GST Registration Mandatory for Small Traders

The Goods and Services Tax (GST) is a single tax system that has replaced various indirect taxes in India. It applies to the supply of goods and services across the country and aims to create a seamless national market.

It is essential for small traders to understand and comply with GST. It simplifies tax compliance, reduces the cascading effect of taxes, and allows small traders to claim input tax credits. GST registration enhances business credibility, facilitates easier access to credit, and enables participation in e-commerce platforms. In this article, you will learn about GST Registration for Small Traders, eligibility, documents required and more.

Who Qualifies as a Small Trader?

A small trader under GST is typically an individual or business engaged in the supply of goods or services on a modest scale. These traders often operate locally or regionally and serve specific communities or markets. They may have limited resources and infrastructure compared to large entities.

Small traders usually handle various aspects of their business independently, which include procurement, sales and customer relations. Despite their size, they play a vital role in the economy as they provide essential goods and contribute to employment and local development. 

Mandatory GST Registration Criteria for Small Traders

Small traders are required to register for GST if they fall into the categories listed below:

1.    Inter-State Supply of Goods or Services: Businesses that are engaged in supplying goods or services across state borders must obtain GST registration, regardless of their turnover.

2.   Casual Taxable Persons: Entities that occasionally supply goods or services in India without a fixed place of business are required to register for GST.

3.    Non-Resident Taxable Persons: A non-resident taxable person is an individual or business outside India that occasionally supplies goods or services in India without any fixed place of business.

4.    E-Commerce Operators and Sellers: Business that operates on e-commerce platforms or those who supply goods through such platforms need to register for GST.

5.     Reverse Charge Mechanism (RCM) applicability: If a business is liable to pay tax under the reverse charge mechanism, it must register for GST.

6.     Previous Tax Registrations: Businesses that previously registered under VAT, excise or services tax must migrate to GST and obtain a new registration.

7.     GST Threshold Limit: Small businesses must register for GST if their annual turnover exceeds Rs. 40 lakhs in most states or Rs. 20 lakhs in special category states.

Voluntary GST Registration

Even if a small business does not meet the mandatory registration criteria, it can opt for voluntary GST registration. Small traders can enjoy many benefits when they voluntarily register for GST. Few of the benefits are listed below:

1.   Claim ITC: ITC stands for Input Tax Credit. Voluntarily registered businesses can claim credit for GST paid on purchases and expenses. This reduces overall tax liability, improves cash flow and profitability.

2.    Expand Market Reach: With GST registration, businesses can engage in inter-state trade and sell through e-commerce platforms. It broadens their customer base and enables growth beyond local markets

3.     Enhances Business Credibility: GST registration signals compliance and professionalism. It builds trust with customers and suppliers. It can also facilitate access to government contracts and partnerships.

Documents Required For GST Registration

Listed below are the documents that are essential for GST registration for small traders:

1.   PAN Card: Permanent Account Number of the business or proprietor.

2.    Photograph: Recent passport-sized photograph of the proprietor or authorised signatory.

3.    Identity and Address Proof: Aadhaar card, voter ID, passport, or driving license of the proprietor or authorised signatory.

4.    Business Address Proof: Documents such as an electricity bill, property tax receipt, rent agreement, or ownership deed to verify the principal place of business.

5.     Bank Account Details: Cancelled cheque, bank statement, or passbook copy to confirm bank account information.

6.      Authorisation Letter: If someone other than the proprietor is authorised to sign the GST application, an authorisation letter or board resolution is required.

To learn more, you can contact Online Legal India  

Process for GST Registration for Small Traders

Below is a detailed step-by-step process for GST registration for small traders:

Step 1: Access to the GST portal

You need to visit the GTS portal. Navigate to the Services tab and select the option New Registration. You need to choose the option Taxpayer as your user type, then provide your state, district, business name, PAN, email, and mobile number. Complete the captcha and proceed to the next step.

Step 2: Verify Contact Details

After submitting your details, you'll receive One-Time Passwords (OTPs) on your registered email and mobile number. Enter these OTPs to verify your contact information. Upon successful verification, the system will generate a Temporary Reference Number (TRN), which you'll use to continue your registration process.

Step 3: Log in With TRN

Return to the GST portal's 'New Registration' section and select 'Temporary Reference Number (TRN).' Enter your TRN and the captcha code, then click 'Proceed.' You'll receive another OTP on your registered contact details; enter this OTP to access your saved application draft.

Step 4: Fill in the Business Details

Once you have logged in with your business details you need to provide comprehensive business information which will include legal name, trade name, constitution and commencement date. You also need to mention details about promoters or partners, authorized signatories, and the principal place of business. If applicable, add information about additional business locations and upload relevant address proofs.

Step 5: Specify Goods and Services

Once all the details are filled in, you need to identify the goods and services your business offers. To do this, you need to select proper HSN (Harmonised System Nomenclature) codes for goods and SAC (Service Accounting Code) for services. It is essential to select accurate classification as it helps to apply correct tax rates and facilitates compliance with GST registration.

Step 6: Upload Required Documents

After filling in your business details and selecting the correct goods or service categories, you will need to upload the necessary documents. Use the portal’s upload section to attach each file as per the required format and size. Make sure the documents are clear, correct, and match the information you’ve entered in your application.

Step 7: Submit the Application

After you have filled in all the information, you need to review it to ensure accuracy. Submit the application using a Digital Signature Certificate (DSC), e-Sign, or Electronic Verification Code (EVC). Post submission, you'll receive an Application Reference Number (ARN) to track your application's status.

Step 8: Await Approval and GSTIN

The GST authorities will review your application and may request additional information or clarification. Once approved, you will receive a unique 15-digit Goods and Services Tax Identification Number

GST Rates for Small Traders:

The Goods and Services Tax (GST) in India is structured into five primary slabs. Listed below are the GST rates for Small traders:

GST Composition Scheme Rates

Below is a list of the GST composition scheme rates for small businesses:

Listed below are the primary category of GST exemption that are applicable to small businesses:

1. Turnover-Based Exemption

Small businesses with an annual turnover below ?40 lakh for goods and ?20 lakh for services (?20 lakh and ?10 lakh in special category states) are exempt from GST registration. This, in turn, reduces compliance burdens for low-revenue enterprises.

2. Supply-Based Exemption

Certain essential goods and services, such as unbranded food items, healthcare, and educational services, are exempt from GST to ensure affordability and accessibility for the public.

3. Supplier-Based Exemption

Specific entities like agriculturalists and charitable organisations are exempt from GST registration as they supply only exempt goods or services.

4. Reverse Charge Mechanism (RCM) Exemption

Recipients are not required to register for GST solely due to receiving supplies under RCM, especially when the daily value of such intra-state supplies from unregistered persons does not exceed ?5,000.

5. Zero-Rated Supplies

Exports and supplies to Special Economic Zones (SEZs) are considered zero-rated. This means they attract 0% GST, which allows businesses to claim input tax credits and promote international trade competitiveness.

6. Non-GST Supplies

Certain items, like alcoholic liquor for human consumption and petroleum products, are outside the scope of GST. These categories of goods remain under the purview of state taxes.

Penalties for GST Non-Complaince for Small Traders:

Below is a detailed list of the non-compliance penalties for small traders:

Benefits of GST registration for Small traders:

Listed below are the benefits of GST registration that a small business owner can enjoy:

1. Claim Input Tax Credit

GST registration allows a business to claim credit for taxes paid on purchases, which in turn reduces overall tax liability and improves cash flow.

2. Simplify Tax Structure

GST replaces multiple indirect taxes with a single tax, and streamlines compliance. It also reduces complexity in tax management.

3. Enhance Business Credibility

A GST-registered business gains legitimacy, which makes it more attractive to clients, suppliers, and financial institutions.

4. Facilitate Interstate Trade

GST registration enables a business to conduct interstate transactions seamlessly and expand its market reach across India.

5. Access Government Tenders and Schemes

Registered entities become eligible to participate in government tenders and access various schemes and subsidies aimed at promoting business growth.

6. Improve Record-Keeping and Transparency

GST mandates systematic record maintenance, which fosters transparency and aids in better financial management.

7. Ensure Legal Protection and Compliance

GST registration ensures compliance with tax laws. It also protects businesses from penalties associated with non-registration.

8. Simplify Online Processes

GST registration and return filing are conducted online, which makes the process efficient and accessible, especially beneficial for startups and small enterprises.

9. Eliminate Cascading Taxes

GST removes the tax-on-tax effect as it allows credit for taxes paid on inputs. It also reduces the overall tax burden on goods and services.

10. Opt for the Composition Scheme

Small businesses with a turnover of up to 1.5 crore can opt for the Composition Scheme, which allows them to pay tax at a fixed rate and enjoy simplified compliance.

Conclusion

To sum up, it is important to understand GST Registration for Small Businesses and its compliance to ensure smooth business operations and avoid penalties. Whether a trade operates, locally or expands across states, GST registration bring benefits like Input Tax Credits and better market credibility.

The process may seem a bit complicated, but assistance is available through trusted platforms. Among other service providers, Online Legal India is one of the most reliable choice for small traders. Their expert team will guide you through the GST registration process, ensure timely return filing, and compliance.