GST Registration Process for Proprietorship

GST Registration Process for Proprietorship

Goods and Services Tax aims to systemic the entire process of taxation and to eliminate cascading effects on taxes. An alternative to various tax laws, such as VAT, service tax, excise duty, etc., could therefore enhance a more transparent and efficient system of tax. It includes different types of businesses, including proprietorship. Therefore, GST registration is required for a business to be established legally, to collect tax from customers, and to duly claim input tax credit.

When is GST Registration Required for a Sole Proprietorship?

Turnover Threshold:

If the annual turnover exceeds the prescribed threshold limit, GST registration is compulsory. The threshold limits differ according to the category of business and locality.

• For most states, it is ₹20 lakhs for service providers (₹10 lakhs for special category states).
• The threshold Limit for the Supply of Goods is ₹40 lakhs in regular states and ₹20 lakhs in special states.

Inter-State Supply of Goods or Services:

GST registration is a must for businesses dealing in the supply of goods or services by state irrespective of turnover. This also encompasses those businesses which are into export or import of goods.

E-Commerce Sellers:

Any sole proprietor selling goods or services through e-commerce platforms must meet the prerequisites for GST registration.

Voluntary Registration:

The sole proprietor may wish to register voluntarily in circumstances where registration is not mandatory, as this gives access to input tax credit and elevates credibility.

Business Involved in Specific Activities:

A business is facilitated to obtain GST registration when involved in the reverse charge mechanism or the supply of goods or services through an e-commerce operator.

Benefits of GST Registration for Sole Proprietorship

Legal Recognition and Credibility:

The business gains legal recognition through registration with GST. This would enhance its market credibility. 

Input Tax Credit:

This is an important advantage due to GST registration under which the taxpayer can claim input tax credit on the purchase made for a business, thus helping to lighten the tax burden.

Access to Wider Market:

GST registration enables a sole trader to deploy its energies in interstate commerce and export goods and services across borders without restriction. 

Competitive Advantage:

GST registered businesses are most likely to trump their unregistered peers. 

Simplified Taxation:

GST, as one, is a tax regime that consolidates several indirect taxes that were there earlier, such as VAT, excise, and service tax. Reporting is simple regarding taxation, and compliance is not so overbearing. 

Government Benefits:

GST registration is the golden key to various schemes, incentives, and subsidies that are only available to registered businesses. It also makes the business eligible for government contracts, tenders, and grants.

Avoidance of Penalties:

Doing business without GST registration in the cases where it is mandatory would entail penalty, interest, and even legal action by the government. Registry ensures compliance in terms of tax law for a business.

GST Registration Process for Sole Proprietorship

Registering for GST as a sole proprietorship is an easy and online process. The following is a stepwise guide:

Visit the GST Portal.

Go to the official GST portal (https://www.gst.gov.in/)

Click on ‘Register Now’:

Clicking on the homepage’s “Services” tab, it is possible to register. Now, click on the “New Registration” option.

Basic Details:

You will be asked for basic details such as:

• Business Name: Name of the business, sole proprietorship.
• PAN Number: The Permanent Account Number (PAN) of the proprietor.
• Business Address: The address where the business is located.
• Email Address and Mobile Number: For communication and verification.

The PAN number of the proprietor will serve as the identity for the business for tax purposes.

Submit Documents:

You will upload the following documents for verification: proof of business registration or incorporation (if applicable).

• PAN card of the proprietor.
• Aadhaar card (for identity verification)

Address proof (e.g., rent agreement, utility bill, etc.).

Bank account statements or canceled cheques to verify the business’s bank details.

GST Application:

After all necessary details are entered and the documents are uploaded, an application reference number (ARN) will be generated by the system for tracking the status of the application.

GST Verification:

The application will be verified by the GST authorities, and if all information is correct, the GSTIN will be issued to the proprietor. This may take a few days to a couple of hours.

Documents Required for GST Registration

1. Proprietor’s PAN Card
2. Proof of business address – rent agreement/utility bills/property documents
3. Aadhaar card (for proprietor)
4. Photograph of the proprietor
5. Bank statement or canceled cheque
6. Details for GST compliance – nature of business and type of goods/services offered.

GST Filing and Compliance for Sole Proprietorship

The sole proprietor must comply with GST filing requirements at regular intervals after obtaining registration under GST.

• GST Returns: The proprietor has to file either monthly or quarterly GST returns (as applicable based on turnover) through the GST portal. Sales are reported by the taxpayer, purchases, and input tax credits.
• Invoice Generation: Tax invoices should be established by GST-registered businesses to comply with the GST legal requirements for every sale transaction and should contain information such as the GSTIN, the total amount of tax, and any other necessary material.
• Payment of Taxes: The tax shall be payable on the sales and purchases made, and after making an end to the input tax credit, the proprietor will deposit the GST collected from the customers into the government.
• Another Compliance: The proprietor is required to file an additional annual GST return along with the monthly or quarterly filing at the end of the year.

Get Started with TaxDunia 

Getting GST registration for a sole proprietorship is one of the most important compliances under Indian tax laws, especially for those businesses whose turnover exceeds the prescribed ceiling limits or undergoes interstate supply of goods and services. Registration opens up a series of advantages, like claiming an input tax credit or various government schemes, and improved credibility.