Notification No. 10/2019-Central Tax gave exemption from registration to any person who engages in the sole supply of goods and whose annual turnover does not exceed ₹40 lakhs.
Understanding the ₹40 Lakhs Threshold
GST Registration Limit 40 Lakhs – Initially, when GST was rolled out, the exemption limit for registration was ₹20 lakhs for goods. However, in a bid to offer relief to small businesses and considering the challenges faced by them, the GST Council decided to raise this limit to ₹40 lakhs for suppliers of goods. The essence of this decision lies in its objective: to reduce the compliance burden on micro and small enterprises. By increasing the threshold, many small traders and manufacturers are exempted from the rigors of GST registration and compliance.
Notification No. 10/2019-Central Tax dated 7th March 2019
The new GST registration online threshold for those engaged in the supply of goods has been raised to 40 lakhs (save for those making intra-state supplies in the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, and Uttarakhand).
- Except for ice cream sellers and other edible ice, whether or not containing chocolate;
- Pan masala, tobacco, and manufactured tobacco alternatives,
- Those who are obliged to register under Section 24.
On the other hand, the GST registration barrier for service providers remains at ₹ 20 lakhs and ₹10 lakhs for the special category states.
GST Registration Limit of 40 Lakhs – Exceptions to the Rule
While the ₹40 lakh limit seems straightforward, there are exceptions:
- Special Category States: For states categorized as special under the GST Act, the threshold remains half, i.e., ₹20 lakhs. These states include Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, and Uttarakhand.
- Service Providers: The threshold for service providers is different. For them, the GST exemption limit stands at ₹20 lakhs and ₹10 lakhs for special category states.
Benefits of the GST Registration Limit of 40 Lakhs Threshold
- Eased Compliance: With the higher threshold, numerous small businesses are freed from the intricate paperwork and detailed compliance associated with GST. This allows them to focus on their core operations without the overhead of regular GST filings.
- Boost to MSMEs: Micro, Small, and Medium Enterprises (MSMEs) form the backbone of the Indian economy. The increased limit ensures that many of these enterprises can operate without the added financial and operational pressure of GST.
- Growth Opportunities: Without the need for GST compliance, many small businesses can now explore more aggressive growth strategies, leading to an overall boost in economic activity.
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Compulsory GST Registration Under Section 24 of the CGST Act, 2017
The following individuals are required to register under Section 24(1) of the CGST Act 2017, even if their aggregate turnover is less than the set threshold limit, and are exempt from registration under Section 22. (1).
- Despite the threshold hold limit, anyone who makes an interstate taxable supply of goods must register. However, if the total annual revenue of the company is less than the threshold, no registration is required.
- Regardless of the threshold hold limit, casual taxable individuals making taxable supplies must register.
- Regardless of the threshold limit, those who are obligated to pay tax under reverse charge are required to register.
- Mandatory registration is necessary for those who are obligated to pay tax under Section 9(5).
- Any non-resident taxable person who makes a taxable supply must register, regardless of the threshold hold limit.
- Whether or not registered under the GST Act 2017, persons who are obligated to deduct tax under Section 51 (TDS) must register separately as a tax deductor.
- Even if their annual turnover is less than the threshold, people who offer goods or services on behalf of other taxable persons, whether as an agent or otherwise, must register under GST.
It must be emphasized that only C&F agents that stock and sell items on behalf of the Principal are obliged to register. Ordinarily, commission agents who do not engage in products or services themselves are not obliged to register if their annual revenue is less than the threshold for the same.
- Input service distributors must register as an ‘Input Tax Distributor’, whether or not they are registered under the CGST Act 2017.
- Persons who supply products or services or both through such an electronic commerce operator must register compulsorily under the CGST Act, with the exception of supplies mentioned under Section 9(5).
- Every individual providing online information and database access or retrieval services (OIDAR) from a location outside India to a person in India, other than a registered taxable person, is obliged to register under GST.
- Mandatory registration is necessary for any other person or class of individuals that the Central Government or a State Government may notify based on the GST Council’s recommendations.
- Unless he is liable under reverse charge, a person dealing exclusively in exempted items is not obliged to register under GST.
What is the Minimum GST Registration Limit?
The Goods and Services Tax (GST) categorises all goods and services into different tax slabs. The government has established a basic GST threshold limit that exempts businesses with lower income from mandatory GST registration.
Current Threshold Limits:
Businesses with an annual turnover exceeding ₹40 lakhs (for goods) or ₹20 lakhs (for services) must register for GST. Businesses below these thresholds are not required to register but are encouraged to do so voluntarily. Voluntary registration provides benefits such as tax transparency, easier business operations, and eligibility for input tax credit (ITC).
| Category | Minimum Turnover – Old Regime | Minimum Turnover – New Regime |
| For sale of goods and services | ₹20 lakhs and above (all states) | ₹10 lakhs and above (special category states*) |
| For sale of goods | – | ₹40 lakhs and above (all states) |
| ₹20 lakhs and above (special category states) | ||
| For sale of services | No change | ₹20 lakhs and above (all states) |
| ₹10 lakhs and above (special category states) |
FAQs
What is the significance of Notification No. 10/2019-Central Tax?
Notification No. 10/2019-Central Tax is crucial as it increased the GST registration threshold from ₹20 lakh to ₹40 lakh for most businesses. This change provided relief to many small businesses by exempting them from GST compliance.
What happens if a business crosses the ₹40 lakh threshold during the financial year?
If a business's annual turnover exceeds ₹40 lakh at any point during the financial year, they are required to register for GST from the beginning of that financial year. It's essential to monitor your turnover closely to comply with GST regulations.
Can businesses below the ₹40 lakh threshold voluntarily register for GST?
Yes, businesses with a turnover below the ₹40 lakh threshold can voluntarily register for GST. This might be beneficial if they want to claim input tax credit on their purchases or if they deal with interstate supplies.
Is there a difference in the threshold limit for goods and services?
Yes, there is a difference. The threshold for goods is ₹40 lakh, while for services it's ₹20 lakh. This means businesses dealing primarily in services need to register for GST at a lower turnover compared to those dealing in goods.
Are there any special provisions for start-ups regarding GST registration?
While there aren't specific exemptions for startups, the government has introduced various schemes and benefits to support startups. These include simplified procedures, tax exemptions, and funding options. However, startups still need to comply with GST regulations if they cross the threshold limit.
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