Who Must Register for GST? Thresholds, Section 24 and the Exceptions

The number everyone quotes is the wrong number

Ask ten business owners the GST threshold and nine will say ₹40 lakh. It is the most repeated figure in Indian tax and it is wrong more often than it is right, because it applies only to a person supplying goods, only in states that adopted it, and only where none of the Section 24 triggers apply.

Getting this wrong runs in both directions. Some businesses register when they never needed to and take on a lifetime of monthly returns. Others trade for two years past the line and discover the problem when a customer asks for a GSTIN.

This piece answers one question only: do you have to register. If the answer turns out to be yes, the full registration process, documents and timeline is covered separately.

What decides GST registration?

Liability to register under GST is decided by Section 22, Section 23 and Section 24 of the Central Goods and Services Tax Act 2017, read together. Section 22 sets turnover thresholds, Section 23 exempts certain persons entirely, and Section 24 overrides both by listing categories that must register regardless of turnover.

The order of operations matters. Check Section 24 first, because if you are in it, the thresholds are irrelevant. Only if you are outside Section 24 does the turnover test in Section 22 decide anything.

Key terms explained

• Aggregate turnover: the total value, computed on an all-India basis on the same PAN, of all taxable supplies, exempt supplies, exports, and inter-state supplies, excluding GST itself and excluding inward supplies taxed under reverse charge.
• Special category states: for registration thresholds these are Manipur, Mizoram, Nagaland and Tripura, which use ₹20 lakh for goods and ₹10 lakh for services.
• Casual taxable person: someone who occasionally supplies in a state where they have no fixed place of business, such as an exhibitor at a trade fair.
• Non-resident taxable person: a person supplying in India who has no fixed place of business here.
• Reverse charge: a mechanism where the recipient rather than the supplier pays the GST.

The thresholds, honestly stated

Under Section 22 read with Notification 10/2019 Central Tax:

The ₹40 lakh goods threshold came in from 1 April 2019 and states were given the option to adopt it. Several, including Telangana, chose to stay at ₹20 lakh, and Puducherry did the same. Before relying on ₹40 lakh, confirm the position for your state of registration.

Two further points catch people out. Aggregate turnover is measured across the PAN, not per branch or per state, so three small units add up. And exempt supplies count towards aggregate turnover even though no tax is charged on them.

Section 24: when the threshold stops mattering

Section 24 of the CGST Act requires the following persons to register irrespective of turnover:

• Persons making any inter-state taxable supply
• Casual taxable persons making taxable supply
• Persons required to pay tax under reverse charge
• Persons required to pay tax under Section 9(5) as an e-commerce operator
• Non-resident taxable persons
• Persons required to deduct tax under Section 51
• Agents supplying on behalf of other taxable persons
• Input Service Distributors
• Persons supplying goods through an e-commerce operator required to collect tax under Section 52
• Every e-commerce operator required to collect tax at source
• Persons supplying online information and database access or retrieval services from outside India to an unregistered person in India

Item 9 is the one that surprises small sellers. One listing of goods on a marketplace and registration is compulsory from the first sale, which is why selling through a marketplace changes the calculation entirely.

The two exemptions almost nobody mentions

Section 24 looks absolute. Two notifications soften it in ways that matter a great deal in practice.

Inter-state supply of services. Notification 10/2017 Integrated Tax exempts a person making inter-state supplies of services from compulsory registration under Section 24, so long as aggregate turnover stays within the ₹20 lakh or ₹10 lakh threshold. This is why a Pune consultant billing a Bengaluru client at ₹8 lakh a year does not need a GSTIN. The exemption covers services only. It does not extend to goods.

Services through an e-commerce operator. Notification 65/2017 Central Tax exempts a supplier of services through an e-commerce operator from compulsory registration until the ₹20 lakh threshold is crossed, provided the operator is not liable under Section 9(5). A yoga instructor taking bookings through a platform is therefore in a different position from a seller of goods on the same kind of platform.

Both of these are exemptions from compulsory registration. Once aggregate turnover crosses the Section 22 threshold, the ordinary rule applies again.

Exporters of services: a special case

Export of services is an inter-state supply under Section 7(5) of the IGST Act, which appears to drag every service exporter into Section 24. The Notification 10/2017 exemption applies here too, so a freelancer earning ₹15 lakh from overseas clients is not compelled to register.

The practical answer is usually to register anyway, and not because of the threshold. Without a GSTIN you cannot file a Letter of Undertaking, and without an LUT you cannot make zero-rated supplies without paying IGST or claim refunds of accumulated input tax credit. We have set out how that works in exporting services without charging IGST.

When the clock starts

Step 1: Identify the date you became liable. For threshold cases this is the day aggregate turnover crosses the limit. For Section 24 cases it is the day you make the first covered supply.

Step 2: Apply within 30 days. Section 25(1) of the CGST Act requires the application within 30 days from the date on which you become liable.

Step 3: Casual and non-resident persons apply earlier. The proviso to Section 25(1) requires application at least five days before commencement of business, with advance deposit of estimated tax.

Step 4: Note the effective date. Where the application is filed within 30 days, registration is effective from the date liability arose, which protects your right to input tax credit on stock held. File late and the effective date is the date of grant, and credit on the intervening period is lost.

Step 5: Complete Aadhaar authentication. This determines whether your application moves quickly or is routed to physical verification.

Documents you will be asked for

• PAN of the business and of every promoter, partner or director
• Aadhaar of the authorised signatory
• Proof of constitution: partnership deed, certificate of incorporation or LLP agreement
• Proof of principal place of business: ownership document, rent agreement, or consent letter with the owner’s document
• A recent utility bill for the premises
• Bank account proof: cancelled cheque, statement or first page of passbook
• Photographs of promoters and the authorised signatory
• Digital Signature Certificate for companies and LLPs

Common mistakes

• Applying ₹40 lakh to a service business. The business crosses ₹20 lakh, keeps trading, and accumulates unregistered liability. ₹40 lakh is a goods-only threshold.
• Counting turnover state by state. Three branches at ₹15 lakh each are treated as below the limit when the PAN-level figure is ₹45 lakh. Aggregate turnover is computed all-India on the PAN.
• Ignoring exempt supplies. A business with ₹18 lakh of taxable and ₹6 lakh of exempt supply believes it is under ₹20 lakh. Exempt supplies count.
• Registering voluntarily without understanding the consequence. Nil returns become compulsory from the date of registration, late fees accrue on returns nobody filed, and the GSTIN is eventually cancelled for non-filing. Register when there is a commercial reason, and file from day one.
• Assuming a freelancer with foreign clients must register. Unnecessary monthly compliance on a small practice. Notification 10/2017 Integrated Tax preserves the threshold for inter-state supplies of services.

Penalties and consequences

Failure to obtain registration when liable attracts a penalty under Section 122(1)(xi) of the CGST Act 2017 of ₹10,000 or the amount of tax evaded, whichever is higher.

Where tax has not been paid for reasons other than fraud, Section 73 permits recovery of the tax with interest at 18 per cent per annum under Section 50(1) and a penalty of 10 per cent of the tax or ₹10,000, whichever is higher.

Where the department alleges fraud, wilful misstatement or suppression of facts, Section 74 raises the penalty to 100 per cent of the tax and extends the limitation period available to the officer.

An unregistered supplier cannot issue a tax invoice, which means the recipient cannot claim input tax credit, and in business-to-business trade that usually costs the supplier the customer before it costs anything else.

How these provisions interact

Section 24 of the CGST Act overrides the turnover thresholds in Section 22, but Notification 10/2017 Integrated Tax carves inter-state suppliers of services back out of that override and restores the threshold for them.

Section 25(1) links the date of liability under Sections 22 and 24 to a 30-day application window, and the effective date of registration determines whether input tax credit on pre-registration stock under Section 18(1)(a) survives.

Section 2(6) of the IGST Act defines export of services, and because Section 7(5) treats such supply as inter-state, an exporter’s registration position is decided by Section 24 read with Notification 10/2017 rather than by Section 22 alone.

Voluntary registration: worth it or not?

If you are weighing this against the income tax side of a small practice, presumptive taxation for small businesses covers the other half of the decision. And if a registration has already been cancelled for non-filing, what happens when a GSTIN is cancelled sets out the way back.

Key takeaways

• Liability to register under GST is determined by Section 22, Section 23 and Section 24 of the CGST Act 2017 read together, and Section 24 must be checked first because it overrides the turnover thresholds entirely.
• The general thresholds are ₹40 lakh for a supplier of goods and ₹20 lakh for a supplier of services in normal states, reduced to ₹20 lakh and ₹10 lakh in the special category states of Manipur, Mizoram, Nagaland and Tripura.
• Notification 10/2017 Integrated Tax preserves the threshold for persons making inter-state supplies of services, which is why consultants, freelancers and service exporters below ₹20 lakh are not compelled to register.
• An application must be filed within 30 days of becoming liable under Section 25(1), and failure to register when liable attracts a penalty of ₹10,000 or the tax evaded, whichever is higher, under Section 122(1)(xi).

Frequently asked questions

If you would rather not work this out alone

Applicability is the part worth getting right, because both errors are expensive in different ways. If you want someone to check your position against Section 24 before you file anything, our GST registration work starts with that assessment rather than with the form.