Benefits of GST Registration for Small Businesses and Startups

All new businesses that wish to make their mark, have to do two things – apply for the Startup India, and GST Registration online. Not only does this help establish a new business easily but also facilitates compliance and trade.

Further, tax compliance is essential when it comes to running a business. In the Indian context, this refers to the GST, Income Tax, TDS, and others. Among these having a GST registration is of the essence to conduct basic business processes with ease.

Who Can Apply for a GST Registration?

Any business that offers a product or service can apply for a GST registration online. Further, this becomes mandatory when the business crosses a certain monetary threshold. 

• Annual turnover of 40 lakhs for products or goods (20 lakhs for Northeast India and the Hill States of Himachal Pradesh and Uttarakhand)
• Annual turnover of 20 lakhs for services (10 lakhs for Northeast India and the Hill States of Himachal Pradesh and Uttarakhand)

To add, this is also mandatory in the below scenarios:

• The business operates across state borders
• The company is an e-commerce platform or aggregator.
• A casual taxable person with no fixed places of business.
• A non-resident taxable person, i.e., a foreign business.
• If the company falls under the Reverse Charge Mechanism (the service provider is liable to pay GST)
• If the business is an Input Service Distributor or an agent for the same.

Why apply for a GST Registration

At its inception, GST was designed to bring all businesses under a single tax regime. Thus, by opting for GST registration online, every business owner can reap the following benefits:

1. Simple Taxation Process

Under the GST regime, CST, VAT, Excise Duty, Service Tax, Purchase Tax, Entry Tax, and several other central and state taxes were subsumed. With GST, businesses need to pay only one tax and enjoy simplicity in filing for taxes. This also eliminates the cascading effects that paying for multiple taxes has on a business, i.e., a high final price of a particular product or service.

• Eligibility for Input Tax Credit (ITC)

When your business completes the GST registration online, they get to enjoy Input Tax Credit. This implies that the amount they pay as GST gets adjusted against the GST on their sales.

• Increased Business Credibility and Trust

Most businesses and larger corporations prefer to deal with only companies that carry a GST registration. Thus, for your startup, it is essential to complete both GST and Startup India Registration.

• Access to Government Tenders and Contracts

To be eligible to bid on a government contract, holding a GST registration is mandatory. Thus, unless your business undergoes GST registration online alongside their Startup India registration, they have no way to apply for any government contracts.

• Efficient Management of Inter-State Sales and Logistics

If a business does not have a GST registration, they cannot file for IGST. Thus, they also cannot generate an e-way bill to send their goods across borders. All businesses that deal in inter-state transfer of goods have to file for IGST, get an e-way bill, and only then send their goods to another state.

• Easier Export of Goods and Services

Exports are zero-rated under GST while imports have to pay the Customs Duty. With the help of GST registration, you can claim reimbursement on all unused input taxes. This, in turn, will help offset the cost of your export operations.

• Access to Various GST-Linked Schemes

Small businesses can benefit from the Composition Scheme where they have to pay only 1% tax if their annual turnover is INR 75 lakh or below. Further, MSMEs can also apply for the Startup India Registration and avail of the GST-linked schemes for startups.

• Ease of Obtaining Loans and Credit

To avail aid from any financial institution, it is important to hold a GST registration alongside the usual tax registration (PAN and TAN) for a business.

This helps the banks assess the financial viability and position of the business as a whole. In turn, this establishes the risks associated with giving said business a loan.

Penalties for Not Having A GST Registration

Not only can a business lose out on the above benefits by not availing a GST Registration online, but they are also subject to a number of penalties.

Under Section 122 of the CGST Act businesses have to pay a minimum fine of INR 10000 or 10% of the tax which is due. Thus, for a late GST application, every business has to pay whichever value is maximum.

Further, they may also face the following:

• Their vehicles, transportation, or goods may get detained at the state border checkpoints.
• The products or vehicles may be confiscated.
• The business, person, or entity will not be able to claim any Input Tax Credit.
• They will miss out on bidding on government contracts.
• Application for loans or investments may face restrictions and scrutiny.

To add, as per Rule 18 of CGST Rules 2017, every business that has a GST registration needs to display their GST ID, barring which they may attract fines. 

Thus, all businesses that are eligible for GST should apply for GST registration online as early as possible.

To Conclude: Ensuring Business Efficiency with GST Registration

Often, small entrepreneurs first establish their business and then apply for things like Startup India registration and GST Registration online. However, these need to be done as promptly as possible to avoid any non-compliance. Further, having a GST Registration has several benefits as discussed above.

Thus, to ensure smooth business processes, it is best to voluntarily apply for the GST registration online.

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