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Goods and Services Tax or GST was introduced in India in 2017 as a unified indirect tax system to simplify taxation and promote uniformity in tax rates across the country. It subsumes various taxes such as excise, service tax and VAT into a single tax structure. Currently the GST registration limit or minimum GST registration turnover limit is ₹40 lakhs, meaning all businesses with a turnover of more than ₹40 lakhs (for goods) and ₹20 lakhs (for services) annually must register for GST.
Under GST, all goods and services are categorised and taxes ranging from 5% to 28% are levied on them accordingly. Some items are exempted and attract no tax. We take a closer look at the details in the next section.
What is the minimum GST registration limit?
As mentioned previously – GST categorises all goods and services, and taxes are levied as per the slabs. Also, the government has a basic GST threshold limit that allows businesses with a lower income to not register for GST.
Currently, businesses with an annual turnover of over ₹40 lakhs (for goods) and ₹20 lakhs (for services) are required to register for GST. All businesses that fall below the GST threshold limit are exempted from registering under the GST regime though it’s encouraged that they voluntarily register for GST. This will provide tax transparency, ease of doing business, and benefits of input tax credit (ITC).
GST registration threshold limit
|Min. turnover – Old regime
|Min. turnover – New regime
|For sale of goods and services
|₹20 lakhs and above (for all states)
₹10 lakhs and above (for special category states*)
|For sale of goods
|₹40 lakhs and above (for all states)
₹20 lakhs and above (for special category states)
|For sale of services
₹20 lakhs and above (for all states)
₹10 lakhs and above (for special category states)
*In the section below find more information on special category states
In the past, there had been strong demands from small businesses and MSMEs in general on the minimum threshold limit. As such, in 2019, the GST Council increased the threshold income limit to the current figures, which has been applicable since April 2019.
GST registration threshold exceptions:
- The GST registration turnover limit is different for special category states and union territories. This includes the Eastern and North-Eastern states of Sikkim, Manipur, Meghalaya, Arunachal Pradesh, Mizoram, and Tripura.
- It also includes Uttarakhand and Puducherry. The minimum turnover limit in these states has been reduced to ₹20 lakhs (for goods) and ₹10 lakhs (for services).
- The states and UTs of Jammu & Kashmir, Ladakh and Assam, though falling under special category states, opted for the new regime of GST, i.e., ₹40 lakhs and ₹20 lakhs for goods and services respectively.
- Certain activities do not require to be registered for GST, such as non-taxable goods/services, goods/services through an unregistered eCommerce platform, etc.
Also read: Impact of GST on logistics
How to calculate GST threshold limit?
Calculating the GST registration turnover limit is a straightforward process. In simple terms, it refers to the minimum annual turnover your business must have in any given year to register for GST.
To calculate, some of the factors that must be considered are:
- Annual turnover – Determine the total value of goods or services offered by you in the given financial year, including taxable and non-taxable supplies.
- Aggregate turnover – This includes the turnover of all business entities with the same PAN (business). GST registration is required if the overall turnover exceeds the minimum threshold.
- Export earnings – This refers to revenue generated from international sales. This is important because these earnings need to be converted into local currencies (i.e., foreign exchange) for accounting, taxation, and compliance purposes.
- Interstate supplies – This refers to the sale of any goods or services to another state within India and the applicable IGST rates for it.
Note – If you are an eCommerce business or inter-state supplier, it is required to register for GST even if you do not meet the GST limit. Also, take note that the limit is different for normal and special states, and for goods and services.
Also read: GST on transport – Rates for goods and passenger transportation
Documents required for GST registration in India
The importance of small scale industries in India is significant. Not surprisingly, the government modified the minimum GST registration limit to provide more small businesses the opportunity to do business with ease.
So, whether your SME falls within the GST registration threshold or not, or if you voluntarily choose to register your business with GST, here’s a list of the basic documents you will be requiring (Note: This is a basic list. Other documents will be required based on the nature of business).
List of documents for GST registration:
- Passport photo of the business owner/s (for Partnership firm, photo of all partners and authorised signatories required)
- PAN and Aadhaar card of the owner/s (for Partnership firms, PAN card of all partners required)
- Email address and mobile number
- Business address proof (for Partnership firms, address proof of partners required)
- Bank account details
- Any other documents (e.g., Partnership deed copy, registration certificate for LLP, Certificate of Incorporation for Companies, etc.)
List of GST rates in India
GST rates for various goods and services are categorised under four slabs of 5% to 28%. There are certain commodities that attract 0% GST (NIL) and few others at 3% and 0.25%.
As a business owner, it’s good to know what are the GST rates your products and services incur. Here’s a look at some of the items and the GST rates levied on them:
|GST rates (%)
|List of popular products
|Milk, curd, egg, gur (jaggery), salt, fresh vegetables, unbranded honey, besan, health services, education services, etc.
|Edible oils, sugar, tea, roasted coffee beans, skimmed milk powder, cashew nuts, raisin, agarbatti, Indian sweets, coir mats, spices, life saving drugs, etc.
|Butter, ghee, almonds, processed food, computers, mobiles, fruit juice, etc.
|Soap, toothpaste, hair oil, toiletries, capital goods, corn flakes, pasta, ice cream, printers, computers, etc.
|Small cars, high end bikes, consumer goods like AC and fridge (white goods), etc.
*This is a basic limit of items and GST rates. Please check the official GST website for the complete list.
Also read: GST on steel bars
GST registration limit – Challenges and way ahead
It can be said without a doubt that there are various benefits of registering your business under the GST regime, especially when it comes to claiming Input Tax Credit.
However, many businesses, often miss registering for GST even after crossing the minimum threshold limit. Consequences of failing to register for GST can lead to:
- Legal fines and penalties, if not registered within the prescribed time frame
- Inability to claim ITC and hence increase in overall tax liability and operating expenses
- Loss of business opportunities and competitive edge, as many businesses prefer to work with credible GST registered businesses only (e.g., government tendering, high value contracts, etc.)
Small businesses, especially those that do not fall under the GST threshold limit may at times prefer not to register for GST. This is often because GST registration requires business compliance and the process itself can at times get tedious (e.g., file returns, reconcile invoices, etc.). Moreover, registered businesses have to collect GST from their customers and remit it to the government. All of this often making it complex for small business, with limited manpower and resources to comply.
However, with changing times, the government is taking initiatives to bring all businesses under the GST regime to keep matters transparent, agile, and compliant.