Threshold Limit for GST Registration in India

Understanding the threshold limit for GST registration is necessary for anyone who wants to start or run a business in India. It helps in determining whether your business needs to be officially registered under the Goods and Services Tax system. GST aims to bring transparency, streamline tax processes, and ensure compliance. The registration criteria vary based on the business type and location, which will be discussed later in this article. Knowing where your business stands within these limits protects you from legal trouble and enables smooth operations. Let us discuss the threshold limit for GST registration in this blog.

What is GST Registration?

GST registration in India is the process by which businesses register under the Goods and Services Tax system and obtain a unique 15-digit Goods and Services Tax Identification Number (GSTIN). This registration is essential for businesses to legally collect GST from customer and claim Input Tax Credit (ITC) on their purchases. It applies to entities supplying goods or services that meet certain turnover thresholds, and is also mandatory for specific categories such as e-commerce sellers and interstate suppliers. Registering for GST ensures compliance with tax laws and facilitates smooth business operations.

Threshold Limit for GST Registration

Understanding the GST registration thresholds is important for businesses in India to ensure compliance and avoid penalties. Let us discuss the threshold limit for GST registration:

Supplier of Goods

• Standard Threshold: Businesses engaged in the supply of goods are required to register for GST if their annual aggregate turnover is Rs. 40 lakhs or more.
• Special Category States: For certain states with unique economic and geographical conditions, the threshold is lower, which is Rs. 20 lakhs.

Service Providers

• Standard Threshold: Service providers must register for GST if their annual turnover is over Rs. 20 lakhs.
• Special Category States: These special category states have a threshold limit of Rs. 10 lakhs.

States That Have Opted for the New Limit

These are the states that have opted for the new limit or continue the earlier one with the status quo:

Jammu & Kashmir and Assam have opted to raise their turnover limit to Rs. 40 lakhs, but these two states have the option to remain under the lower threshold limits as they still fall under the special category states.

Threshold Limit for the GST Composition Scheme

The GST composition scheme is a simplified tax scheme under the GST system that allows small taxpayers with limited turnover to pay tax at a fixed, lower rate and file fewer returns, without claiming ITC. It is designed to reduce compliance burden and is available to eligible manufacturers, traders, and service providers who operate within a state.

Eligibility Criteria

• Supplier of Goods: The annual turnover is up to Rs. 1.5 crores.
• Suppliers in Special Category States: The annual turnover is up to Rs. 75 lakhs.
• Service Providers: The annual turnover is up to Rs. 50 lakhs.

Tax Rates Under the Composition Scheme

• Manufacturers and Traders: 1% (0.5% CGST+0.5% SGST)
• Restaurants (Not Serving Alcohol): 5% (2.5% CGST+2.5% SGST)
• Service Providers: 6% (3% CGST+3% SGST)

Importance of Knowing the Threshold Limit for GST Registration

The following details include the importance of knowing the threshold limit for GST registration:

• Legal Compliance: If your business crosses the GST threshold and you are not registered, you may face penalties. Knowing the limits helps you stay on the right side of the law.
• Claim Input Tax Credit: Registered businesses can claim GST paid on purchases. This reduces the overall tax burden and saves money.
• Mandatory for Certain Activities: Even if your turnover is below the limit, you must register if you sell online or across states. Knowing this will help you avoid any surprise liabilities.
• Helps in Business Planning: Understanding when GST applies will let you plan your finances, pricing, and expansion with clarity.
• Avoids Penalties and Fines: If you are unaware and don’t register when it is required, you can face heavy penalties, which include interest on unpaid tax.
• Simplifies Tax Filing: Staying within or crossing the threshold affects how and when you file GST returns, and being aware of it makes compliance easier.

Voluntary GST Registration

There is no mandatory threshold limit for anyone who wants to obtain a voluntary GST registration, which offers the same strategic benefits and facilities.

Who Should Consider Voluntary GST Registration?

• Startups and Small Enterprises: New businesses aiming to establish credibility and prepare for future growth.
• Businesses with Significant Input Costs: Entities that incur substantial GST on purchases can benefit by claiming ITC, which improves cash flow.
• E-Commerce Sellers: Online sellers planning to expand reach and comply with platform requirements.
• Service Providers: Service-oriented businesses seeking to enhance professionalism and complete tasks effectively.
• Exporters: Businesses involved in exports can claim refunds on GST paid for inputs, which reduces costs.
• Interstate Suppliers: Businesses that are planning to supply goods or services across state borders.
• Those Seeking Competitive Advantage: Entities aiming to work with larger corporations that prefer GST-registered suppliers.

When is GST Registration Mandatory Regardless of Turnover?

Under the GST, certain business activities need mandatory registration, irrespective of turnover thresholds. Section 24 of the CGST Act, 2017 outlines these specific scenarios, which are mentioned below:

• Interstate Supply of Goods

Businesses involved in supplying goods across state borders must register for GST, regardless of their annual turnover. Exceptions exist for specific categories like handicraft goods, where registration is not mandatory if the aggregate turnover remains below Rs. 20 lakhs and Rs. 10 lakhs for special category states.

• E-Commerce Operators and Suppliers

Entities operating e-commerce platforms or supplying goods or services through such platforms are required to register for GST, irrespective of turnover. This ensures tax compliance and facilitates the collection of Tax Collected at Source (TCS) by the e-commerce operator.

• Reverse Charge Mechanism (RCM) Cases

Under RCM, the buyer must pay GST directly to the government for certain goods or services, not the seller. Businesses liable to pay tax under RCM must register for GST, regardless of their turnover. If a business exclusively makes outward supplies where the tax is payable by the recipient under RCM, it may be exempt from registration.

• Non-Resident Taxable Persons

Individuals or entities not residing in India but supplying goods or services within the country are classified as non-resident taxable persons. They are mandated to register for GST, irrespective of the turnover, to ensure tax compliance on their transactions in India.

• Casual Taxable Persons

Businesses that occasionally supply goods or services in a state or union territory where they don’t have a fixed place of business are termed as casual taxable persons. Such entities must obtain GST registration regardless of turnover. Exemptions are available for certain categories, such as suppliers of handicraft goods, only when their aggregate turnover is below the specified limits.

Impact of Threshold Limit on Different Industries

The GST threshold limit significantly impacts various industries. Small businesses in retail and trading benefit from exemption if turnover is below the limit, reducing compliance burden. Service providers like freelancers enjoy relief under the ?20 lakh threshold. However, e-commerce sellers and inter-state suppliers must register regardless of turnover, increasing regulatory load. Manufacturers opting for the Composition Scheme gain tax simplicity but cannot claim input credit. Overall, the threshold determines tax liability, registration needs, and operating strategy across sectors.

The threshold limit for GST registration acts as the gateway for businesses to enter the formal tax system. Understanding these limits helps entrepreneurs make informed choices about registration, compliance, and growth. As business landscapes evolve, staying aware of these thresholds is essential for smooth operation and long-term success. This article provided a complete guide on the threshold limit for GST registration. If you want to get your GST registration certificate, contact Online Legal India. They have professional experts to assist you in filing and guiding you along the way.