GST Registration Process For Small Businesses | Step-by-Step Guide

GST registration enables the business to charge GST from customers and transfer the credit of the tax paid on purchases to the buyers or the customers. It also subjects it to formal taxation and enhances its credibility to avail loans or work with big firms. All the small business owners in India are required to register for Goods and Services Tax (GST) if their goods and services annual turnover crosses a limit as fixed under GST law. The total turnover is not the only criterion against which the GST registration requirement is made, but also on other factors like:

• Whether the business is interstate or intrastate operations,

• The nature of the goods that are offered or the services rendered.

• No matter whether the business is engaged in e-commerce or online marketplaces.

• If the business would like to avail of the Input Tax Credit (ITC).

When a business passes the threshold or falls under the range that obliges it to register (such as inter-state supply), it must register under GST.

GST for Small Businesses: Here Is What You Should Know?

• Goods Suppliers: For instance, if and when your annual turnover crosses ₹40 lakh, then GST registration becomes compulsory. However, where the business is carried out in any of the states falling in Arunachal Pradesh, Manipur and Meghalaya, the turnover must not exceed ₹ 20 lacs.

• Service Providers: All service providers and businesses having a turnover of over ₹20 lakh in any preceding State are required to register themselves under GST. Some states have put limits in their particular regulation in which service providers are allowed to turnover up to ₹10 lakh for Manipur and Mizoram.

How Does GST Benefit Startups And Small Businesses?

Since the implementation of the GST, it has majorly benefited the startups and small businesses in various ways, which are outlined in the subheads below:

Tax Credit On Purchases

Before the implementation of GST, there were two separate taxes, namely the Value Added Tax charged on the purchases and the Service Tax charged on the sales of the service providers; however, the service providers could not avail of the credit of the VAT paid. The best thing that happened to them is that through GST, they can claim the taxes paid on their purchases against the taxes charged on their products.

• Example Pre-GST: A startup is purchasing ₹25,000 in VAT and is selling goods for ₹1,20,000, on which it has paid service tax ₹12,000; the total taxes paid are ₹14,500.

• Example Post-GST: Under the GST, in the same case, the same startup could set off ₹6,000 on purchases against ₹14,400 GST on sales, thus the effective tax was ₹8,400 only.

Improved Logistics For Small Businesses

GST has made the logistics easier through the removal of several taxes on the Interstate movement of goods. Interstate taxes were a major concern in the past, meaning that companies had to have several warehouses to avoid having to pay taxes on goods shipped from one state to another; this factor is no longer an issue, and therefore, companies can cut costs while at the same time increasing efficiency. Also, the abolishing of check posts and tolls helps in faster movement of goods and thus brings down the costs of transportation.

Impact On Manufacturing Startups

The introduction of Goods and Services Tax (GST) created both opportunities and challenges to manufacturing startups in India. Although, GST has simplified the indirect taxation by combining various taxes into a single structure, it has also affected the compliance cost on the small manufacturers. Here’s how:

Reduction In Compliance Costs

Earlier, it was an array of taxes which were imposed on various sectors, however, GST has amalgamated most of them and thus has reduced the burden on organisations. This is especially helpful for newcomers to the business environment, for example, the startups and small business ventures, as they are left to the major business of the business, instead of grappling with different tax systems in different states.

Ease Of Doing Business With Single Registration

Another advantage of GST is that businesses are only required to register under this single tax law to run their business across India. This makes the requirements easier to fulfil and the amount of documents to fill in; thus, startups can grow their businesses more freely.

GST Offences & Legal Consequences For Non-Compliance

Non-compliance with the GST laws is costly, whereby there are some penalties that one can face depending on the extent of the offence. Below is a summary of penalties:

Conclusion

GST has brought about a sea change in the tax environment in India, particularly for small businesses and startups, because of its simplified structure of tax laws. However, the businesses must be aware and conform to the GST laws all the time so that they do not have to pay fines.

Get the latest updates on government schemes and policies with Jaagruk Bharat. Join India's biggest Jaagruk Bharat community. Share your thoughts, questions, and favourite topics with us.