Difference Between Voluntary and Mandatory GST Registration

Understanding GST Registration

GST registration is a fundamental compliance requirement under India’s indirect tax regime. Every business that meets the specified turnover threshold or engages in certain taxable activities must register under the Goods and Services Tax (GST) system.

However, not every registration is mandatory. Some businesses can opt for voluntary GST registration to enjoy certain benefits such as Input Tax Credit (ITC), increased market credibility, and smoother B2B transactions.

This blog explains the difference between voluntary and mandatory GST registration, relevant provisions under the CGST Act, 2017, and practical insights for small business owners in Bihar and across India.

What is Mandatory GST Registration?

Mandatory registration means a business is legally required to register under GST once it crosses the prescribed turnover threshold or falls under specific categories defined by law.

Eligibility and Threshold Limits

Under Section 22 of the CGST Act, 2017, GST registration becomes mandatory when:

• Aggregate turnover exceeds ₹40 lakh for goods suppliers (₹20 lakh for service providers).
• For special category states, the limit is ₹10 lakh.
• Businesses engaged in inter-state supplies, e-commerce, or import/export activities must register irrespective of turnover.

Cases Requiring Compulsory Registration (Section 24)

Under Section 24 of the CGST Act, the following must register compulsorily:

• Persons making inter-state taxable supplies
• Casual taxable persons
• Non-resident taxable persons
• Agents supplying goods/services on behalf of others
• Input Service Distributors (ISD)
• Persons liable to pay tax under reverse charge
• E-commerce operators and their suppliers

Thus, mandatory registration is driven by either turnover or business activity type, irrespective of profit or scale.

What is Voluntary GST Registration?

Voluntary registration, as per Section 25(3) of the CGST Act, allows eligible small businesses or startups below the threshold limit to register under GST by choice.

This enables them to claim input tax credits, issue GST-compliant invoices, and transact with other registered dealers seamlessly.

Eligibility and Process for Voluntary Registration

A business can opt for voluntary registration if:

• It is engaged in supply of taxable goods or services.
• It wants to claim Input Tax Credit on purchases.
• It wants to deal with registered clients or government departments.

Registration Process (via gst.gov.in):

1. Visit gst.gov.in.
2. Click on “New Registration” under Services → Registration.
3. Fill Part A with PAN, mobile, and email; verify via OTP.
4. Complete Part B with business details and upload documents.
5. Submit and verify through Aadhaar authentication or DSC.
6. Receive GSTIN after officer approval (within 3–7 days).

Key Differences Between Voluntary and Mandatory GST Registration

Comparative Table: Voluntary vs Mandatory Registration

Advantages and Disadvantages of Voluntary Registration

Advantages

• Eligible to claim ITC on inputs and capital goods
• Can issue GST invoices
• Enhances business credibility for B2B clients
• Enables participation in government tenders

Disadvantages

• Increased compliance burden (returns, audits, reconciliations)
• Need to maintain digital records and GST payments even with low turnover

Voluntary registration is beneficial for businesses planning future expansion or dealing with GST-registered clients.

Example – Small Trader Opting for Voluntary Registration

Consider a Patna-based textile trader earning ₹25 lakhs annually — below the ₹40 lakh threshold.

He voluntarily registers under GST to supply fabric to a large garment manufacturer who insists on GST invoices.
By registering, he gains:

• Access to Input Tax Credit on raw materials
• B2B contract eligibility
• A formal compliance profile enhancing market trust

This case highlights how voluntary registration can act as a business enabler, not just a tax obligation.

Legal Provisions and Sections under the CGST Act

• Section 22 – Persons liable for registration
• Section 23 – Persons not liable for registration
• Section 24 – Cases requiring compulsory registration
• Section 25(3) – Voluntary registration
• Rules 8–26, CGST Rules, 2017 – Registration process
• Circular No. 20/2016-GST – Clarifications on voluntary registration
• Judgment: M/s Aastha Enterprises v. State of UP (2020) — clarified the legal rights of voluntarily registered taxpayers.

(Refer to CBIC-GST Notifications and Indian Kanoon for section details.)

Conclusion – Choosing the Right Type of GST Registration

Choosing between voluntary and mandatory GST registration depends on your turnover, client base, and business goals.

• If your turnover exceeds the statutory limit or involves inter-state supplies, registration is compulsory.
• If you aim for growth, credibility, or ITC benefits, voluntary registration can give your business an early advantage.

Tip: Always assess the compliance cost versus benefit before registering.

Frequently Asked Questions (FAQ)

1. What is the difference between voluntary and mandatory GST registration?
Voluntary registration is optional for small businesses; mandatory registration is required once turnover crosses the prescribed limit.

2. Who must register mandatorily under GST?
Businesses exceeding ₹40 lakh (₹20 lakh for services) turnover or involved in inter-state supply must register.

3. Can a small trader register voluntarily under GST?
Yes, any business can voluntarily register under Section 25(3) to avail Input Tax Credit.

4. What are the benefits of voluntary GST registration?
Helps claim ITC, build business credibility, and enable B2B transactions.

5. Can voluntary registration be cancelled later?
Yes, it can be surrendered after one year of registration, subject to clearance.

6. What happens if I cross the GST threshold without registering?
You may face penalties under Section 122 for failure to register.

7. Is GST registration different for service providers and traders?
Yes, turnover limits differ — ₹20 lakh for services and ₹40 lakh for goods.

8. Can voluntary registration be converted to mandatory?
Yes, once turnover exceeds the threshold, it automatically becomes mandatory.

9. Is voluntary registration beneficial for startups?
Yes, it allows startups to claim input credits and improve compliance trust.

10. Can I cancel my voluntary registration online?
Yes, via Form GST REG-16 on the GST portal after officer approval.

References

1. CBIC – GST Official Portal
2. GST Portal – gst.gov.in
3. Indian Kanoon – CGST Act Sections

Author: Advocate Tabish Ahmad

Advocate Tabish Ahmad (B.A. LL.B., LL.M., Diploma in Cyber Law – GLC Mumbai) is a Certified Cyber Law Practitioner and practising Advocate at the Patna High Court. He specializes in Cyber Crime, GST Litigation, and Tax Appeals, with extensive experience in representing clients before judicial and quasi-judicial forums.

He serves as President of the Cyber Lawyers Association and is a Member of the Advocates’ Association, Patna High Court. As a Mentor at the Indian Tax Academy and JurisCrack, he guides young lawyers and students in cyber and tax law practice.

Author of several books on Cyber Crimes, Taxation, and GST, Advocate Tabish Ahmad is recognized for his practical insights on digital law, data privacy, and cyber fraud defence.

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