Before starting any business, one should become well-versed with the relevant legislation and regulation around their area of undertaking. This also includes any taxes that their business may be liable to pay. The Goods and Services Tax, introduced in 2017, aims to help small businesses by getting rid of complex centre and state taxation systems and replacing them with a simple, unified one.
If you are about to launch a new business, it is necessary to know all about GST registration for small business. Yes, all small businesses register for GST, as it is mandatory for them to do so under the GST Act. You must definitely consider getting a GST for small business if you are a goods manufacturer with an annual turnover of over Rs. 40 Lakhs. In the services sector, businesses making more than Rs. 20 Lakhs should register for GST. This limit has been reduced to Rs. 10 Lakhs for states in the northeast.
Upon registration, the business owner is assigned a Goods and Services Tax Identification Number (GSTIN) which is used to keep record of tax payments and due amounts.
Even though many small businesses try to evade taxes, the benefits of GST registration for small businesses outweigh the disadvantages. In this section, we break down why small businesses should register for GST:
Unified taxation: With the launch of GST, the slew of indirect taxes such as service tax, VAT and excise duty have been eliminated. This means that small entrepreneurs need not pay taxes on taxes anymore.
Composite scheme: Any business that has an annual turnover of more than Rs. 75 Lakhs can pay a flat tax of between 1% and 5%.
Transportation costs: Taxes on the interstate transportation of goods have been reduced under GST. This brings down the overall cost of procurement of raw materials as well as distribution of the product.
Credibility: Getting a GST number for small business can make it appear more legitimate in the eyes of bigger companies seeking to do business with the company. These businesses are even spared from dealing with unnecessary compliances and they can file their returns quarterly.
Easy access to credit: Fulfilling the GST requirements, increases the chances of availing business loans at lower interest rates. This happens because their operations are registered with a government entity and the chances of fraudulent activities are lesser.
Here’s a list of documents required:
Passport sized photographs of the owners
PAN card of the company
Identity proofs like Aadhaar cards, passport or driver’s licence
Certificate of association for LLPs, OPCs and private limited companies
Bank details through bank statements, passbook or cancelled cheques
Partnership deed in case of partnership firms
The process of GST registration for small business is divided into two parts. Follow these steps for the first part of getting a GST number for small business –
Visit the GST website and select ‘Services’, go to ‘Registration’ and click on ‘New Registration’.
A form will appear. Enter all the relevant details and select ‘Proceed’.
OTPs will be sent on the registered email ID and phone number. Enter the same.
Note down the 15-digit temporary reference number (TRN) sent to you for future assistance during the second part of registration
Visit the GST portal again, under ‘New Registration’, select the TRN option and enter your TRN number.
Key in the captcha code and select ‘Proceed’
Enter the OTP received on your registered mobile number and email ID.
Click on ‘Proceed’ to see the status of your application and make edits.
You can complete the second part of GST registration for small business after 15 days of completing the first part. Here’s how –
Select the ‘Business Details’ section on the dashboard and enter the trade name, business constitution and the district of operations.
Enter other details like the date of commencement of business and whether or not you are a casual taxation person. If yes, then generate challans for advance tax payments under the GST law.
Select your appropriate ‘Reason to Obtain Registration’ and enter the details.
Choose your existing registration type like central sales tax, excise duty or service tax, then enter the registration number and date of registration.
Enter the details of up to 10 promoters under the Promoters/Partners tab.
Key in the details of the authorised signatory.
Input the principal place of business details.
Enter the details of goods and services along with HSN codes or SAC.
Provide the bank details of the taxpayer.
Enter your professional tax employee code, state excise licence number and professional tax registration certificate number.
Choose between Aadhaar verification and other options.
Visit the verification page and submit the application with DSC in case of LLPs and companies, e-sign in case of Aadhaar verification, or EVC through registered mobile number.
Receive a confirmation message that your application has been completed.
Check out our detailed article on GST Registration
The introduction of GST has revolutionised small business in a number of ways. By eliminating existing cumbersome taxation policies and ushering in a unified regime, businesses have been able to simplify their workflows, boost their credibility and gain better access to loans. If you haven’t already, get your GST registration for small business today!
The composition scheme under GST is a simple and easy scheme for small businesses. This scheme was introduced to bring relief to SMEs to lift the burden of compliance provisions under the law. Under the composition scheme, the small business owner can pay a fixed percentage of turnover and be relieved from the detailed compliances.
A taxpayer with business turnover below Rs. 1.5 Crores can opt for the Composition Scheme. In the North-Eastern states and Himachal Pradesh, the limit has come down to Rs. 75 Lakhs.