When does a business actually need GST registration?
· 5 min read
Above ₹40 lakh turnover for goods or ₹20 lakh for services in most states. But inter-state supply, e-commerce selling and reverse charge make registration mandatory from the first rupee, regardless of turnover.
The turnover thresholds are the part everyone knows. The exceptions are what actually catch people out.
The thresholds
For a business supplying goods, registration becomes compulsory once aggregate turnover in a financial year crosses ₹40,00,000. For services, the limit is ₹20,00,000. Several special category states use lower limits of ₹20,00,000 and ₹10,00,000 respectively.
Aggregate turnover means all supplies under the same PAN across India — taxable, exempt, exports and inter-state — not just the turnover of one branch.
When turnover does not matter
Registration is mandatory from the first rupee, whatever your turnover, if you:
- Make any inter-state taxable supply of goods
- Sell through an e-commerce operator that collects tax at source
- Are liable to pay tax under reverse charge
- Are a casual taxable person or a non-resident taxable person
- Supply on behalf of another registered person as an agent
The inter-state rule is the one that surprises small businesses most often. A Ranchi trader selling ₹5,00,000 of goods to a buyer in Bihar needs registration, even though the turnover is nowhere near ₹40,00,000. Note that this applies to goods — a service provider making inter-state supplies still gets the ₹20,00,000 threshold.
The composition scheme
Businesses below ₹1,50,00,000 turnover can opt for the composition scheme and pay a flat rate on turnover instead of tracking input credit. It is simpler, but the trade-off is real: you cannot claim input tax credit, you cannot make inter-state supplies, and you cannot charge GST on your invoices — which makes you less attractive to registered buyers who wanted that credit.
Voluntary registration
Plenty of businesses below the threshold register anyway, because their customers are registered and want an invoice they can claim credit on. That is a commercial decision rather than a legal one, but it is usually the right call if you sell business to business.