GST Liability Explained: Who Needs to Pay GST in India?

Table of contents:

• Introduction
• Taxable Persons under GST
• Reverse Charge Mechanism (RCM) Under GST
• GST Liability for E-Commerce Operators and Sellers
• Special Cases of GST Liability
• GST Registration Turnover Thresholds
• Conclusion

The Goods and Services Tax (GST), introduced as a unified tax structure, has transformed the way businesses operate in India. It consolidates multiple indirect taxes into a single system, simplifying compliance while ensuring greater transparency in the taxation process. However, for businesses and individuals, understanding who is liable to pay GST remains a critical aspect of compliance.

The liability to pay GST depends on various factors such as the nature of the business, turnover thresholds, the type of goods or services provided, and the location of transactions. Whether you are a manufacturer, service provider, trader, or consumer, GST obligations impact nearly every stage of economic activity. In this article, we will delve into the specifics of GST liability in India, exploring who bears the responsibility for payment and how businesses can ensure they meet their obligations under this comprehensive tax regime.

Taxable Person under GST

Under the Goods and Services Tax (GST) regime, a taxable person refers to an individual or entity engaged in the supply of goods, services, or both, that is subject to taxation under GST laws. Understanding who qualifies as a taxable person is crucial for compliance, as it determines who needs to register, collect GST, and file returns.

Key Characteristics of a Taxable Person under GST

Engagement in Business:

A taxable person includes any individual or entity involved in carrying out a business, whether it is for a profit or not. The term “business” covers a wide range of activities, including trade, commerce, manufacturing, or providing services.

Threshold Limits for Registration:

Registration under GST is mandatory once an entity exceeds the prescribed turnover thresholds:

• For businesses supplying goods: ₹40 lakhs (₹20 lakhs in special category states).
• For businesses providing services: ₹20 lakhs (₹10 lakhs in special category states). However, these limits do not apply to certain categories of taxable persons, as discussed below.

Must Read: GST Registration Threshold and Turnover Limit for Businesses

Compulsory Registration (Irrespective of Turnover):

Certain individuals or entities must register under GST regardless of their turnover:

• Casual taxable persons.
  • Non-resident taxable persons.
  • Persons making inter-state taxable supplies.
  • Persons required to deduct tax at source (TDS) or collect tax at source (TCS).
  • Input service distributors.
  • E-commerce operators and suppliers selling through e-commerce platforms.
  • Persons liable to pay tax under the reverse charge mechanism (RCM).

Casual Taxable Person:

A casual taxable person is someone who occasionally undertakes business activities involving the supply of goods or services in a state or union territory where they do not have a fixed place of business. Such individuals are required to obtain temporary GST registration and pay tax in advance.

Non-Resident Taxable Person:

A non-resident taxable person refers to a supplier of goods or services who has no fixed place of business in India. They must also register under GST and comply with tax requirements.

Taxable Supplies:

A person becomes a taxable person by virtue of supplying goods, services, or both that are taxable under GST. Even if an entity engages in exempt supplies, it may still need to register if it engages in other taxable activities.

Voluntary Registration:

Any person who does not meet the mandatory threshold can opt for voluntary GST registration. This is particularly beneficial for businesses wanting to claim input tax credits or deal with GST-compliant entities.

Exemptions from Being a Taxable Person

• Certain activities, such as the supply of agricultural produce by farmers, are excluded from GST.
• Employees providing services to employers in the course of employment are not considered taxable persons.
• Individuals involved in activities that are entirely exempt or outside the scope of GST are also excluded.

Reverse Charge Mechanism (RCM) under GST

The Reverse Charge Mechanism (RCM) under the Goods and Services Tax (GST) shifts the liability to pay tax from the supplier to the recipient of goods or services. Under the normal tax system, the supplier of goods or services is responsible for collecting and paying GST to the government. However, under RCM, the recipient becomes liable to pay GST directly to the government.

We have covered everything about RCM under GST compliances, in a separate article which covers key features, applicability, ITC compliances etc…

Must read: What is Reverse Charge Mechanism (RCM) under GST?

GST Liability for E-Commerce Operators and Sellers

Under the Goods and Services Tax (GST) regime in India, e-commerce businesses have specific compliance requirements and liabilities. The GST provisions for the e-commerce sector aim to bring transparency, prevent tax evasion, and streamline taxation in this fast-growing industry. Both e-commerce operators (platform providers) and e-commerce sellers (vendors using the platform) have distinct responsibilities.

Must Read: How TCS Under GST Impacts E-Commerce Sellers in 2025

Key Terms in E-Commerce under GST

1. E-Commerce Operator (ECO): An e-commerce operator is any person who owns, operates, or manages a digital platform for facilitating the supply of goods or services. Examples include Amazon, Flipkart, Zomato, and Uber.
2. Electronic Commerce: Electronic commerce refers to the supply of goods or services (or both), including digital products, through a digital or electronic network.
3. Supplier (Seller): A supplier is an individual or entity selling goods or services through the e-commerce platform.

GST Liability for E-Commerce Operators

1. Tax Collection at Source (TCS):
   • E-commerce operators are required to deduct TCS at 1% (0.5% CGST + 0.5% SGST or 1% IGST) on the net taxable value of supplies made through their platform.
   • The TCS applies to transactions involving registered sellers, excluding exempt supplies and services covered under reverse charge.
2. TCS Deposit and Reporting:
   • The TCS collected must be deposited with the government by the 10th of the following month.
   • Operators must file a GSTR-8 return to report TCS details.
3. Liability for Specified Services: In certain cases, e-commerce operators are directly liable to pay GST on the services provided through their platform. This applies to:
   • Passenger transportation services (e.g., Uber, Ola).
   • Accommodation services in unregistered hotels or guest houses.
   • Housekeeping services provided by individuals (e.g., Urban Company).
4. Registration Requirement:
   • E-commerce operators must register under GST, regardless of their turnover, as per Section 24 of the CGST Act.

GST Liability for Sellers on E-Commerce Platforms

1. Compulsory GST Registration:
   • Sellers supplying goods or services through e-commerce platforms must register under GST, irrespective of their turnover. This is a mandatory requirement under Section 24 of the CGST Act.
   • Exemption: Sellers dealing exclusively in goods or services exempt under GST do not need to register.
2. GST Collection on Supplies:
   • Sellers are responsible for charging GST on taxable supplies made through the platform.
   • The applicable GST rate depends on the nature of goods or services supplied.
3. Input Tax Credit (ITC):
   • Sellers can claim ITC on the GST paid on purchases or expenses related to their business, provided they have valid tax invoices, and the input is used for taxable supplies.
4. Reconciliation with TCS:
   • Sellers must reconcile the TCS credit reflected in their GST portal (in Form GSTR-2A or GSTR-2B) with the details of supplies reported by the e-commerce operator.
   • The TCS credit can be claimed in the seller’s GSTR-3B return.

Special Cases of GST Liability

The Goods and Services Tax (GST) framework includes special provisions for certain scenarios to address unique business models, transactions, and taxable events. These provisions ensure compliance while covering non-standard cases effectively.

1. Composition Scheme

Small businesses with an annual turnover of up to ₹1.5 crore (₹75 lakhs for special category states) can opt for the Composition Scheme. Key features include:

• Tax at reduced rates (1% for traders, 5% for restaurants, etc.).
• Limited to intra-state supplies.
• No input tax credit (ITC) claim allowed.

2. Input Service Distributors (ISD)

Head offices or centralized offices distributing ITC to branches must register as ISD. They distribute ITC proportionately to branches based on turnover.

3. GST on E-Way Bills

For inter-state or intra-state movement of goods above the prescribed value (₹50,000 in most cases), generating an e-way bill is mandatory. Non-compliance may result in penalties.

Must Read: Using Pin to Pin Distance Calculators for GST E-Way Bills: A Step-by-Step Guide

4. Export and SEZ Supplies

• Exports and supplies to Special Economic Zones (SEZs) are considered zero-rated.
• Taxpayers can claim a refund of ITC or make supplies without tax under a Letter of Undertaking (LUT).

5. Deemed Supplies

Certain transactions, such as stock transfers between branches in different states, are treated as deemed supplies and attract GST.

Must Read: Deemed Exports Under GST: Eligibility, Taxation, Benefits and Refunds

6. Special GST Rates

• Works Contracts: GST at 18% applies to contracts for construction, repair, and maintenance.
• Job Work: Reduced GST rates for job workers (e.g., 5% for textiles).

Conclusion

The GST registration framework ensures equitable compliance with turnover thresholds of ₹40 lakhs for goods and ₹20 lakhs for services (lower for special category states). Mandatory registration for inter-state suppliers, e-commerce participants, casual and non-resident taxable persons, and those under reverse charge ensures comprehensive tax coverage.

Special provisions like TCS for e-commerce operators and ITC benefits enhance transparency and efficiency, supporting diverse business models. By adhering to GST rules, businesses contribute to a streamlined tax system while leveraging operational benefits. This fosters fairness, accountability, and growth within the Indian economy.

Disclaimer: This article provides a general overview of GST liability in India. For detailed and accurate information, please refer to the official GST website: www.gst.gov.in.

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