Whether you are having a body corporate or proprietorship firm, it is mandatory for both to get GST enrollment once they cross the GST registration threshold limit. Since 2017 goods and services tax registration is mandatory for those goods and service providers who fall under its eligibility criteria. There are certain requisites of GST enrollment which will be discussed in the current blog, specially regarding the proprietorship firm. If you are running a business through a proprietorship firm and have confusion regarding enrollment of GST, must read the present write-up. This will clear all your doubts and helps to know about whether you need to take registration for goods and services tax or not.
What is a Proprietorship Firm?
A firm owned and run by one single person which is not a body corporate is called sole proprietorship firm. It is a kind of business setup run by a single person, managing all business operations independently. This type of business is typically chosen by small business owners who cater to local customers without any plans for major expansion. In a Sole Proprietorship, the individual business owner holds complete responsibility and is liable for the business.
Sole proprietorship firms setup is suited for small local enterprises such as kirana stores, street vendors, food outlets, and service providers operating within a limited area and serving local clientele. It’s important to note that a Sole Proprietorship is different from a One Person Company, each suitable for distinct business needs.
Sole proprietorship firms are not required to be registered under any kind of law like body corporates need to get registered under the Companies Act of 2013. Just because it doesn’t need to get registered under any law, does not mean other licenses and registration will not be applicable on it. Some general requirements as per the requirement of law needs to be fulfilled by them like GST registration if applicable, MSME registration which is optional, Trade License etc.
When a Proprietorship Firm should get GST Enrollment?
If any proprietorship firm that falls under the GST threshold limit then it is mandatory for it to obtain GST enrollment. After crossing the threshold limit they cannot work without GST enrollment because they are not allowed to do the same as per the GST Act of 2017. The threshold limit for both the goods and services was different. When this law regarding GST came into force it was the same for both goods as well as services. But correctly for the goods it is Rs. 40 lakhs and for special category states it is Rs. 20 lakhs. Whereas for the services it is Rs. 20 lakhs.
Goods and services tax registration has certain exceptions as well. According to these exceptions which are given under section 24 of the GST Act, there are certain businesses which mandatorily need to take GST Registration for which turnover does not matter. Thes list of such businesses is given below:
- All businesses involved in online trade
- Businesses that operate across states must register for Goods and Services Tax (GST), regardless of their turnover.
- Even if a business engages in irregular or occasional transactions or is liable to pay tax under the reverse charge mechanism, GST registration becomes necessary.
- Companies and individuals falling under specific sections of the GST law, such as Section 9 Clause 5 or Section 51, are mandated to register for GST.
- This also applies to Non-Resident Indians conducting taxable supplies and entities responsible for paying GST on behalf of others, like agents or representatives, along with those distributing input services.
Is GST Registration for Proprietorship Firms Mandatory?
No, it is not at all compulsory for all the sole proprietorship firms to get GST enrollment till they did not cross the goods and services tax registration threshold limit. The day they cross the goods and services tax registration threshold limit it becomes mandatory for them to get GST enrollment. The threshold limit regarding the goods and services tax registration is mentioned above in detail, one can refer to the same for the understanding purpose.
Procedure of GST Registration for Proprietorship Firms
The step-by-step process to obtain GST enrollment are mentioned below:
- Collect all the necessary information required for the enrollment process
- Access the official GST website
- Make an account and create login credentials on the official portal of the goods and services tax registration by providing your basic details.
- Complete the GST REG-01 form
- Upload scanned copies of the required documents
- Submit the application after checking it once
- Pay the required registration fees while submitting the application for the GST enrollment
- Submitting the application, a verification email and an Application Reference Number (ARN) will be sent to you.
- The GST officer will review your application, and in case of any issues, they might request additional information or documents.
- Upon successful verification, you’ll receive the GST certificate
Documents Required for GST Enrollment for Proprietorship Firms
The list of documents required for the GST enrollment are mentioned below:
- The owner’s KYC documents will be needed.
- It is required to provide identification of the company’s owner.
- The owner’s PAN card is a must.
- Proof of an office address or a company address is required.
- NOC from the landlord accompanied by documentation of the leased office or business address
- It must be necessary to have a shop and establishment certificate.
- Certified Chartered Accountant only in some situations
- The owner’s or proprietor’s income tax returns are required.
What are the Benefits of GST Registration for Proprietorship Firms?
Registering a Sole Proprietorship Firm in India is simple and comes with various advantages. The process is hassle-free with fewer formalities, making it an accessible option for small business owners. You only need one person for registration, and there are three registration options available. What’s great is its flexibility. You can easily convert it to another business entity. It’s cost-effective and incorporates quickly without needing registration elsewhere. As there’s no governing law, it comes with minimal limitations. The proprietor has complete control, but personal and business assets are intertwined, posing a risk. What’s unique is that no separate registration is required for a Sole Proprietorship Firm.
Conclusion
GST enrollment is a crucial step for sole proprietorship firms, especially after surpassing the GST registration threshold. Understanding that GST registration becomes mandatory for businesses trading online, operating across states, or partaking in occasional transactions under the reverse charge mechanism is essential. For sole proprietorship firms, while it’s not compulsory until crossing the threshold limit, once reached, obtaining GST enrollment is necessary. This registration brings multiple benefits, providing hassle-free, flexible business operations, though it combines personal and business assets. While not mandatory initially, crossing the threshold limit makes GST registration necessary for smooth business operations, aligning with GST regulations.
