GST Registration Threshold Limits for Goods and Services Providers

One of the first compliance questions any business faces is whether GST registration is actually required. The answer depends largely on turnover, but it is not the same for everyone.

In its 32nd meeting on 10 January 2019, the GST Council updated the registration limits for small businesses. Goods traders and service providers were given different turnover thresholds, so it became easier to know when GST registration is required.

Understanding these limits is important. It helps businesses stay compliant, avoid penalties, and register for GST at the right time without unnecessary hassle.

What Does GST Registration Threshold Mean?

The GST registration threshold refers to the turnover limit beyond which a business must register under GST. If your annual turnover stays below this limit, registration is optional. Cross it, and registration becomes mandatory.

Understanding how turnover is calculated and what counts toward it is crucial to staying compliant. Our detailed guide on minimum turnover for GST explains all the key factors, making it easier to navigate GST registration requirements.

This threshold limit for GST registration depends on:

• Whether you supply goods or services
• The state you operate from
• The nature of your business

Threshold Limit for GST Registration for Goods Traders

If your business deals in the supply of goods, the GST registration limit is relatively higher compared to services. This is done to ease compliance for small traders and local businesses.

Here’s how it works:

• For most Indian states, GST registration becomes mandatory once your annual turnover crosses ₹40 lakh
• For special category states, the limit is lower at ₹20 lakh

This threshold limit for GST registration applies to traders, wholesalers, retailers, and manufacturers dealing purely in goods.

A few important points to keep in mind:

• The limit is calculated on aggregate turnover, not just taxable sales
• Exempt supplies and exports are also included in this calculation
• GST collected is not counted as part of turnover

Once your turnover crosses the GST registration threshold, registration must be completed within the prescribed time. Delaying it can lead to penalties and loss of input tax credit.

Threshold Limit for GST Registration for Service Providers

Service providers fall under a stricter GST rule compared to goods traders. The turnover limit is lower, and it applies to most professionals and freelancers offering services.

Here’s the basic framework:

• In most Indian states, GST registration is required once annual turnover exceeds ₹20 lakh
• In special category states, the limit drops to ₹10 lakh

This threshold limit for GST registration covers a wide range of service-based businesses, including consultants, freelancers, agencies, IT service providers, and professionals.

A few practical points to note:

• Turnover is calculated on an all-India basis, not state-wise
• Income from taxable, exempt, and export services is included
• GST charged to clients is excluded from the turnover calculation

Unlike goods traders, service providers often cross the GST registration threshold faster due to fewer expense offsets. That makes regular tracking important.

Once you cross the basic limit for GST registration, applying on time helps avoid late fees and compliance issues later on.

Goods vs Services: A Quick Comparison

Type of Business	Normal States	Special Category States
Goods traders	₹40 lakh	₹20 lakh
Service providers	₹20 lakh	₹10 lakh

This table alone clears up most confusion around the GST registration threshold.

How Aggregate Turnover Is Calculated for GST

When checking whether you have crossed the threshold limit for GST registration, the law looks at your aggregate turnover, not just your main sales figure. This is where many businesses get confused.

Here’s what is included while calculating turnover:

• Value of taxable goods or services
• Exempt supplies, even if no GST is charged
• Export of goods or services
• Interstate supplies made under the same PAN

And here’s what is not counted:

• GST collected from customers
• Inward supplies liable to reverse charge
• Non-business income not linked to your GST activity

One important thing to remember:

• Turnover is calculated on a PAN-India basis, not state-wise

So even if each branch looks small on its own, the combined turnover may cross the GST registration threshold. Keeping a close watch on these numbers helps you avoid accidental non-compliance.

When GST Registration Is Mandatory Regardless of Turnover

Even if your turnover is below the threshold limit for GST registration, GST becomes compulsory in certain cases.

GST registration is mandatory for:

• Interstate suppliers of goods or services
• Casual taxable persons supplying goods or services occasionally
• Persons liable under the reverse charge mechanism
• Non-resident taxable persons doing business in India
• Persons required to deduct TDS under GST
• Persons required to collect TCS under GST
• Input Service Distributors (ISD)
• Agents or principals supplying goods or services on behalf of others
• E-commerce operators providing a platform for suppliers to sell

Businesses operating online face unique GST challenges, such as handling reverse charge, claiming input tax credit correctly, and managing compliance for multiple states. To understand these requirements and avoid mistakes, refer to our detailed guide on GST and tax credit limits for online sellers.

• Suppliers selling goods through e-commerce operators, where TCS applies
• Online service providers located outside India supplying services to unregistered persons in India
• Persons supplying online money gaming from outside India to customers in India

Composition Scheme: An Alternative for Small Businesses

The Composition Scheme is designed for small businesses that want simpler GST compliance. It allows eligible taxpayers to pay tax at a fixed rate and file fewer returns.

For goods traders and manufacturers:

• Available if annual turnover is up to ₹1.5 crore
• Only intra-state supplies are allowed
• GST cannot be collected from customers

For service providers:

• A separate composition option applies
• Available up to ₹50 lakh annual turnover

A few key limitations to remember:

• Input tax credit cannot be claimed
• Interstate supplies are not permitted
• E-commerce sales are generally not allowed

The Composition Scheme works well for businesses that value ease over tax credit benefits. But once turnover crosses the limit, regular GST registration becomes mandatory.

For businesses evaluating whether this scheme suits their operations, it’s important to understand how it works in practice, the benefits it offers, and the limitations to keep in mind. Our detailed guide on GST Composition Scheme for Small Businesses explains everything you need to know, helping small businesses decide if opting for this scheme is the right move.

Conclusion

The threshold limit for GST registration is clear once you separate goods from services. Goods traders enjoy a higher limit of ₹40 lakh in most states, while service providers must register after ₹20 lakh. Special category states follow lower limits for both.

If you are close to crossing the GST registration threshold or unsure how to calculate your turnover correctly, professional guidance can save time and prevent mistakes. Platforms like LegalWiz.in help businesses handle online GST registration and compliance smoothly, without the usual back-and-forth or confusion.