Registering for GST as a freelancer or small business owner may seem straightforward, but in practice, it often involves unexpected compliance demands and bureaucratic hurdles. While the official requirements specify only basic documents—such as a photograph and proof of business address—applicants frequently encounter additional requests from GST officers, leading to delays and confusion.
Additional Compliance Requirements
Although GST laws do not mandate extra registrations, officials often demand supplementary documents such as:
- Shops and Establishment Licenses – Required in some states even for home-based businesses.
- MSME Udyam Certificate – Optional but frequently requested to validate business legitimacy.
- Professional Tax (PT) Registration – Misinterpretations sometimes lead to requests for employee-based PT registration for proprietors with no employees.
- No Objection Certificates (NOCs) – Needed from landlords, housing societies, or shared office providers in many cases.
“The varying practices across jurisdictions make it difficult for applicants to predict what documentation will be required,” says Ranjeet Mahtani, Partner at Dhruva Advisors. This lack of standardization results in delays and increased compliance burdens.
Address Verification Challenges
The biggest hurdle for sole proprietors and freelancers is proving their business address. GST officers frequently scrutinize residential addresses, often demanding:
- Shop & Establishment Licenses, even when not legally required.
- Notarized Consent Letters from landlords, which is beyond statutory requirements.
- NOCs from Housing Societies for those working from home.
- Physical Verification requiring photographs of the workspace, signage, and entry points.
In cities like Mumbai, authorities apply strict interpretations of local shop laws, treating home-based businesses as commercial entities. “Many states have different interpretations of ‘shop’ laws, leading to inconsistencies in GST registration practices,” explains Vijaykumar Puri, Partner at VPRP & Co LLP.
Impact on E-Commerce and Dropshipping Businesses
Dropshipping and inventory-free e-commerce businesses face the toughest registration challenges. Since these businesses operate without warehouses, GST officers sometimes reject applications due to the absence of a storage facility.
“GST officials often do not recognize the modern business models, leading to registration cancellations,” says Dainik Gohel, Managing Partner at DGNM & Associates. To overcome this, businesses either:
- Rent a warehouse, which may not be feasible for small businesses.
- Use virtual office addresses, though in some states like Gujarat, even these are being rejected due to fraudulent registrations.
The Need for Policy Clarity
Experts suggest that these hurdles arise due to concerns over fake registrations and tax evasion. However, the lack of clear guidelines leads to genuine businesses facing unnecessary obstacles. “Penal consequences should be introduced for officers who reject applications without valid reasons,” suggests Sambhav Daga, Founder of Zaptax Advisors.
A more standardized approach to GST registration, combined with better officer training, can significantly reduce compliance burdens and improve the ease of doing business for freelancers and small enterprises.
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