GST Registration Threshold Limit: Who Needs to Register & When?

Understand the GST registration threshold limit, turnover criteria & exemptions. Find out when GST is mandatory & who qualifies for voluntary registration.

GST or Goods and Services tax is an indirect tax levied on purchase of goods and services within the economic framework of India. Different goods and services are taxed differently depending on their criticality to economic growth. 

Tax threshold is a mechanism that is often used to stimulate growth in small businesses in the economy. This ensures that the economy is not dependent on any one or two major players and has a strong foundational net in terms of strong and independent small businesses. What the threshold system does is that it exempts small businesses from charging GST to their customers. When a business earns less than a particular limit of turnover per year, they are allowed to sell their goods at more competitive rates in comparison to big businesses. Once the small business has grown to a fair extent, it is eventually brought under the tax umbrella.

In this article we are going to be discussing terms such as GST registration limit / aggregate turnover limit, GST registration applicability limit and special category states for GST registration. These are all terms that are related to something called the GST threshold.

What is the Threshold Limit for GST Registration?

The GST registration threshold limit is determined by turnover limits, which vary based on business type and location. The aggregate turnover includes all taxable supplies, exempt supplies, exports, and interstate sales but excludes GST and inward supplies under reverse charge.

For businesses dealing in goods, the registration threshold is ₹40 lakh for most states. However, in category states (special category states like the Northeastern states, Himachal Pradesh, and Uttarakhand), the limit is ₹20 lakh. For manufacturers and service providers, the turnover limit is ₹20 lakh (₹10 lakh in category states). If a business exceeds these limits, GST registration becomes mandatory.

For example, a trader in Maharashtra selling taxable supplies like electronics must register if their aggregate turnover exceeds ₹40 lakh. However, a business in Assam dealing in goods has a lower limit of ₹20 lakh. Certain services, such as healthcare and education, fall under exempt supplies and do not contribute to GST liability.

The turnover limits help small businesses stay compliant without unnecessary tax burdens. Voluntary registration is also an option for businesses below the threshold, allowing them to claim input tax credit.

 Types of GST Registration Threshold Limits

Business Type	Normal States (₹)	Category States (₹)	Remarks
Supply of Goods (Traders & Suppliers)	40 lakh	20 lakh	Mandatory GST registration if turnover exceeds the limit.
Manufacturers	20 lakh	10 lakh	Includes small-scale manufacturers and producers.
Service Providers	20 lakh	10 lakh	Includes freelancers, consultants, and businesses providing taxable services.
Composition Scheme (Goods)	1.5 crore	75 lakh	Reduced tax rate but with restrictions on inter-state trade.
Composition Scheme (Services)	50 lakh	50 lakh	Available for small service providers at a lower tax rate.

State-Wise Applicability of GST Registration Threshold Limits

State Category	States Included	Threshold for Goods (₹)	Threshold for Services (₹)
Normal States	Andhra Pradesh, Bihar, Chhattisgarh, Delhi, Goa, Gujarat, Haryana, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh, West Bengal	40 lakh	20 lakh
Special Category States	Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand	20 lakh	10 lakh
Jammu & Kashmir	Jammu & Kashmir	40 lakh	20 lakh
Ladakh	Ladakh	20 lakh	10 lakh

Composition Scheme for GST

The Composition Scheme under GST is designed to simplify tax compliance for businesses that are within the taxable threshold of GST but are barely so. If the transition for these businesses from being non-GST businesses to GST chargeable businesses is too sudden it can take a toll on their continuity. For instance, the increase in their prices due to inclusion of GST can throw customers off who might then choose to go to another small vendor instead where they can continue to enjoy the same price as before.

In order to make this transition more affable, the GST composition scheme was introduced. Under this scheme, small businesses are allowed to collect GST at a fixed rate on turnover instead of the regular GST rates. Once the business crosses this turnover limit milestone as well, it is then required to collect GST at regular rates.

Turnover Limits for Composition Scheme for GST

The GST registration limit for composition schemes in India was initially Rs. 1.0 crore turnover per annum. However, the CBIC has recently notified an increase to the threshold limit from Rs 1.0 Crore to Rs. 1.5 Crores so as to improve tax compliance simplification and provide relief to more businesses under the scheme. This limit is, however, limited to the normal states as mentioned above. The turnover limit in special category states is₹75 lakh. These businesses pay GST at a reduced rate (1% for traders and 2% for manufacturers) but cannot claim Input Tax Credit (ITC) or make interstate sales. Additionally, businesses dealing in ice cream, pan masala, tobacco, and aerated beverages are disqualified from the scheme.

For service providers, the turnover limit is ₹50 lakh across all states, with a lower GST rate of 6% (3% CGST + 3% SGST). This helps small service businesses like consultants and freelancers reduce tax liability while simplifying compliance.

For mixed supplies (businesses dealing in both goods and services), the ₹1.5 crore turnover limit applies if the service component does not exceed 10% of turnover or ₹5 lakh, whichever is higher. If service revenue exceeds this threshold, the business must register under the regular GST scheme.

Who Is Compulsorily Required to Register for GST Regardless of Threshold?

Individuals or entities engaged in specific activities as mentioned in Section 24 of the GST Act, irrespective of their turnover, are liable for compulsory registration. This applies to specific cases where the nature of activities or supplies makes registration compulsory.

1. Interstate Supplies: Businesses making inter-state supplies of goods must obtain registration, irrespective of their turnover. However, service providers enjoy threshold exemptions.
2. E-commerce Operators and Sellers: E-commerce operators and businesses selling through platforms like Amazon, Flipkart, or Swiggy must register under GST, regardless of their turnover.
3. Casual Taxable Persons: Individuals or businesses making occasional supplies without a fixed place of business (such as in exhibitions or fairs) must obtain registration before commencing operations.
4. Non-Resident Taxable Persons: Foreign entities making supplies in India must register under GST, even if they have no permanent establishment.
5. Reverse Charge Mechanism (RCM): Businesses receiving supplies under RCM must register, irrespective of turnover.
6. TDS and TCS Deductors: Certain government entities and businesses required to deduct TDS or TCS under GST provisions must obtain registration.
7. Input Service Distributors (ISD): Businesses distributing input tax credit across branches must register.

These provisions under Section 24 ensure compliance for specific activities, making GST registration mandatory beyond just turnover limits.

How to Calculate Aggregate Turnover for GST Threshold?

Aggregate turnover in GST refers to the total value of all taxable, exempt, export, and inter-state supplies of goods or services made by a person with the same PAN across India. It includes turnover from all branches but excludes inward supplies under the reverse charge mechanism (RCM) and GST components like CGST, SGST, IGST, and cess. Aggregate turnover is crucial in determining whether a business must register under GST.

Exemptions in Turnover Calculation

Certain elements are excluded from aggregate turnover when calculating the GST threshold:

1. GST Charged on Outward Supplies: The tax component (CGST, SGST, IGST) on outward supplies is not included in aggregate turnover.
2. Inward Supplies under Reverse Charge (RCM): Purchases where the recipient pays GST under RCM are excluded from the seller’s aggregate turnover.
3. Non-Taxable Supplies: Items such as alcohol for human consumption and petroleum products (which are outside GST purview) are not considered.
4. Supplies Between Different Branches: Transactions between branches under the same PAN are counted only once to prevent duplication.

Changes in GST Registration Threshold Limit Over the Years

The GST amendments over the years have brought several turnover changes, particularly in threshold limits for GST registration. The GST Council has played a crucial role in revising these GST registration limits based on industry feedback and economic factors.

Previous vs. Current Threshold Limits

Initially, the GST threshold limit for mandatory registration was ₹20 lakhs for service providers and ₹10 lakhs for special category states. For goods suppliers, the threshold was ₹20 lakhs. However, in 2019, the GST Council increased the limit for goods suppliers to ₹40 lakhs, while service providers retained the ₹20 lakh limit. For special category states, the threshold for services was revised to ₹10 lakhs, but some states chose to adopt higher limits.

States Opting for New Threshold Limit

The ₹40 lakhs adoption for goods was not uniform across all states. Some special category states, including Arunachal Pradesh, Meghalaya, Sikkim, and Uttarakhand, adopted the higher threshold, while others such as Mizoram, Nagaland, and Tripura retained the ₹20 lakh limit.

Similarly, states like Telangana and Kerala chose to maintain the older GST registration limits for better tax compliance, whereas larger states such as Maharashtra and Karnataka adopted the revised limits. These special category state revisions highlight the flexibility provided to states in state adoption of GST rules based on their economic and administrative needs.

Conclusion on GST Audit

Understanding GST threshold limits is crucial for businesses to maintain GST compliance and avoid penalties. Proper turnover calculation helps businesses track when they need to register under GST. For goods, the registration limits vary, with ₹40 lakhs in regular states and ₹20 lakhs in special category states, while for services, the limits are ₹20 lakhs and ₹10 lakhs, respectively.

Timely registration is essential once a business exceeds the threshold. Failure to register within 30 days can lead to fines, loss of input tax credit (ITC), and compliance issues. Additionally, businesses making interstate supplies, e-commerce sales, or dealing under the reverse charge mechanism must register regardless of turnover.

Given the frequent updates to GST rules, consulting tax professionals ensures accurate GST compliance and helps businesses maximize tax benefits while avoiding errors in filings. By staying informed and adhering to registration limits, businesses can focus on growth and financial stability while meeting legal obligations.

FAQs on GST Registration Threshold Limit

What is the GST registration threshold limit for e-commerce sellers?

E-commerce sellers must register for GST regardless of turnover, as they do not qualify for the standard threshold limits of ₹40 lakhs for goods and ₹20 lakhs for services. Additionally, businesses making interstate supplies of goods require mandatory GST registration, irrespective of turnover, ensuring compliance with tax regulations.

Can small businesses opt out of GST if they stay below the threshold?

Yes, small businesses can opt out of GST if their turnover remains below the threshold. However, they may choose voluntary registration, allowing them to claim input tax credit (ITC), expand market reach, and build credibility. Voluntary GST registration benefits businesses dealing with registered entities and interstate transactions.

How is aggregate turnover calculated for GST purposes?

Aggregate turnover for GST includes taxable, exempt, export, and interstate supplies across all business locations under the same PAN, excluding GST and reverse charge inward supplies. Aggregate Turnover = Taxable Supplies + Exempt Supplies + Exports + Inter-state Supplies − GST and RCM Inward Supplies. Example: A business with ₹30 lakh taxable sales, ₹5 lakh exempt sales, and ₹10 lakh exports has an aggregate turnover of ₹45 lakh.

What is the difference between regular and special category state thresholds?

Regular states have a GST threshold of ₹40 lakhs for goods and ₹20 lakhs for services. Special category states have a lower threshold of ₹20 lakhs for goods and ₹10 lakhs for services. Example: A trader in Maharashtra registers above ₹40 lakh, while in Nagaland, registration is mandatory above ₹20 lakh.

Are service providers in special category states required to register at ₹10 lakhs turnover?

Yes, service providers in special category states must register for GST if their turnover exceeds ₹10 lakhs. However, certain states, like Jammu & Kashmir and Uttarakhand, have opted for a ₹20 lakh threshold. Service providers making interstate supplies must register regardless of turnover, ensuring tax compliance.

Can I register for GST voluntarily even if I don’t cross the threshold?

Yes, you can opt for voluntary GST registration even if your turnover is below the threshold. Benefits include input tax credit (ITC), interstate trade, business credibility, and eligibility for government contracts. Register online via the GST portal by submitting PAN, business details, and required documents for approval.

What happens if my turnover exceeds the GST threshold mid-year?

If your turnover exceeds the GST threshold mid-year, you must apply for GST registration within 30 days. Once registered, you must start collecting GST, file returns, and comply with tax regulations. Input tax credit (ITC) can be claimed from the date of registration approval. Non-compliance may lead to penalties.