special Cases

Certain businesses must register for GST, regardless of turnover. These include:

  • Inter-State Business

Any business supplying goods or services across state lines must register for GST, regardless of turnover. This ensures proper tax collection and compliance across different states.

  • E-commerce Platform

Businesses operating through e-commerce platforms are required to register for GST to facilitate tax collection at source. This applies to all e-commerce operators and sellers using these platforms.

  • Casual Taxable Persons

Casual taxable persons, who occasionally supply goods or services in a taxable territory where they do not have a fixed place of business, must register for GST regardless of their turnover. This ensures that all temporary businesses comply with GST regulations.

Procedures for GST Registration

The GST registration process in India involves several steps to ensure proper compliance. Here is a detailed guide:

Step 1: Access the GST Portal: Visit the official GST portal at https://www.gst.gov.in/.

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Step 2: Click on ‘Register Now’: On the homepage, select ‘Register Now’ under the ‘Taxpayers’ section.

Step 3: Part A: Generate a TRN (Temporary Reference Number):

  • Select ‘New Registration’.
  • Fill in the details, like your legal name, PAN, email address, and mobile number.
  • Enter the OTPs sent to your email and mobile for verification.
  • Note down the TRN generated.

Step 4: Part B: Complete the Application:

  • Log in using the TRN.
  • Fill out the detailed application form with sections like business details, promoters/partners, authorized signatory, principal place of business, additional places of business, goods and services, bank account details, and state-specific information.
  • Upload the required documents, including PAN, business proof of registration, identity and address proof, photographs, bank details, and the authorization letter/board resolution.

Step 5: Verification:

  • Submit the application using DSC (Digital Signature Certificate) or EVC (Electronic Verification Code).
  • If you are a company or an LLP, DSC is mandatory.

Step 6: ARN Generation:

  • Upon successful submission, an Application Reference Number (ARN) is generated.
  • Use this ARN to track the status of your application.

Step 7: Application Processing:

  • The GST officer will verify your application and documents.
  • Additional information or documents may be requested.
  • If everything is in order, the officer will approve the application.

Step 8: GSTIN Allotment:

  • Once approved, a unique Goods and Services Tax Identification Number (GSTIN) is issued.
  • You will receive a certificate of separate registration with your GSTIN.

Step 9: Login and Access:

  • Use your GSTIN and password to log in to the GST portal.
  • Complete the necessary post-registration steps, such as adding business details, setting up the user profile, and starting to file returns.

By following these steps, businesses can successfully register for GST, ensuring compliance and the ability to avail of input tax credits and other benefits

Who Needs to Register Under GST?

Under the GST (Goods and Services Tax) regime in India, the following entities must register:

who needs to register under gst?
  • Businesses Exceeding Turnover Threshold:
    • ₹40 lakhs for goods suppliers (₹20 lakhs for special category states).
    • ₹20 lakhs for service providers (₹10 lakhs for special category states).
  • Inter-State Suppliers:
    • Businesses supplying goods or services across state lines must register, irrespective of turnover.
  • E-commerce Operators:
    • Businesses operating through e-commerce platforms need to register to facilitate tax collection at source.
  • Casual Taxable Persons:
    • Individuals who occasionally supply goods or services in a taxable territory where they do not have a fixed place of business.
  • Non-Resident Taxable Persons:
    • Non-residents who supply goods or services in India without a fixed place of business.
  • Input Service Distributors (ISD):
    • Entities distributing input tax credit to their branches or units.
  • Agents:
    • Agents supplying goods or services on behalf of other taxable persons.
  • Persons Liable under Reverse Charge Mechanism:
    • Entities required to pay tax under the reverse charge mechanism.
  • TDS/TCS Deductors:
    • Persons required to deduct or collect tax at source.
  • Voluntary Registration:
    • Businesses are not required to register but opt to register voluntarily for benefits such as input tax credits.

Ensuring timely and accurate GST registration is crucial for compliance and avoiding penalties.

The Minimum Limit for GST Registration

In India, the minimum turnover limit for GST registration varies based on the type of business and the state in which it operates. The current thresholds are:

  • Goods Suppliers:
  1. ₹40 lakhs for most states.
  2. ₹20 lakhs for special category states.
  • Service Providers:
  1. ₹20 lakhs for most states.
  2. ₹10 lakhs for special category states.

Businesses exceeding these turnover threshold limits must register for GST to comply with tax regulations. Special category states include northeastern states and hilly regions, which have lower thresholds due to their unique economic conditions.

What Falls Within the GST Criterion of Aggregate Turnover?

Aggregate turnover under GST includes the total value of all taxable supplies, exempt supplies, exports of goods or supplies of services, and inter-state supplies. It is calculated on an all-India basis and excludes the value of inward supplies on which tax is payable under reverse charge and any central, state, or union territory taxes. Here’s a breakdown of what is included:

  1. Taxable Supplies: All sales or supplies that are subject to GST.
  2. Exempt Supplies: Supplies that are exempt from GST.
  3. Exports: All export transactions of goods and services.
  4. Inter-State Supplies: Supplies made between different states within India.

Benefits of GST Registration

  • Legal Recognition:

GST registration provides businesses with legal recognition as suppliers of goods or services. This recognition is crucial for establishing trust with customers, suppliers, and government authorities. It also helps in maintaining transparency and business compliance with tax laws, thereby enhancing the business’s reputation and legitimacy.

  • Input Tax Credit:

Registered businesses can claim input tax credits (ITC) on the GST paid on their purchases. This reduces the overall tax compliance burden, as businesses can deduct the GST paid on inputs from the GST collected on sales. ITC helps in reducing costs and improving cash flow, making the business more competitive.

  • Ease of Compliance:
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GST simplifies the tax structure by consolidating multiple indirect taxes into a single tax system. This reduces the complexity of direct tax compliance, making it easier for businesses to file returns, maintain records, and adhere to tax regulations. The streamlined process also minimizes the risk of errors and penalties.

  • Increased Credibility:

Being GST-registered enhances a business’s credibility. It indicates that the business is compliant with tax laws, which can increase trust among customers and suppliers. This credibility can lead to better business opportunities, partnerships, and a stronger market presence.

  • InterState Business:

GST registration allows businesses to engage in inter-state trade without restrictions, expanding their market reach. This facilitates the movement of goods and services across state borders, leading to broader business opportunities and increased revenue potential.

  • E-commerce Compliance:

Businesses operating on e-commerce platforms are required to register for GST. This secretarial compliance ensures that they can collect and remit tax correctly, avoiding legal issues and penalties. It also enables seamless operations on these platforms, enhancing business efficiency.

  • Avoidance of Penalties:

GST registration helps businesses avoid penalties associated with non-compliance. By being registered and adhering to GST regulations, businesses can prevent fines, interest on unpaid taxes, and other legal consequences. This ensures smooth operations and financial stability.

Conclusion

GST registration is essential for any business. It not only ensures compliance with tax laws but also offers several benefits, like input tax credits and legal recognition. By staying informed and proactive about GST registration, businesses can avoid penalties and streamline their operations.

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FAQs

Who is liable to get registered under GST?

Any business with an annual turnover exceeding ₹40 lakhs (₹20 lakhs for special category states) for goods suppliers, and ₹20 lakhs (₹10 lakhs for special category states) for service providers, must register for GST. Additionally, inter-state suppliers, e-commerce operators, casual taxable persons, and non-resident taxable persons are also required to register, irrespective of their turnover.

Who is a casual taxable person under GST?

A casual taxable person is someone who occasionally supplies goods or services in a taxable territory where they do not have a fixed place of business. They must register for GST regardless of turnover, and their registration is valid for a period of 90 days, which can be extended.

Who is a non-resident taxable person under GST?

A non-resident taxable person is someone who occasionally supplies goods or services in India but does not have a fixed place of business within the country. Like casual taxable persons, they must register for GST regardless of turnover, and their registration is typically valid for 90 days, extendable upon request.

Who is a composition taxpayer?

A composition taxpayer is a small taxpayer who opts for the composition scheme under GST to pay tax at a fixed rate on their turnover. This scheme is available for businesses with an annual turnover of up to ₹1.5 crore, offering simplified returns and reduced compliance, but they cannot claim input tax credit.

Who is a QRMP taxpayer?

A QRMP (Quarterly Return Filing and Monthly Payment of Taxes) taxpayer is a business with an annual turnover of up to ₹5 crores that opts to file GST returns quarterly instead of monthly. They pay taxes monthly through a fixed sum method or self-assessment basis, simplifying compliance and easing cash flow management.

Are you dealing with a business not registered for GST but charging GST?

If a business is charging GST without being registered, it is illegal. Entities with a valid GSTIN are the only ones who can collect GST. Customers should verify the GSTIN on invoices and report non-compliant businesses to the tax authorities to avoid being charged incorrectly.

Is GST registration mandatory for a company?

Yes, GST registration is mandatory for companies that exceed the turnover thresholds specified under GST law. Additionally, companies involved in inter-state supply, e-commerce, or providing taxable services must register regardless of turnover. Non-compliance can result in penalties and legal consequences.

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