HOW DO I REGISTER A PROPRIETORSHIP WITH GST?
A proprietorship firm is a business owned and operated by a single individual. The proprietor is personally liable for all the debts and obligations of the business.
To register a proprietorship with GST in India, you need to follow these steps
- Choose a business name: Select a unique name for your proprietorship firm that is not already registered by another business. You can choose any name as long as it is not infringing on any trademarks or copyrights.
2. Gather required documents: Collect all the necessary documents, as mentioned below, including PAN card, Aadhaar card, bank account proof, and business name proof.
- PAN card of the proprietor
- Aadhaar card of the proprietor
- Proof of business name (such as a trade license or newspaper advertisement)
- Proof of address (such as a utility bill or rental agreement)
- Bank account statement (to show that you have a business bank account)
- GST registration certificate (if you have already registered for GST)
Apply for GST registration: You can apply for GST registration online or offline. The online form can be found on the website of the Goods and Services Tax Network (GSTN). The offline form can be obtained from the GSTN office in your state.
4. Pay the GST registration fee: The GST registration fee for a proprietorship firm is INR 1,000. You can pay the fee online or offline.
5. Get the GST registration certificate: Once you have applied for GST registration and paid the registration fee, you will be issued a GST registration certificate. This certificate will be your proof of registration.
ADVANTAGES OF REGISTER A PROPRIETORSHIP WITH GST
Legal Recognition: Registering your proprietorship with GST provides legal recognition to your business. It distinguishes your business as a legal entity for taxation purposes, which can enhance your credibility in the eyes of customers, suppliers, and financial institutions.
Input Tax Credit (ITC): One of the significant advantages of GST registration is the ability to claim Input Tax Credit (ITC) on GST paid on purchases. This means that when you buy goods or services for your business, you can offset the GST you paid against the GST you collect from your customers. This helps reduce the overall tax liability, making your business more cost-effective.
Compliance with the Law: Registering with GST makes your business compliant with the tax laws of the country. Failure to register when required can result in legal penalties and complications. Compliance also makes it easier to participate in government contracts and programs.
Cascading Tax Elimination: GST eliminates the cascading effect of taxes. Previously, in a non-GST system, businesses paid taxes on top of taxes, which increased the cost of goods and services. With GST, taxes are levied only on the value added at each stage of the supply chain.
Ease of Interstate Transactions: GST simplifies interstate business transactions by replacing various state-level taxes with a single integrated tax (IGST). This makes it easier for your business to expand its customer base beyond state borders.
Online Filing and Payment: GST registration comes with the convenience of online filing and payment of taxes. This reduces the paperwork and administrative burden on your business, making it easier to meet tax obligations.
Competitive Advantage: Many businesses prefer to deal with registered suppliers as it allows them to claim ITC. Being GST-registered can give your business a competitive advantage, especially if your competitors are not registered.
Access to Input Suppliers: GST registration allows you to purchase inputs and raw materials from registered suppliers. This can help ensure the availability of quality inputs for your business operations.
Tax Transparency: GST encourages transparency in business transactions. Invoices and transactions are tracked digitally, making it more challenging for businesses to engage in tax evasion or fraud.
Simplified Tax Rates: GST typically has a standardized tax rate for most goods and services, making it easier to calculate and manage taxes compared to a complex tax structure.
DISADVANTAGES OF REGISTER A PROPRIETORSHIP WITH GST
Complex Registration Process: While GST is designed to simplify the taxation system, the initial registration process can be cumbersome, especially for individuals who are not familiar with tax compliance requirements.
Compliance Burden: GST registration involves regular compliance activities, such as filing returns, maintaining records, and timely payment of taxes. This can be administratively burdensome, particularly for small businesses with limited resources.
Frequent Filings: Depending on the turnover and nature of the business, GST-registered proprietors may need to file GST returns on a monthly, quarterly, or annual basis. Monthly filings can be particularly demanding for smaller businesses.
Penalties for Non-Compliance: Failing to comply with GST regulations can result in penalties, fines, and legal consequences. Small errors in GST returns can lead to penalties, which can be a significant drawback for businesses with limited financial resources.
Increased Accounting and Record-Keeping: GST registration requires meticulous accounting and record-keeping. Businesses must maintain accurate records of all transactions, invoices, and receipts to claim Input Tax Credit (ITC). This can be time-consuming and may necessitate the use of accounting software or hiring an accountant.
Cash Flow Impact: For businesses that supply taxable goods or services, there may be a cash flow impact, as GST must be collected from customers and remitted to the government. This can affect liquidity, especially if customers delay payments.
Threshold Limit: Proprietorships with annual turnovers below the GST threshold limit (which varies by country) may not be required to register for GST. However, this can limit the ability to claim ITC and may put small businesses at a competitive disadvantage.
Market Perception: Some customers may prefer to deal with unregistered businesses to avoid GST, especially if they are not eligible for ITC. This perception can affect your market competitiveness.
Increased Costs: GST compliance may lead to increased costs due to the need for professional help (accountants or tax consultants), accounting software, and other compliance-related expenses.
Limited Liability: A proprietorship does not provide limited liability protection to the owner. In the event of business debts or legal issues, the owner’s personal assets are at risk.
Volatility in Tax Rates: Changes in GST rates or tax rules can impact business operations
If you are considering registering a proprietorship with GST, you should make sure that you are prepared to comply with all the relevant regulations.
HOW AURIGA ACCOUNTING HELP YOU TO REGISTER A PROPRIETORSHIP WITH GST
Business Registration Information: Accounting software can help you organize and manage essential information required for GST registration, such as business name, address, PAN (Permanent Account Number), and other relevant details.
Turnover Calculation: The software can assist in calculating your business’s annual turnover to determine whether it exceeds the GST registration threshold, which is a key factor in deciding whether GST registration is mandatory.
Document Management: Many accounting software solutions allow you to upload and manage documents electronically, making it easier to store and retrieve necessary documents like PAN card, address proof, bank statements, and more, which are typically required for GST registration.
GSTIN Generation: Once your application for GST registration is approved, the software can help you generate and record your GST Identification Number (GSTIN).
Tax Classification: Accounting software may include tax classification tools that help you categorize your products or services correctly under the applicable GST tax slabs (e.g., 5%, 12%, 18%, 28%).
Invoice Generation: The software can generate GST-compliant invoices with the required details, including your GSTIN, the customer’s GSTIN (if applicable), and the GST amount.
Return Filing: After GST registration, businesses are required to file regular GST returns. Accounting software can automate the process of return preparation and submission, reducing the risk of errors and late filings.
Input Tax Credit (ITC) Tracking: A crucial feature is the ability to track and manage your Input Tax Credit (ITC) effectively. The software can help you identify eligible ITC on your purchases, which can be offset against your GST liability.
Compliance Alerts: The software can provide alerts and reminders for important GST-related deadlines and rule changes, helping you stay compliant with GST regulations.
Reporting: Generate reports related to your GST transactions and compliance, which can be useful for internal reviews, audits, and ensuring accuracy in your GST-related activities.