Before discussing the difference between Mandatory and Voluntary GST registration, let us first discuss GST. GST or Goods and Services Tax is introduced to bring all the taxes under one regime. GST Registration is mandatory for every supplier who makes the supply of goods and services or both if his annual turnover in a financial year more than the specified limit can get GST registered. Following is the limit for taking GST Registration:
- In the case of Services: The annual turnover in a financial year is Rs. 20 lakh (Rs. 10 lakh for states like Manipur, Nagaland, Tripura, and Mizoram).
- In case of Goods:The annual turnover in a financial year is Rs. 40 lakh (Rs. 20 lakh in states of Manipur, Mizoram, Nagaland, Sikkim, Tripura, Arunachal Pradesh, Meghalaya, Pondicherry, Telangana, and Uttarakhand).
Following is the list of different taxes that comes under GST:
- Custom Duty.
- VAT
- Luxury tax.
- Service tax.
- Octroi
- Taxes on betting, lotteries, and gambling.
- Central sales tax.
- Central excise duty.
- Amusement and Entertainment tax.
There are three categories under GST:
- Central Goods and Service Tax: This is proposed by the Central Government of India and the State and Central Government agree to combine their tax collections and share the revenue equally.
- State Goods and Services Tax: It is one of the components of GST, and the State Government collects it on intra-state supplies.
- Integrated Goods and Services Tax (IGST): This is done by the State Government and Central Government together but the tax collected by the Central Government.
Note: Slab rate of GST is 5%, 12%, and 18% for different Goods and Services.
What is Voluntary GST Registration?In India, many businesses fall under the category of GST registration, and it mandatory for these categories to get registered under GST. In contrast, few people do not come under the criteria as we mentioned above in this blog and wants to take GST Registration then they can apply for voluntary registration as other businesses registrations.
Benefits of Voluntary GST Registration:
- This registration helps to increase the number of buyers; buyers purchase anything only from a person providing tax invoices. Only a person who is registered can issue the tax invoices.
- Those businesses registered voluntarily under GST can make inter-state sales without any restrictions. So, it extends the potential market for Small and Medium-size Enterprises (SMEs), and they have an option to sell their goods online with the help of e-commerce platform.
- GST provides a different rating to the taxpayers based on their regular compliance and regularity in paying tax which helps to upgrade his/her rating.
- For the GST registered person, it easy to get credits and loans due to transparency in the business.
- A person who registered voluntarily can take Input Tax Credit (ITC) on their purchases and input services like consultation fees, legal fees, etc. and it helps to increase their business profitability and margin.
Liabilities of Voluntary GST Registration:
- It is compulsory to collect and must remit to the government for a person who is registered under GST. If an individual or a person did not pay the tax, then they have to pay it from the total amount received, allowing for that the amount is inclusive of taxes.
- The registered person has to file annual and quarterly returns regularly. If the person does not file annual and quarterly returns regularly, the government of India will charge penalties.
- In case of any default, penalties can be charged, and it can affect credit rating.
There are some criteria for mandatory Registration. Following is the list of criteria for the registration:
- Mandatory registration is compulsory for the inter-state supply of goods.
- The annual turnover of the supply of goods within the same state is more than Rs. 40 lakh except for Manipur, Mizoram, Nagaland, Sikkim, Tripura, Arunachal Pradesh, Meghalaya, Pondicherry, Telangana, and Uttarakhand where the turnover of the supply of goods is Rs. 20 lakhs.
- A person involved in the supply of services has to get registered under GST if the turnover is more than Rs. Lakhs except for Manipur, Mizoram, Nagaland, Sikkim, Tripura, Arunachal Pradesh, Meghalaya, Pondicherry, Telangana, and Uttarakhand.
- A person involved in the supply of goods and services in Manipur, Mizoram, Nagaland, Sikkim, Tripura, Arunachal Pradesh, Meghalaya, Pondicherry, Telangana, and Uttarakhand has to register if the turnover is more than Rs. 20 lakh in case of goods and Rs. 10 lakh in case of services.
- An e-commerce operator must get registered under GST who provides to buy and sell goods and services even if the turnover does not attract the specified limit.
- It is also mandatory for input service distributor to get registered.
- In case the supplier is a non-resident taxable person, such type of person has to register.
- Registration is necessary for a person who is required to pay tax under the Reverse Charge Mechanism.
- Registration under GST is also compulsory for a person who is deducting TCS or TDS in GST.
- If any person who is providing online information in India from outside of India has to get registered.
- Any other person notified by the government.
Benefits of Mandatory GST Registration:
- Mandatory registration under GST helps to eliminate the cascading effect of the tax.
- Small businesses can avail benefits of GST as it gives an option to lower taxes by the composition scheme.
- Compliances are less.
- Improved the efficiency of logistics.
- The unorganized sector is regulated under GST.
From above it is cleared that, if a person does not fall under the category as mentioned above then it's a personal choice that he/she wants to get registered under GST or not, if they want to get registered then it is called voluntary GST registration. And GST registration is mandatory for those persons who are specified by the government. So the voluntary registration under GST has benefits along with some liabilities, as we mentioned above in this blog.
