GST Registration for Small Businesses: Process, Advantages, Disadvantages

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  • 11/06/2025

Introduction

Prior to embarking on any business venture, it is crucial to familiarise oneself with the pertinent legislation and regulations governing the chosen field of operation. This encompasses a thorough understanding of any applicable taxes that the business may be obligated to pay. The Goods and Services Tax (GST), implemented in 2017, serves the purpose of simplifying the tax landscape for small businesses by replacing intricate central and state taxation systems with a streamlined and unified framework. For those who are launching their business (small-scale or big-scale), gaining knowledge about the impact of GST on businesses for small enterprises becomes imperative. All small businesses are required to register for GST as mandated by the GST Act. In the case of goods manufacturers with an annual turnover exceeding Rs.40 lakhs and service sector businesses generating more than Rs. 20 lakhs in revenue, GST registration is obligatory. However, the GST registration threshold is lowered to Rs. 10 lakhs for states in the northeast.

Understanding GST

The Goods and Services Tax (GST) is anticipated to streamline and replace a multitude of indirect taxes, including VAT, customs duty, Excise, CST, Service Tax, and Entertainment Tax, with a unified tax system in India. In the Indian GST framework, there are primarily two forms of taxation: intra-state and inter-state. Intra-state transactions, referring to the movement of goods within a state, will incur two types of GST—CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax). On the other hand, at the inter-state level, where goods traverse between states, the tax levied is known as IGST (Integrated Goods and Services Tax).

Advantages of GST Registration for Small Enterprises

Even though many small businesses try to evade taxes, the advantages of GST registration for small businesses outweigh the disadvantages. In this section, we break down why small businesses should register for GST:
  • Unified Taxation 
The implementation of the Goods and Services Tax (GST) marks an enormous shift in the direction of unified taxation, putting off quite a number of indirect taxes together with service tax, VAT, and excise obligation. This transformation is specifically remarkable for small marketers, as it relieves them from the burden of paying taxes on top of different taxes.
  • Composite Scheme 
The introduction of the composite scheme allows corporations with an annual turnover exceeding Rs. 75 lakhs to choose a simplified tax structure, paying a flat tax starting from 1% to 5%. This streamlined technique gives financial advantages and reduces the complexities related to tax calculations.
  • Transportation Costs 
Obtaining a GST-wide variety for small companies does not ensure complement credibility; however, additionally, it positions them as more valid entities within the eyes of large businesses trying to interact in commercial enterprise partnerships. Additionally, those companies are exempt from unnecessary compliances, permitting them to report returns on a quarterly foundation.
  • Credibility 
Meeting the GST requirements also opens doors to easier access to credit for businesses. The registration of operations with a government entity enhances credibility, reducing the perceived risk of fraudulent activities and increasing the likelihood of securing business loans at lower interest rates.
  • Easy Access to Credit 
Fulfilling the GST requirements will increase the possibility of availing enterprise loans at lower interest rates. It takes place due to the fact their operations are registered with a government entity, and the possibilities of fraudulent activities are decreased. Also Read: Benefits of GST Registration

Disadvantages of Not Registering for GST

As per the GST Act, there is a direct penalty associated with the failure to obtain small business GST compliance and registration in India, and this penalty is applicable even in cases of delayed registration. According to Section 122 of the CGST Act: 
  • Any taxable person who neglects to acquire GST registration, despite being obligated to do so under the act, is subject to a penalty of Rs.10,000 or the amount of tax evaded or any shortfall in tax payment, whichever is greater.
  • For instance, if a person fails to register for GST, and the total tax liability, after calculation, amounts to Rs.2 lakh, the penalty for the failure to register for GST will be Rs.2 lakh or Rs.10,000, whichever is greater; consequently, a penalty of Rs.2 lakh is levied.
The penalty for failing to register for GST in a timely manner generally comes into effect once the tax authority discovers the omission. These penalties, as previously mentioned, are applicable if the tax department issues a notice and, subsequently, the individual applies for GST registration.

Exploring the GST Registration Process

While exploring the vastness of the GST registration process, there are a handful of essential points that should be kept in mind while moving ahead with the registration process. The GST registration process guide is equally beneficial to non-taxpayers for knowledge purposes. Under the GST Act, there are various types of registration. You must be aware of the different types of GST Registration before selecting the appropriate one. The different types of GST Registration are:
Normal Taxpayer Most businesses in India fall under this category. You need not provide any deposit to become an average taxpayer. There is also no expiry date for taxpayers who fall under this category. Casual Taxable Person Individuals who wish to set up seasonal shops or stalls can opt for this category. You must deposit an advance amount that is equal to the expected GST liability during the time the stall or seasonal shop is operational. The duration of the GST Registration under this category is three months, and it can be extended or renewed. Composition Taxpayer Apply for this if you wish to obtain the GST Composition Scheme. You will have to deposit a flat amount under this category. This category does not provide an input tax credit. Non-Resident Taxable Person If you live outside India but supply goods to individuals who stay in India, opt for this type of GST Registration. Similar to the Casual Taxable Person type, you must pay a deposit equal to the expected GST liability during the time the GST registration is active. The duration for this type of GST registration is usually 3 months, but it can be extended or renewed at the type of expiry.

Online GST Registration Process

The step-by-step GST registration procedure guide is given below: Step 1: Visit the GST portal at https://www.gst.gov.in/ and click on the ‘Register Now’ hyperlink below the ‘Services’ tab. Step 2: Select ‘New Registration’ and fill in the following info: Part – A -Choose ‘Taxpayer’ from the ‘I am a’ drop-down menu. – Select the respective state and district. – Enter the business call. – Provide the PAN of the business. – Input the e-mail ID and cellular range within the furnished containers, ensuring they are lively for OTP verification. – Enter the photo displayed on the display screen and click on ‘Proceed’. – On the next page, input the OTP dispatched to the e-mail ID and mobile number within the respective bins and click on ‘Proceed’. – Note down the Temporary Reference Number (TRN) displayed on the display screen. Part – B Step 1: Revisit the GST portal and click on ‘Register’ beneath the ‘Services’ menu. Step 2: Choose ‘Temporary Reference Number (TRN)’, enter the TRN wide variety, and input the captcha details. Click on the ‘Proceed’ button. Step 3:  Receive an OTP for your electronic mail ID and registered cellular range. Enter the OTP and click on ‘Proceed’. Step 4:  Check the fame of your application on the next page. Click on the Edit icon on the right side. Step 5: In the subsequent step, fill in 10 sections and submit the desired documents, together with snapshots, enterprise deal proof, bank info (account number, financial institution calls, bank branch, and IFSC code), authorisation form, and the constitution of the taxpayer. Step 6: Visit the ‘Verification’ web page, test the statement, and publish the utility with the use of one of the following methods:
  • A digital Verification Code (EVC) is dispatched to the registered cell variety.
  • If groups are registering, submit the software using the Digital Signature Certificate (DSC).
  • By e-signal approach, with an OTP sent to the cell quantity connected to the Aadhaar card.
Upon completion, a success message might be displayed on the screen, and the Application Reference Number (ARN) can be sent to the registered cell quantity and e-mail ID. Also Read: How To Do GST Registration Online

Understanding GST Returns

A GST return is a document that contains the details of income, purchases, sales, and tax paid by a taxpayer. It is a document that needs to be filed with the tax authorities to report the financial activities of a business during a specific period.

Types of GST Returns

There are various kinds of GST returns based on the nature and scale of the business. Some commonplace kinds encompass GSTR-1, GSTR-3B, GSTR-4, and GSTR-9. Each go-back serves a specific reason and covers extraordinary components of a taxpayer’s economic transactions.
  • GSTR-1: This return captures the info of outward resources or income made via a registered taxpayer.
  • GSTR-3B: It is a summary return that consists of information on both inward and outward substances in conjunction with the tax liability.
  • GSTR-4: Designed for organisations opting for the Composition Scheme, this return consists of a summary of quarterly tax bills.
  • GSTR-9: This is an annual return that consolidates the information provided in month-to-month or quarterly returns at some stage in the financial year.
Also Read: A Comprehensive Guide to the Types of GST Returns in India

Conclusion

One of the most important things to keep small and medium enterprises in India operating smoothly is GST registration. This article demonstrates the need for a GST number for GST registration in India. Because it is not only straightforward but also advantageous to aspiring businesspeople, the GST number is used to get loans, cut expenses, and improve the flexibility and efficiency of corporate operations. It might take a lot of time to register for GST, especially for new businesses or small businesses. In order to save time and obtain your GST number more quickly, you may choose CaptainBiz to experience hassle-free GST compliance.

FAQs

  1. If there is no registration, will the late costs still be charged?

Late fees for filing GST returns after the deadline do not apply to individuals who choose not to register for GST. Section 47 specifies that these late fees are applicable only to registered persons. In cases where an individual opts not to register for GST, the penalty for failing to file a GST return does not apply.

  1. What is the effect of compliance ratings?

The compliance rating under GST operates distinctly, akin to a CIBIL score assessing an individual’s creditworthiness. It evaluates both the positive and negative aspects of GST taxpayers. Failing to acquire GST registration or submit GST returns punctually negatively impacts one’s compliance rating.

  1. Does GSTR-1 need to be submitted even if no transactions occurred during the reporting period?

Yes, even if no sales or other commercial activity occurred during the reporting period, a GSTR-1 must still be submitted. So, it’s important to highlight that the GST returns contained zero entries.

  1. Can the provider change the papers if the recipient does not act immediately?

No, the provider cannot change the papers for GST return filing in India if the recipient does not act immediately. The supplier must explicitly reject the document before the recipient can change it.

  1. Can a taxpayer extend the time between filings?

The taxpayer can adjust the reporting period once. This must be done before the first return is submitted for the fiscal year.

  1. Who is eligible to opt for the composition scheme under GST?

The Composition scheme is available for small taxpayers seeking lower tax rates and reduced compliance under GST. Businesses with an aggregate turnover below Rs 1.5 crore, and Rs. 75 lakh for North-eastern states and Himachal Pradesh, can apply for the composition scheme.

  1. Is there a fee for GST registration?

GST registration can be completed online at no charge.

  1. What is the deadline for GST registration?

Businesses obligated to register for GST must do so within 30 days of meeting the criteria. Casual and non-resident taxpayers must register before commencing their business activities.

  1. How long does GST registration remain valid?

GST registration has no expiration date and remains valid until voluntarily surrendered, suspended, or cancelled. Authorities determine the validity term for non-resident and casual taxable individuals upon the issuance of the GST registration certificate.

  1. Can an unregistered individual collect GST?

No, only registered individuals are authorised to collect GST. Unregistered individuals cannot claim input tax credits for GST paid.

Learn the pros and cons of GST registration for small businesses and get started today.

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Niharika Kapoor Content Writer
Niharika is a Freelance Content Writer and Translator with a Master of Arts in Literature. She has 5+ years of working in the same and has worked in different industries.
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