The registration threshold is the first thing anyone learns about GST and one of the least reliable guides to whether registration is actually required. Section 22 sets a turnover test. Section 24 then overrides it for a list of categories, and that list catches a great many small businesses which are nowhere near any threshold.
The thresholds
| Supplies | Normal states | Special category states |
|---|---|---|
| Goods only | ₹40 lakh | ₹20 lakh |
| Services, or goods and services | ₹20 lakh | ₹10 lakh |
The ₹40 lakh limit came in through Notification 10/2019-Central Tax with effect from 1 April 2019, and it applies only to a person engaged exclusively in the supply of goods. The word does real work. A trader with ₹35 lakh of goods and ₹2 lakh of service income is not exclusively supplying goods, so his threshold is ₹20 lakh and he crossed it long ago.
States were given an option on the ₹40 lakh limit and not all adopted it uniformly. Confirm the position for the specific state rather than assuming.
Aggregate turnover is wider than sales
Section 2(6) defines aggregate turnover as the aggregate value of all taxable supplies, exempt supplies, exports and inter-state supplies of persons having the same PAN, computed on an all-India basis, excluding the taxes themselves.
Four features of that definition produce most of the mistakes.
It includes exempt supplies. A business whose main line is exempt can cross the threshold on the exempt turnover alone and become liable to register because of a small taxable side activity.
It is PAN-based and all-India. Turnover from every state under the same PAN is added together. Three branches at ₹15 lakh each is ₹45 lakh, not three businesses below the limit.
It includes exports, which are zero-rated but very much part of turnover.
It counts inter-state supplies to distinct persons. Stock transfers between your own registrations in different states are supplies, and they enter the figure.
Interest income deserves a separate mention. Interest on deposits and loans is an exempt supply, and it enters aggregate turnover. A person with modest professional receipts and substantial interest income can be over the threshold without any obvious commercial reason to think so.
Section 24, which is the part that catches people
Section 24 opens with a phrase that overrides everything above: notwithstanding anything contained in Section 22(1), the following persons shall be required to be registered. Turnover is irrelevant for these categories. Registration is required from the first rupee.
Persons making any inter-state taxable supply. This is the big one for goods. A trader in Rajkot with ₹6 lakh of turnover who sells to one customer in Maharashtra is required to register.
There is important relief for services. A notification exempts suppliers of services making inter-state supplies from compulsory registration until they cross the ordinary ₹20 lakh threshold. So a freelance consultant billing clients in other states is not pushed into registration by the inter-state limb alone. A person supplying goods inter-state has no equivalent relief.
Casual taxable persons. Someone supplying occasionally in a state where he has no fixed place of business. Exhibition and trade fair stalls, seasonal operations, a contractor executing a short project in another state. Registration is required in advance, and it carries an advance deposit of the estimated tax.
Persons liable to pay under reverse charge. If you are liable to pay tax under Section 9(3) or 9(4) on inward supplies, you must register, whatever your turnover. Import of services is the usual trigger. A small business subscribing to foreign software is receiving an imported service and is liable under reverse charge.
Non-resident taxable persons, again with registration in advance and a deposit.
Persons required to deduct tax under Section 51 or collect under Section 52.
Persons who supply through an electronic commerce operator who is required to collect tax at source, and electronic commerce operators themselves.
Input service distributors, and persons supplying on behalf of another registered person as an agent.
Persons supplying online information and database access or retrieval services from outside India to an unregistered person in India.
The reverse charge limb and the inter-state goods limb are the two that most often turn up during a review of a small business which believed, quite reasonably, that it was below the threshold and therefore outside GST.
The cost of registering late
Registration must be applied for within thirty days of becoming liable. Late registration is not a filing formality with a small fee attached.
Tax is payable from the date of liability, not the date of registration. The obligation attaches when you became liable. Registering six months late means six months of output tax due, and by then the supplies were priced and invoiced without GST, so the tax comes out of margin.
Input credit for the intervening period is largely lost. Section 18(1) allows credit on inputs held in stock on the day before registration becomes effective where registration was applied for within thirty days. Apply late and that entitlement narrows sharply. You owe the output tax and cannot set much against it.
Interest and penalty follow.
The asymmetry is what makes it expensive. The liability is retrospective and the credit is not.
Voluntary registration
Registration is available voluntarily under Section 25(3) below the threshold, and it is often a sound commercial decision rather than a compliance burden.
The case for it: your business customers can claim credit on what you supply them, which makes you a materially cheaper supplier to a registered buyer than an unregistered competitor. You can claim credit on your own inputs. And where you supply anything inter-state in goods, you were going to need it anyway.
The case against: full compliance obligations from day one, monthly or quarterly returns, and cancellation is a process rather than a decision.
For a business selling mainly to registered businesses, voluntary registration usually pays for itself. For one selling mainly to consumers, it usually does not.
The 56th Council simplification
Among the recommendations of the 56th GST Council meeting on 3 September 2025 was a simplified registration process, and a scheme for small suppliers supplying through electronic commerce operators to obtain simplified registration. The e-commerce limb of Section 24 had been a real barrier for very small sellers, for whom full registration was disproportionate to the turnover involved. If you are advising small sellers on marketplaces, this is the area to check the current position on, because it has been moving.
The summary
₹40 lakh for goods only, ₹20 lakh otherwise, halved in special category states, computed on aggregate turnover which is PAN-level, all-India, and includes exempt supplies, exports, stock transfers and interest income. Then read Section 24, because inter-state supply of goods, liability under reverse charge, casual supply in another state and supply through an e-commerce operator all require registration from the first rupee. Apply within thirty days, because the tax is retrospective and the credit is not.
