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GST Registration Limit: Understanding the Minimum Turnover

Updated: May 6


GST Registration Limit: Understanding the Minimum Turnover


India implemented the Goods and Services Tax (GST), an indirect tax system, in 2017. As a single tax, it regulates the flow of products and services from the manufacturing to the consumer sectors. The finance ministers of each state make up the GST Council, which sets the tax rate and other relevant matters. The GST Council enhanced the GST registration threshold restrictions in response to demands made by MSMEs. On January 10, 2019, during the 32nd GST Council meeting, these modifications were recommended. The CBIC subsequently informed it. It facilitates easier GST compliance.  The GST registration threshold limits are described in this article. It highlights the new GST registration restrictions, the previous threshold limits, and the individuals who are affected.

 

Table of Content

 

Minimum Turnover Limit for GST Registration

Businesses must register for GST and pay taxes on their taxable items and services if their annual revenue exceeds Rs. 40 lakhs for goods and Rs. 20 lakhs for services. Companies with annual sales under Rs. 40 lakh are not compelled to register for GST, although they are free to do it on a voluntary basis. Businesses gain from this since it allows them to take advantage of input tax credits and other advantages.  

It should be mentioned that several special category states in India have various minimum turnover requirements for GST. The minimum threshold limits for the supply of products in these special category states are Rs. 20 lakhs, and for the supply of services, it is Rs. 10 lakhs. It has also been proposed by the GST Council that all enterprises, regardless of their current registration status, register for GST if their annual turnover exceeds Rs. 40 lakh. 

It is anticipated that the GST minimum turnover threshold in India in 2023 will stay at Rs. 40 lakhs. Small businesses should be able to benefit from the GST and experience some relief as a result of this. It is also probably going to make it possible for the government to levy taxes on all companies, no matter how big or little.

The following table provides a clear overview of the old and new GST threshold limits, registration status, and relevant deadlines:



Minimum Turnover Limit for GST Registration


Classification of States for the Applicability of New GST Turnover Limits


Normal category states with a GST threshold of Rs. 40 lakhs

Andaman and Nicobar Islands, Andhra Pradesh, Bihar, Chandigarh, Chhattisgarh, Dadra and Nagar Haveli and Daman and Diu, Delhi, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Lakshadweep, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, West Bengal


Normal Category States that chose status quo

Telangana


Special category states with the new GST threshold of Rs. 40 lakhs

Assam, Jammu and Kashmir, Ladakh 


Special category states with the new GST threshold of Rs. 20 lakhs

Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Tripura, Uttarakhand

Notably, J&K and Assam, two hilly states, have also chosen to increase the cap to Rs. 40 lakh. Since these two states are Special Category States, they may have continued to operate under lower threshold limitations. These two states had earlier chosen a higher threshold limit of Rs. 20 lakh when they were allowed to impose GST only on aggregate turnover surpassing Rs. 10 lakh. Additionally, to offset the natural disasters the state experienced last year, Kerala is now able to impose a "calamity cess" of up to 1% on all intra-state supplies of goods and services.


Categories with Compulsory GST Registration Requirements

  • Casual Taxable persons

  • Non-resident taxable persons

  • Interstate suppliers

  • Persons required to deduct TDS/TCS under GST

  • Persons taxable under the reverse charge basis

  • Input service distributors

  • Every e-commerce company offering suppliers a platform to produce supplies through it

  • Providers who deliver items via online retailers and are responsible for withholding taxes at the source

  • Individuals acting as Agents or Principals in a transaction on behalf of another person

  • Internet service providers who offer services to an unregistered individual in India from outside of the country


Understanding the Composition Scheme

According to Mr. Jately, service providers and individuals providing mixed supplies of products and services in the informal sector with a turnover of up to Rs. 50 lakh will be eligible for the GST regime's composition scheme. In addition, he stated that "this 6 percent is lower than the service tax paid by service providers with turnover up to Rs 50 lakh." The composition rate for services has been set at 6%.

  • Limit Increased: As of April 1, 2019, the current limit of Rs 1 crore will be surpassed by the prescribed amount of Rs 1.5 crore under the composition. A much-needed break for composite taxpayers and those who plan to register in the composition levy.  For Uttarakhand and the North Eastern states, the cap is still Rs. 75 lakh. Additionally, eateries that do not serve alcohol are subject to the limit.

  • Composition taxpayers are no longer obliged to file quarterly returns; quarterly returns filing is not necessary. The tax liability for each quarter remains unchanged in spite of this.

  • Covered Services: Mixed supply providers with annual turnover up to Rs 50 lakhs may now select to pay a composition levy. These service providers will also be liable to a GST rate of 6% with 3% CGST and 3% SGST. This initiative is available to independent service providers and mixed suppliers of products and services with a previous financial year's annual revenue of up to Rs. 50 lakh.


Conclusion

GST registration is a key component of efficient company management, and it establishes legitimacy and legality. If a company's yearly turnover exceeds ₹40 lakhs, it is required to register under the GST regulations. It is essential to comprehend that being eligible for GST entails fulfilling turnover requirements, having a current PAN Card, and making taxable deliveries of goods and services. In addition to ensuring compliance, meeting these requirements has several advantages, including lower compliance costs, more efficient tax processes, and increased competitiveness. Businesses should strategically align with the GST regulations in order to facilitate smoother operations and improve the reputation of their brands.


FAQ

Q1. Is the GST registration limit 20 lakhs or 40 lakhs?

Enterprises in India must register for GST if their annual turnover exceeds Rs. 40 lakhs (or Rs. 20 lakhs for enterprises in certain special category states). The GST Council increased the 20 lakh minimum requirement for GST registration to 40 lakh.


Q2. What is the new GST limit?

The GST exemption limit has been raised from Rs 20 lakhs to Rs 40 lakhs at the 32nd GST Council Meeting.


Q3. What happens if you fail to register after crossing the threshold limits?

Noncompliance may result in severe consequences such as hefty penalties, legal action, and a detrimental effect on the credibility and reputation of a firm.


Q4. What is the turnover limit for composite GST?

In India, the annual turnover limit for composition plans is Rs. 1.5 crore. Small enterprises having yearly sales up to Rs. 1.5 crore can choose to use voluntary composition schemes, which allow them to choose fixed tax rates above ordinary GST rates. 


Q5. What is the GST exemption limit for services?

For service providers, the threshold limit of aggregate revenue for exemption from GST registration and payment has been set at ₹ 20 Lakh.


Q6. Is GST mandatory for small businesses having a turnover below 20 lakhs?

If a company's annual sales falls below the threshold of Rs. 40 lakhs for goods and Rs. 20 lakhs for services, or if the startup is involved in the supply of exempt items or services, it is not subject to GST.






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