A current account is a type of bank account primarily used for business transactions. It is a non-interest bearing account that allows businesses to deposit and withdraw money as needed. In India, businesses are required to have a Goods and Services Tax (GST) registration to open a current account. However, there are some exceptions to this rule.
What is GST?
Goods and Services Tax (GST) is a tax levied on the supply of goods and services in India. It was implemented in 2017 to replace multiple indirect taxes levied by the central and state governments. GST is levied at every stage of the supply chain, from the manufacturer to the consumer, and is collected by businesses that are registered under GST.
Why is GST registration required to open a current account?
As per the guidelines issued by the Reserve Bank of India (RBI), businesses are required to provide their GST registration number to open a current account. This is because GST registration is a mandatory requirement for businesses with an annual turnover of more than Rs. 20 lakhs (Rs. 10 lakhs for North Eastern and hill states). The GST registration number serves as proof that the business is registered with the government and is authorized to collect and pay GST.
Can a current account be opened without GST in India?
While GST registration is a mandatory requirement for most businesses to open a current account in India, this rule has some exceptions. For example, if you are an individual or a sole proprietorship, you may be able to open a current account without GST registration. However, this is subject to the discretion of the bank and may vary according to the lender’s policies.
If you are a partnership firm, LLP, or private limited company, you are required to have a GST registration to open a current account. In some cases, the bank may allow you to open a current account without GST registration if you provide an undertaking that you will register for GST within a specified period of time.
It is essential to keep in mind that even if you are not required to register for GST, you may still be required to provide additional documents, such as PAN card, Aadhaar card, a certificate of business registration, and proof of address, in order to open a current account. Therefore, it’s important to double-check with the bank or financial institution about the specific current account requirements.
What are the benefits of GST registration?
While GST registration is a mandatory requirement for most businesses to open a current account, there are several benefits of getting registered under GST. These include:
- Legal recognition: GST registration provides legal recognition to your business and makes it eligible for various government schemes and benefits.
- Input tax credit: GST registration allows you to claim an input tax credit for the tax paid on your purchases. This can help you reduce your tax liability and improve your cash flow.
- Compliance: GST registration ensures that you are compliant with the tax laws and regulations in India. It also helps you avoid penalties and legal issues.
- Competitive advantage: GST registration can help you gain a competitive advantage over businesses that are not registered under GST. This is because registered businesses are perceived to be more credible and trustworthy by customers and suppliers.
While it may be possible to open a current account without GST registration in India for certain types of businesses, it is a mandatory requirement for most businesses. GST registration provides legal recognition to your business, allows you to claim input tax credit, ensures compliance with tax laws and regulations, and can give you a competitive advantage.