Voluntary Registration Under GST: Advantages and Disadvantages

Voluntary registration is self registration by the dealers in order to get listed within the GST framework. It is applicable for those who are not within the parameters of registration and are not required to register in the GST. Upcoming GST will be requiring registrations to be strict and complied with the rules and regulations and has also declared that the business units having a turnover less than 20 lakh (10 lakh for NE states) and Rs. 40 Lakhs for small and medium enterprises with effect from April 1,2020 can get away with the GST registrations. This time it is somehow different with the rules and regulations as the government has been seeking some voluntary registrations. This means that the taxpayer whose turnover does not exceed 20 lakh limit can also do registrations under GST.

Also, it is contained in the provision that all the rules and regulations inhibited by the GST rule-book will be applicable to all those voluntarily registrants same like a normal taxpayer and will have to strictly comply with the provisions asserted on all.

The obvious rule which every taxpayer as of now knows that the threshold limit for the registrations is 20 lakh and if their business is not completing that mark that they don’t need the registrations. But the voluntary registrations bring some healthy chance for those dealers as speculated by the experts. Small spare parts business unit may not be exceeding the limit but in case if he supplies his goods to a large dealer who is under GST and maintains accordingly then it will be the opportunistic side of the registrations.

As the input tax credit and invoice matching concept is swept for the reason and it requires both the dealers and business units to be registered under the GST to avail the tax credit. It is now a prerequisite from various business units to deal with the community who are registered under the GST. Thus in the situation, it would be convincing for the spare part dealer to voluntarily register under the GST. This registration will also facilitate the dealers associated with him.

Voluntary Registration Available

Some specific companies having turnover more than 20 lakhs or selling inter-state or selling online have to register mandatorily under GST. Businesses having turnover between 20 lakhs to 1 crore also have the option to choose composition levy. However, it needs to be understood that the composition levy has its own disadvantages such as they will be not able to collect any tax from their customers or get benefits of an input tax credit. Such SMEs prefer to register themselves as normal dealers rather than composition dealers.

Should you Opt for Voluntary Registration?

You need to ask a few questions to yourself before making this decision-

• Who are your sellers?
• Who are your end-customer or buyers?
• How many resources do you have?

Now while answering these question you can find the following tips beneficial

• If the buyer and seller are registered then you can register yourself otherwise you can break the chain of the Income Tax Credit.
• If you are sure that the end-buyers are unregistered then registering yourself will be not beneficial for you.
• In case if you are planning to scaleup your business then you can go with a composition scheme. Lesser taxes, lesser compliances to be maintained and the easy bank loans will be beneficial for you.

SMEs have to do all the calculations and research before opting for voluntary registration under GST. 

Is a Voluntary Registration Permanent?

No, you can cancel your voluntary registration anytime after completing one year. If a person has furnished voluntary registration for his business but failed to do business within six months after the date of registration, then the registration will be cancelled by one of the following –

• A proper authority/ officer OR
• On request of the concerned person himself OR
• On a request or application filed by the person’s legal heirs, in case of death of such person

It needs to be noted that the submitted application for cancellation of registration by the person who has registered voluntarily will be only considered if the one year from the date of registration is completed.

Benefits of Voluntary Registration Under GST

There are various shortfalls of the compositions scheme and by the suggestion of the experts, it is assumed that these shortcomings will be treated well under the voluntary registrations. There are some benefits associated with the voluntary registration as discussed below:

• Benefiting the buyers for the obvious reasons, the registered dealers can provide their community a privilege of the input tax credit as the dealer can issue tax invoice which will be further used for the availing of the input tax credit. This will be a major point that will help the business unit to increase its customer base.
• Voluntarily registration brings ITC as the voluntary registrants can avail the input tax credit on all the purchases and services availed by them. Ultimately making the business margins prevailing the profitability point.
• Hassle free Interstate registrations as the GST registrants are free to do the interstate transactions with lesser restrictions which in turn make the business units more comprehensible and will also have a wider customer base across the nation. Even Small and Medium-sized enterprises (SMEs) are benefited with the move and have the option to set up online stores and can start their trade with other states on the go.
• GST registration will grant better compliance with the trading community as the rating based on the compliance will be fruitful for the compliance strict business units and will expand their customer base on behalf of their active presentation int eh market. The compliance rating will be based on timely return filings and tax payments as for the knowledge.

Disadvantages of Voluntary Registration

All these points will certainly pull business units to go for a voluntary registration but there are some disadvantages for the same cause:

• The business units who registered themselves under the GST will have to set aside additional resources for the capital liquidity and for the compliances.
• Added number of the returns will be another disadvantage under the GST there will be 3 returns per months and ending up to 37 returns per year. There are three GST forms GSTR-1, GSTR-2, GSTR-3 which will have to be filled duly within the time in every month without any mistake. The forms are based on the sales purchase and the ITC input tax credit for the purpose of the tax liability. One must keep in mind that the compliance must be kept up to date and any failure in the filing of these forms will be awarded a penalty added with the rejection of input tax credit.
• Tax liability will be added compliance to the business unit as the voluntary registration is also deemed as a normal registration with tax liability. The threshold limit of 20 lakh is aggregate including every state of operation.
• Multiple registrations will be under the demand after the registration for all those business units who operates in various states for their trading activities. As known, that the GST is a destination based tax and in which the returns should be filed in every state where the business unit is expanded. The input tax credit will be available only if the dealer is registered in all those states where it is operational and all this registration will be resulting in higher cost of compliance for the business
• Penalty provisions are at the registrations rule-book and every business unit which is registered under the GST is bound to follow and comply with all the rules and regulations issued by the GST. Any failure in the compliance will lead to the penalty.

Recommended: Goods and Services Tax Benefits for Startups in India

After all the discussion, it is assumed that voluntarily registration is not at all a bad idea but in return, it will give tremendous opportunities to the SME sector to grow and expand into the wider area of opportunities. However, rules and regulations are equally applicable but those are for the benefits of the business unit in any way. A compliance stricken business model is a healthy way to do operation into the business world.