Many businesses opt for voluntary registration under GST. A business having an annual turnover of less than S$ 1million threshold for compulsory registration can opt for a voluntary GST filing to claim the Input Tax Credit (ITC) and expand business opportunities. Businesses can deduct the GST paid on the purchases only if both the suppliers and business are GST registered. Hence, this makes voluntary registration a prerequisite for certain kinds of businesses.
A GST-compliant entity is always preferred over a non-compliant as it is easy, profitable, and reliable by the customers. This blog throws light on the topic of voluntary registration under GST along with its pros and cons.
Before you apply for Voluntary Registration under GST, you should consider the following:
- What is Voluntary Registration under GST?
- Who will Participate in Voluntary Registration?
- Advantages of Voluntary Registration under GST
- Drawbacks of Voluntary Registration under GST
- Should you opt for Voluntary Registration?
- Is Voluntary Registration Permanent?
What Is Voluntary Registration Under GST?
Voluntary registration refers to applying for registration under GST on a voluntary basis. The taxpayers who do not need to register as per the GST Act can apply for voluntary registration under GST. The business registered under GST should:
- Collect GST on the outward supplies i.e. sales,
- Claim the GST Input Tax Credit (ITC) on the inward supplies i.e. purchases,
- Pay GST payable to the government by making payment of GST.
Who Will Participate In Voluntary Registration?
If a company meets the following requirements, it can apply for GST registration on a voluntary basis:
- Supplies that are taxable,
- Only out-of-scope supplies, such as sales of non-Singapore-bound goods and goods in transit, are allowed,
- Financial services that are also international services are excluded,
- If you use some kind of service from an overseas provider, you would not be eligible for the full input tax credit.
Further, a business has to fulfill the conditions below for voluntary registration:
- The company director/sole-proprietor/partner/trustee/preparer of GST return must complete two e-learning courses, you can find these course details here, “Registering for GST” and “Overview of GST“. These e-learning courses are not needed if the above-mentioned person has the experience of managing other existing GST registered businesses or the preparer of GST return is an Accredited Tax Advisers (ATA) or Accredited Tax Practitioners (ATP).
- Sign up for GIRO for payment and/or refund of GST.
- Provide the security deposit imposed by the Comptroller on a case-by-case basis.
Advantages Of Voluntary Registration Under GST
- GST Registered Status: GST registered companies will receive a certificate of registration, which will serve as legal evidence of their presence.
- Clientele Obtain ITC: The customers will now obtain a tax bill for which they can demand Input tax credit, which offers a great opportunity to broaden the customer base.
- Increased Profits for Businesses: Businesses will be able to demand ITC on their sales. As a result, their income will rise in the end.
- Be Compliant and Get a Good Ranking: Being compliant improves a business’s GST compliance rating, which helps it demand refunds and makes it easier to get loans, rent space, and so on. The higher the ranking, the better, as it will assist you in attracting more customers.
- Competitive Advantage: Local consumers seeking ITC, larger companies, and multinational corporations tend to work with GST registered dealers.
Drawbacks Of Voluntary Registration Under GST
- Compliance with GST Provisions: Voluntarily registered businesses have to comply with GST provisions, increasing the burden of compliance and maintenance cost.
- Return Filling: GST registered businesses must file GST tax returns electronically through the myTax portal website either on a monthly or quarterly basis.
- Payment of Tax Liability: Once registered under GST, the business will have the additional responsibility of collecting and depositing taxes with the authorities.
- Assessment and Penal Provisions: Once registered under GST, a business will also be legally bound by the assessment & penal provisions.
Should You Opt For Voluntary Registration?
- Identify Your Sellers?: Business will benefit from GST registration because you will be able to claim the GST paid if your suppliers/sellers are GST registered. When your suppliers are not GST registered, you cannot claim any GST paid since these suppliers did not charge you GST.
- Identify your Buyers?: If your buyers are GST registered, it is essential to get voluntarily registered so that you can pass on GST credit to buyers.
Is Voluntary Registration Permanent?
Businesses that register voluntarily must:
- Remain registered for at least two years.
- Maintain a GIRO account in order to make GST payments and refunds easier.
- Start making taxable supplies within two years if you have not started when applying for GST registration.
- Follow the obligations of a GST-registered business.
Voluntary registration under GST opens many avenues for businesses to expand notably in the small and medium enterprise sector. It enhances the reliability of the company. It will give the SME sector tremendous opportunities to grow and expand into the wider area of opportunities. But, rules and regulations are equally applicable but those rules and regulations are for the benefit of the business in any way.
If you find this blog informative and would like to know more about the voluntary registration under GST and registration procedure of the same, we would love to do another blog for the same, please let us know.
If you are looking forward to business set-up or business registration including GST registrations, please feel free to reach out to us at Bluebox for assistance. We are a professional services firm with extensive experience in advisory for SMEs and startups. We would be happy to be of assistance!