All you need to know about the threshold limit for GST registration

Any kind of tax is not applicable to all people, irrespective of their income or turnover. It is very important to keep a class of persons up to a specified threshold limit out of the tax ambit so that small people do not get into the tax compliance hassle. Therefore, every tax law provides a threshold limit below which such a law shall not apply.

The same principle is also applicable to GST law. GST law specifies a threshold limit below which a person is not required to obtain GST registration. Therefore, GST registration threshold limits refer to the turnover limit below which businesses are exempted from obtaining GST registration. In simpler terms, small businesses with a turnover below a certain threshold are not liable to register under GST. However, once a business crosses this limit, GST registration becomes mandatory.

This article contains detailed insights into the threshold limit under GST for registration purposes:

1. Threshold Limits for GST Registration

Unlike VAT and Service Tax, GST is applicable to supply goods and services. Therefore, GST Law specifies a separate set of registration provisions for the supply of goods and supply of services.

1.1 Threshold Limit for Supply of Goods

• The GST Law specifies a separate threshold limit for GST registration in the Special Category States.
• 12 states are notified as Special Category states, namely Arunachal Pradesh, Assam, Jammu & Kashmir, Ladakh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, and Uttarakhand.
• Following is the latest threshold limit for GST registration:

• The above-mentioned threshold limit has become applicable as of April 1, 2019. Up to March 31, 2019, the threshold limit for GST registration was INR 20 Lacs and INR 10 lacs for Normal States and Special Category state, respectively.

1.2 Threshold Limit for Supply of Services

• Since GST implementation, there has been no change in the threshold limit for GST registration in the supply of services.

• It is important to note that aggregate turnover is to be considered for the current financial year to determine the liability of GST registration. Therefore, if the turnover of a person exceeds the specified threshold limit during the year, such person is required to obtain GST registration.

2. Cases where GST registration is required irrespective of the Threshold limit

As per Section 24 of the CGST Act, 2017, the following persons are required to obtain GST registration, irrespective of the aggregate turnover:

1. Persons making any inter-state taxable supply, i.e., supply of goods or services, is made from one state to another state. The export of goods or services is also considered an interstate supply.
2. Casual taxable persons making taxable supplies;
3. Persons who are required to pay tax under the reverse charge mechanism
4. Persons who are required to pay tax under Section 9(5) of the CGST Act Under Section 9(5), e-commerce operators are required to obtain the services rendered through them, such as Zomato, Swiggy, etc.
5. non-resident taxable persons making taxable supplies;
6. persons who are required to deduct tax under Section 51. In such cases, a taxpayer is registered as a tax deductor, and this registration is separate from regular GST registration.
7. persons who make taxable supplies of goods or services or both on behalf of other taxable persons, whether as agents or otherwise;
8. Input Service Distributor, whether or not separately registered under this Act;
9. Any person who is required to make supplies through an e-commerce operator such as Amazon, Flipkart, Zomato, Meesho, etc.
10. every electronic commerce operator who is required to collect TCS;
11. every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person;
12. Every person supplying online gaming from a place outside India to a person in India.

Understanding GST Threshold Limit: Calculating the Registration Requirement

Understanding the GST Registration Threshold in India

3. Who is not required to obtain registration under GST?

There are certain categories of goods that have been kept outside the GST environment since the date of the GST implication, such as petroleum products, alcoholic liquor for human consumption, electricity, etc. These products are still liable for VAT and excise duty.

Therefore, Section 23 of the CGST Act, 2017 specifies the following persons who are not required to obtain GST registration, irrespective of their aggregate turnover:

1. Any person who is engaged exclusively in the supply of exempted goods or services;
2. Any person who is engaged in the supply of any of the following products:
   1. Alcoholic Liquor for Human Consumption
   2. Petroleum products;
3. an agriculturist, to the extent of supply of produce out of cultivation of land.

4. Computation of Aggregate turnover to determine Threshold Limit

As per GST law, “aggregate turnover” is the aggregate value of the following supplies:

1. all taxable supplies (excluding the value of inward supplies on which tax is payable on a reverse charge basis);
2. exempt supplies;
3. Exports;
4. All interstate supplies

Aggregate turnover is to be computed on the basis of the Account Number on PAN India basis. E.g., a person has branches in Delhi and Maharashtra. His supply in the state of Delhi is INR 20 Lacs and his supply in the state of Maharashtra is INR 25 lacs. In such a case, the aggregate turnover of such a person is INR 45 Lacs for the computation of the GST threshold limit, and he is required to obtain GST registration in both Delhi and Maharashtra.

While computing aggregate turnover, Central tax, State tax, Union territory tax, Integrated tax, and cess shall not be considered.

Aggregate turnover is to be computed for the period of April to March.

5. Threshold limit for Composition Supply

The Composition levy scheme is a scheme provided to small taxpayers with the least compliance and hassle-free GST. The compliance and composition scheme allows a registered person to charge GST at a very nominal rate of 1% on supplies without any requirement of obtaining ITC.

A composition scheme is a voluntary and optional scheme. This scheme is provided to persons whose aggregate turnover is up to INR 1.50 Crore for their supply of goods (75 lakhs in case of the Eastern States) and 50 lakhs in the case of supplier of services.

However, the following persons are not eligible to opt for the composition scheme:

1. a) Manufacturer of ice cream, pan masala, or tobacco
   b) Person making interstate supplies
   c) Casual taxable person or non-resident taxable person
   d) Suppliers supplying goods through an e-commerce operator

Deepika Jain Partner

FCA| +10 years experience | Practitioner| Ex-KPMG| GST Expert| Trainer

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Finance GST Income Tax