September 01, 2025
7 mins read
Are you planning to start a new business or simply curious to learn how product costs work? One term that you'll often come across is VAT. It stands for Value Added Tax. There's a lot to know about VAT, including how to register online and how it works.
Whether you're selling products or offering services, understanding VAT (Value Added Tax) isn’t just a tax formality, it’s a key step in making your business legit and future-ready. From adding credibility to your brand to ensuring smooth operations with suppliers and customers, VAT registration has its perks. In this guide, we break down everything you need to know about VAT registration, from its meaning and benefits to fees and a step-by-step guide to registering online.
VAT registration is a process that makes registered firms liable to charge and collect VAT on their taxable supplies by notifying their tax authorities accordingly. VAT was implemented in India on April 1, 2005, and was ultimately superseded by the Goods and Services Tax (GST) system in July 2017. By engaging in VAT registration, a Taxpayer identification number (TIN) was issued, which allowed businesses to claim input tax credits on purchases and also ensured they calculated their taxes according to the state consumption tax laws.
Source: ClearTax
VAT registration offers critical compliance and financial benefits to businesses:
Businesses that can reclaim input tax credits can deduct VAT paid on acquisitions from VAT received on sales. The system lowers the total tax bill for the business and avoids double taxation.
Other benefits include:
Input Tax Credit – Credit VAT paid on inputs against VAT payable on outputs, enhancing cash flow
Legitimacy – A VAT Identification Number (TIN/VATIN) improves credibility with customers, suppliers, and banks
Regulatory Compliance – Registration secures compliance with tax systems and prevents penalty triggers
B2B Advantage – VAT-compliant invoice capability is attractive to business customers and enhances supply chain transparency
These advantages reinforce the original design of VAT systems, upholding business reputation and operational efficiency.
VAT registration in India before GST was a planned, state-regulated process to make compliance mandatory and facilitate the conduct of business legally:
The procedure was as follows:
Eligibility check: Dealers were required to register if their taxable turnover exceeded ₹10 lakh in the last three months or ₹40 lakh within twelve months. Some states also covered importers of goods and interstate traders.
Form submission: Applicants filled in and submitted Form VAT‑100, along with the documents required, to the state VAT office.
Verification: Tax officials conduct a site visit, typically within a few working days.
Fee and deposit: Charges for registration (approximately ₹500) and a refundable security deposit, as mandated by state regulations, were collected.
Issue of TIN: After a successful inspection and document verification, companies were issued their VAT Certificate and 11-digit TIN.
This procedure was crafted for transparency and consistency, facilitating efficient state-level VAT administration.
Source: Government Website
Before the implementation of GST, VAT registration in India was based on the annual turnover in respect of dealers. Registration was required in most states on turnover above ₹5 lakh, and some states extended to the upper range of ₹10 lakh in the last 12 months. A small charge that was supposed to be paid, nominal (today usually about ₹500), was the registration fee, and a security deposit required by most State Commercial Tax Departments was to be submitted.
Turnover limit: A liability to register where there is turnover in three successive months of over 10 Lakhs or 12 months of over 40 Lakhs
Registration fee: It is about ₹500, which depends on the state
Security deposit: This can be returned when the rules of the return filings and tax payment are met
These regulated levels were meant to standardise the cost of compliance to small and medium businesses.
Source: Government Website
Firms in various states can apply for VAT registration online on official government websites.
After meeting the prerequisites, the procedure is as under:
Register on the concerned state's VAT platform (e.g., Directorate of Commercial Taxes).
Please complete the application form, providing your business information, estimated annual turnover, and bank details.
Upload documents for KYC, i.e., PAN, identity, and address proofs.
Get an instant temporary TIN after submission.
Inspection & final registration, following which the authorities release the permanent VAT certificate after verification.
This wholly electronic system, facilitated under the National e-Governance Plan, streamlines compliance and offers quicker registration for dealers.
Source: Government Website
The usual requirements of applicants include:
PAN card (business or proprietor)
Identification and address of promoters or directors
Business address documentation (e.g., lease document)
Certificates of Incorporation (of companies), Memorandum & Articles of Association, where appropriate.
These documents confirm the legitimacy of the business and the individuals involved.
Access the state's VAT portal.
Type in your TIN or log in.
Check up on real-time registration or certificate granting.
This facilitates transparency within the VAT compliance process.
Prior to the introduction of GST in India, VAT registration was a mandatory compliance procedure. It provided a legal identity, permitted input tax credit, and required adherence to the regulations. Small businesses were boosted with procedural clarity, a cheap registration fee, and digital facilities.
The VAT also introduced a transparent scheme based on invoices during its time, laying the foundation for the connected GST scheme. Refamiliarisation with the concept of VAT registration is still appreciated in the context of major historical tax compliance and its role in the development of indirect tax systems.
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No. VAT was an indirect state-level tax that was levied on goods, whereas GST is a single national tax on goods and services in place of VAT, service tax, etc., in 2017.
Prior to the introduction of GST, the process was conducted through the relevant state's Commercial Tax Department, which required filing an application, submitting documents, paying a fee, and undergoing site verification.
To obtain a TIN, you must apply online or offline to the state VAT authority, fulfil turnover requirements, submit the necessary documents, and undergo verification.
No, not currently. VAT has been substituted by GST for the majority of goods and services. VAT may still be applicable for certain products, such as alcohol and petroleum, in some states.
Earlier, any dealer or business with an annual turnover of over ₹5–10 lakh or with inter-state sales was mandatorily required to be registered.
A VAT refund refers to the refund of excess input tax credit when the VAT paid on purchases exceeds the VAT collected on sales.
VAT was state-specific and only applied to goods; GST registration is centralised for both goods and services, following a uniform pattern.
Typically, no, but for goods-based businesses, such as those in the alcohol or petroleum industry, which may still require VAT registration in states where GST does not cover these items.
Non-registration would result in penalties, including fines, interest on unpaid taxes, and potential prosecution under the relevant state VAT Act.
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