Can You Collect GST Without Registration? Here’s What Every Small Business Must Know
Meet Arjun – The Local Printer in Trouble
Arjun owns a small digital printing shop in a Tier-2 city. His business has slowly grown over the years. Recently, a big company placed a bulk order, and Arjun saw it as a golden opportunity. To look more professional, he printed an invoice that included 18% GST, hoping it would impress the client.
But there was one big issue — Arjun was not registered under GST.
What followed was a notice, a penalty, and sheer panic. Like Arjun, many small business owners unknowingly break a critical law: collecting GST without registration.
Let’s understand why this is a serious problem and how you can avoid falling into the same trap.
📘 What the GST Law Says: Only Registered Persons Can Collect GST
According to Section 32 of the CGST Act, 2017:
“A person who is not registered under GST shall not collect any amount by way of tax.”
In simple terms:
- ❌ You can’t add GST on your invoice
- ❌ You can’t mention GST % in your bill
- ❌ You can’t include GST in your product price and pocket it
⚖️ Why Is This Law Important?
The GST system is built on transparency. Every registered person:
- Has a unique GSTIN
- Files regular returns
- Collects tax on behalf of the government
- Passes on Input Tax Credit (ITC) to the next party
If unregistered people start charging tax, the entire chain breaks down.
🧾 Who Can Legally Collect GST?
Only those who are:
- ✅ Registered under GST
- ✅ Have a valid GSTIN
- ✅ File GSTR-1, GSTR-3B, and annual returns
- ✅ Issue GST-compliant invoices
- ✅ Maintain records as per GST law
They are legally allowed to:
- Collect GST from customers
- Claim and pass on Input Tax Credit
- Show tax separately in price
🚫 What Happens If You Collect GST Without Registration?
This is where things get serious. The penalties under GST law are heavy and meant to discourage misuse.
❗ Penalties Under Section 122:
- ₹10,000 or
- Amount of tax collected (whichever is higher)
And that’s not all:
- 🔁 You’ll have to return the collected amount with interest
- 🔒 Your business license may be cancelled by local authorities
- 🧾 You’ll lose customer trust — a big deal for small businesses
🛡️ How to Stay Safe: Best Practices for Unregistered Businesses
If you’re currently unregistered under GST, here’s how to handle billing:
📌 Invoice Checklist:
- ✅ Mention clearly: “GST Unregistered Dealer”
- ✅ Never include GST % or split-up in your bills
- ✅ Quote only the total amount payable (no tax component)
- ✅ Maintain simple invoices with basic details
📈 When Should You Register for GST?
Every business must register for GST once it crosses the threshold turnover:
- ₹40 Lakhs for goods (₹20 Lakhs for special category states)
- ₹20 Lakhs for services (₹10 Lakhs for special category states)
If you’re doing interstate sales, selling through e-commerce platforms, or providing services to companies, GST registration may be mandatory, even if you haven’t reached the limit.
👨💼 Pro Tip for Growing Businesses
If your turnover is close to the limit:
- Apply for GSTIN in advance
- Start issuing proper invoices
- Claim ITC on business purchases
- File returns to stay compliant
Getting registered not only keeps you legal — it also boosts credibility with clients and opens up more business opportunities.
📚 Quick Recap:
| Do’s (If Not Registered) | Don’ts (If Not Registered) |
|---|---|
| Mention “Unregistered Dealer” | Don’t write “GST” on invoice |
| Keep bills simple and clean | Don’t charge any % tax |
| Monitor your turnover | Don’t promise GST ITC |
| Register if crossing threshold | Don’t collect tax unlawfully |
🧠 Moral of the Story: Be Smart Like Arjun… Eventually
Arjun realized his mistake, paid the penalty, and immediately registered under GST. His business is now growing legally — with bigger clients and smoother operations.
Let Arjun’s experience be a learning curve for others:
Never collect GST unless you’re legally allowed to.
💬 Need Help?
If you’re unsure whether you need to register or how to issue correct invoices, let our expert team at Taxgyany help you out.
Visit www.taxgyany.com or write to us at info@taxgyany.com
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