A Law or an Act is vital because it sets a discipline, a code of conduct in how a country or a society should work. It is to bring a social change that is beneficial for people of all classes, races, religions, ethnicity, etc. in a country. Without law, there could be chaos, and the very fabric of society could get destroyed. One of the critical issues of any country is the economy. And to address that there have been many laws implemented in India since independence.
GST was a significant law to change the economy for the better. There are different advantages of GST that made dealing with taxes easy for the government. GST helped in removing many indirect taxes. Under GST, there was a unique 15 digit number assigned to every taxpayer/business. Traders were able to recognize GST number importance. Because, with this unique number, traders were able to supply goods to any state seamlessly. Earlier suppliers would have to stop at every state border to pay state tax.
As GST is a law passed in the Indian constitution to prevent corruption and tax evasion, some strict rules were made for offenders. Going against the law will have serious consequences for any Indian citizen. Anyone not abiding by the GST law could face penalties and charges and, in some serious cases, even prosecution and arrests. It is always in the best interest of any taxpayer to get the know-how of this law to help avoid any mistakes that could happen inadvertently. Some taxpayers could commit offense unknowingly and land in trouble. One such offense is not registering under GST. To understand why it’s important to register under GST, a taxpayer should first get to know what is a GST Registration.
According to the GST law, any taxable person/business should register under GST. The GST registration could be done online through the government portal. It is a simple process where you can fill in some details along with scanned copies of your IDs and, after verification by the authorities, about the authenticity of your identity, you will be granted a registration certificate. Below is a list of who is liable for GST Registration.
List of Businesses/Individuals liable to register under GST:
- Anyone who has been registered under the previous tax law. Such as VAT, Service Tax, Excise, etc.
- Goods suppliers, including anyone who is into inter-state goods supply.
- Any business with a turnover of or above Rs.40 lakhs should mandatorily register as a normal taxable entity. For Northeastern and Hill states the turnover threshold limit is Rs.10 lakhs.
- Anyone who sells or supplies goods online.
- Anyone who provides and paid services online.
- Sellers of digital products.
- All eCommerce aggregators.
- Anyone who supplies through E-commerce aggregator.
- Anyone who is not a resident of India but occasionally supplies services or goods.
- Anyone who doesn’t have a fixed place of business within the country, but supplies goods and services.
- Those paying tax under reverse charge mechanism. ( In reverse charge mechanism, the receiver becomes liable to pay taxes as against the normal rule where the supplier of goods or services pays taxes on supply.)
It is mandatory for individuals/businesses in the above list to register under GST. It is an offense to not register under GST. There are clear descriptions given in the law about the offenses and penalties for anyone who fails to register.
Consequences & Effects
1. Fines & Penalties:
If you operate a business without mandatory GST registration, at a minimum, you should expect to cough up penalties and fine. It is one of the common scenarios to occur when a business fails to register under GST. As per section 122 of CGST Act, any taxable person who is liable to be registered under the act, and fails to register will get a penalty of Rs.10,000 or any short tax liability or amount of tax evaded – whichever is higher.
Consequently, if you fail to register under GST and the total tax liability after calculation comes up to RS. 3 lakhs, then the penalty for failing to register under GST will be Rs.10,000 or Rs.3 lakhs, whichever is higher, hence Rs. 3 lakhs will be levied.
2. Legal Action:
Not registering under GST opens your company to legal action. A disgruntled customer who is unhappy with your goods or services could drag you to court and cite your lack of GST registration as fraudulent activity. If you are sued by someone, then your case could become weak because of GST not being registered.
3. Closure of Business:
Many people don’t fully realize the importance of registration. If authorities take any action against your business for any reason, then you should at least have proper legal documents. Not being registered under GST could bring in substantial penalties to you. The losses from these penalties could mean death to your business.
4. Confiscation of Goods:
Under section 130 of the CGST/SGST Act, goods become liable to confiscation when a person has not applied for GST registration. There could be a lengthy procedure to follow in getting back your goods. There are chances that you might not get back your good altogether. During confiscation of goods, an officer has the power to break open the door of premises that are authorized for search. Also, the officer can break open any almirah or box within the premises. Damages caused can prove costly for your business.
5. Inability to run a business smoothly:
Another consequence of doing business without registering under GST will be hurdles you could face. With the robust system and effective measures taken by the government, people are less likely to do business with anyone without proper documentation. This could lead you to lose on good opportunities. It could also create roadblocks for you as the trust factor will not be in your favor.
For any business to run smoothly, it’s mandatory to register under the GST. It helps in dealing fearlessly and with peace of mind. GST number importance could be felt when there is a lack of trust from customers. Registering not only helps to build trust with customers and government but also helps in benefiting from the advantages of GST. The ease of doing business with proper registration far outweighs the nagging issues of not registering or not having proper documentation.
Article Submitted By Community Writer