India’s Goods and Services Tax (GST) has revolutionised the country’s taxation landscape by replacing multiple indirect taxes with a unified system. However, one of the most common questions businesses and entrepreneurs have is, “At what turnover is GST registration mandatory?”
Understanding the minimum turnover threshold for GST registration is crucial for businesses to determine their tax obligations and compliance requirements. If your business surpasses this threshold, GST registration is mandatory; otherwise, it remains optional. But there are exceptions where businesses must register for GST, irrespective of their turnover. Let’s break it down step by step.
Understanding GST Registration Threshold in India
What is Turnover in GST?
Before diving into the limits, let’s first define turnover under GST. In simple terms, aggregate turnover refers to the total value of all taxable supplies, exempt supplies, exports, and inter-state sales made by a business in a financial year. This turnover calculation excludes taxes like CGST, SGST, IGST, and Cess but includes:
Taxable Supplies – Goods and services that attract GST.
Exempt Supplies – Goods/services exempt from GST but included in turnover calculation.
Exports & Inter-State Supplies – Even if the tax rate is zero.
Understanding what counts as turnover is essential to determine whether your business crosses the registration threshold.
Minimum Turnover Limit for GST Registration
GST registration is mandatory once a business crosses a specific turnover threshold. This limit varies based on the nature of business operations, the type of supply (goods or services), and the state where the business operates.
1. GST Registration Threshold for Goods Suppliers
- ₹40 Lakh Threshold: Applicable to businesses dealing in goods (except in special category states and select notified states such as Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand, and Puducherry, where the threshold is ₹20 lakh).
- ₹20 Lakh Threshold: Applicable for businesses operating in special category states and notified states dealing in goods.
Note: Earlier, the threshold for special category states was ₹10 lakh. However, following the GST Council’s recommendations, it was raised to ₹20 lakh for certain states from 1st April 2019. Some northeastern states still opt for the ₹10 lakh limit.
2. GST Registration Threshold for Service Providers
- ₹20 Lakh Threshold: Service providers across India (except special category states) must register for GST once they cross ₹20 lakh in annual turnover.
- ₹10 Lakh Threshold: For service providers in special category states (Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Uttarakhand), GST registration is mandatory beyond this limit.
3. Special Category States & Their Threshold
Certain states have a lower threshold for GST registration due to their unique economic conditions. These include:
- Arunachal Pradesh
- Manipur
- Meghalaya
- Mizoram
- Nagaland
- Sikkim
- Tripura
- Uttarakhand
For businesses operating in these states, GST registration is required once turnover crosses ₹10 lakh for services and ₹20 lakh for goods (in most cases, unless a state has opted for the ₹10 lakh limit for goods as well).
Composition Scheme and Its Turnover Limits
For small businesses that do not want the complexity of regular GST compliance, the Composition Scheme offers a simplified taxation approach. However, businesses opting for this scheme have turnover restrictions.
1. Eligibility for Composition Scheme
The Composition Scheme allows eligible taxpayers to pay GST at a fixed percentage of their turnover instead of the standard GST rates. However, businesses under this scheme cannot claim input tax credit (ITC) or make inter-state sales of goods.
Important: Service providers opting for the Composition Scheme under section 10(2A) can provide services across India, but they are subject to turnover limits.
2. Turnover Limits for Composition Scheme
- Manufacturers and Traders: Up to ₹1.5 crore in annual turnover (₹75 lakh for special category states).
- Service Providers (under section 10(2A)): Up to ₹50 lakh in annual turnover.
- Restaurants (not serving alcohol): Also eligible up to ₹1.5 crore turnover.
This scheme benefits small businesses by reducing compliance burdens, but it comes with limitations such as restricted inter-state supplies for goods and the inability to claim ITC.
Situations Where GST Registration is Mandatory Irrespective of Turnover
Even if a business does not exceed the turnover threshold, GST registration is still compulsory in the following cases:
1. Inter-State Supply of Goods
If a business supplies goods across state borders, GST registration is mandatory regardless of turnover.
Note: Service providers making inter-state supplies are exempt from mandatory registration if their turnover remains below the threshold.
2. E-Commerce Operators and Online Sellers
- Businesses selling on platforms like Amazon, Flipkart, or Shopify must register for GST.
- E-commerce operators facilitating such sales (like Amazon and Flipkart) must also be registered.
3. Reverse Charge Mechanism (RCM) Businesses
Businesses that deal with RCM transactions, where the recipient is liable to pay GST instead of the supplier, must register even if turnover is below the threshold.
4. Casual Taxable Persons & Non-Resident Taxable Persons
- Businesses that occasionally supply goods or services in different states (e.g., trade fairs, exhibitions) must register under GST.
- Foreign businesses providing services in India must register under GST.
How to Calculate Aggregate Turnover for GST?
The aggregate turnover includes various elements that determine GST liability. Here’s a breakdown:
1. Inclusions in Aggregate Turnover
- Taxable sales within India
- Exports (even if GST rate is 0%)
- Inter-state sales (even for Composition Scheme taxpayers)
- Exempted supplies
- Stock transfers between different branches of the same business
2. Exclusions from Aggregate Turnover
- GST tax amounts (CGST, SGST, IGST, and Compensation Cess)
- Inward supplies taxable under the reverse charge mechanism (RCM)
By calculating the correct turnover, businesses can determine if they must register under GST.
Consequences of Not Registering for GST
Failing to register for GST when required can lead to legal and financial repercussions.
1. Penalties for Non-Compliance
- If a business fails to register despite exceeding the threshold, the penalty is 10% of the tax amount due (minimum ₹10,000).
- Fraudulent non-registration may attract a penalty of 100% of the tax amount due.
2. Business Disadvantages of Not Registering for GST
- Loss of Input Tax Credit (ITC): Without GST registration, businesses cannot claim ITC on purchases.
- Restricted Business Growth: Many companies prefer to deal only with GST-registered vendors.
- Legal Risks & Fines: If caught operating without mandatory GST registration, businesses may face penalties, audits, and backdated tax liabilities.
Final Thoughts:
Understanding the minimum turnover for GST in India is essential for businesses to determine whether they must register under GST laws. While goods suppliers generally have a higher threshold of ₹40 lakh (or ₹20 lakh in some states), service providers must register once their turnover crosses ₹20 lakh (or ₹10 lakh in special category states).
Apart from turnover, businesses involved in inter-state trade of goods, e-commerce, RCM transactions, or casual taxable supplies must register for GST irrespective of their annual turnover.
Complying with GST regulations not only prevents penalties but also enhances business credibility and tax transparency. If your business is approaching the GST threshold, it’s advisable to register in time to avoid compliance issues. Stay informed, stay compliant and keep your business running smoothly!
