GST Registration Threshold Limit FY 2025-26 — ₹40L Goods / ₹20L Services (CBIC)

GST registration threshold limit FY 2025-26 — at a glance

Do you need GST registration? You’re required to register if either applies:

Business type	Standard states	Special-category states
Pure goods supplier (no services)	₹40 lakh aggregate turnover	₹20 lakh aggregate turnover
Pure services OR mixed goods + services	₹20 lakh aggregate turnover	₹10 lakh aggregate turnover

OR any Section 24 compulsory trigger applies regardless of turnover (inter-state goods supplies, e-commerce platform sales, reverse charge, casual taxable person, non-resident, agent of registered person, notified categories).

Source: CGST Act 2017 Section 22 read with CBIC Notification No. 10/2019-Central Tax dated 7 March 2019, effective 1 April 2019. Special-category states (for the halved limits) are Manipur, Mizoram, Nagaland and Tripura per the same notification. The other previously-listed states (Arunachal Pradesh, Assam, Meghalaya, Sikkim, Uttarakhand, etc.) opted out of the special-category designation when the ₹40 lakh limit was introduced — they use the standard limits.

Key trap: the ₹40 lakh goods limit only applies to businesses exclusively supplying goods. Earn even ₹1 of taxable services (AMC, installation, consulting, freight charged separately) and your threshold drops to ₹20 lakh. Certain exempt incomes (bank interest, etc.) don’t break the exclusivity test — verify against your specific case.

Why thresholds matter — the basics

The Goods and Services Tax (GST) regime is designed to encompass every value-adding transaction in the Indian economy. Subjecting millions of micro-enterprises, sole proprietors, and part-time freelancers to the rigorous compliance framework of GST would stifle grassroots economic activity.

To prevent this, the CGST Act provides specific “thresholds.” A threshold acts as a legal firewall: until your business volume breaches the predefined limit, you are insulated from the obligation to collect tax, issue GST-compliant invoices, or file complex monthly returns.

For founders and finance teams, understanding exactly where these boundary lines are drawn is critical. Registering prematurely increases overhead and accounting costs; failing to register when legally required invites penalties and the loss of Input Tax Credit (ITC). The rules determining your liability to register are split between two primary pillars of the CGST Act: Section 22 (turnover-based triggers) and Section 24 (transaction-based compulsory triggers).

Section 22 — turnover-based registration triggers

Section 22 of the CGST Act states that every supplier becomes liable to register for GST in the State or Union Territory from where they make a taxable supply of goods or services, once their “aggregate turnover” in a financial year exceeds the specified threshold limit.

The standard limits are bifurcated based on the nature of your business:

1. Exclusive Supply of Goods

The threshold for goods was originally ₹20 lakh. Via Notification 10/2019-Central Tax (effective 1 April 2019), the Government enhanced this limit to ₹40 lakh to protect small traders and manufacturers.

• Condition: you must be engaged exclusively in the supply of goods.
• The trap: if you earn ₹39 lakh from selling physical hardware and ₹1 lakh from installation or AMC services, you are no longer exclusively supplying goods. Your threshold immediately drops to the ₹20 lakh limit. Note: the Government allows certain exempt services (such as interest income from bank deposits) without disqualifying a business from the ₹40 lakh limit — verify the specific exemption applicable to your case.

2. Supply of Services (or Goods + Services)

For pure service providers (consultants, software developers, marketing agencies, chartered accountants) or hybrid businesses supplying both goods and services, the standard threshold is fixed at ₹20 lakh.

Threshold summary table

Category of taxpayer	General states threshold	Special-category states threshold
Exclusive supply of goods	₹40 lakhs	₹20 lakhs
Supply of services	₹20 lakhs	₹10 lakhs
Both goods + services	₹20 lakhs	₹10 lakhs

Always verify specific State adoption of these thresholds — GST is a dual-levy system and State GST Acts may have specific operational nuances.

What “aggregate turnover” actually means (Section 2(6))

The most frequent error small business owners make is confusing their taxable turnover with their aggregate turnover.

Under Section 2(6) of the CGST Act, aggregate turnover is the pan-India aggregate value of:

1. All taxable supplies.
2. All exempt supplies (fresh produce, basic educational services, etc.).
3. Exports of goods or services (zero-rated supplies).
4. Inter-state supplies of persons having the same Permanent Account Number (PAN).

It strictly excludes:

• Central tax (CGST), State tax (SGST), Union territory tax (UTGST), Integrated tax (IGST), and Cess.
• The value of inward supplies on which you are liable to pay tax under the Reverse Charge Mechanism (RCM).

Practical example: Imagine you are an agricultural consultant. You earn ₹15,00,000 in a financial year from providing agricultural extension services (which are exempt from GST under CBIC notifications). In the same year you also earn ₹6,00,000 from commercial marketing consulting (taxable at 18%).

• Your taxable turnover: ₹6,00,000.
• Your aggregate turnover: ₹21,00,000 (₹15L + ₹6L).

Because your aggregate turnover crossed the ₹20 lakh threshold for services, you must register for GST and pay 18% tax on the ₹6,00,000 commercial consulting income. Your exempt income remains exempt, but it pushed you over the registration threshold.

Special-category states — the current list

To accommodate the specific economic realities of smaller and hilly states, the GST Council defined “special-category states” with reduced thresholds. Following Notification 10/2019, this list became fragmented depending on whether you are selling goods or services.

Group 1: lowest thresholds (₹10L services / ₹20L goods) These four states opted to keep the lowest possible thresholds:

• Manipur
• Mizoram
• Nagaland
• Tripura

Group 2: middle tier (₹20L services / ₹20L goods) These six states retained the ₹20L limit for goods (did not adopt the enhanced ₹40L), while services remained at the standard ₹20L:

• Arunachal Pradesh
• Meghalaya
• Sikkim
• Uttarakhand
• Puducherry
• Telangana

Group 3: rest of India (₹20L services / ₹40L goods) All other states and Union Territories (Maharashtra, Karnataka, Delhi, Gujarat, Tamil Nadu, etc.) operate on the standard ₹40L limit for exclusive goods and ₹20L for services.

Section 24 — compulsory registration regardless of turnover

While Section 22 protects you based on revenue volume, Section 24 overrides it entirely. If you engage in any of the specific transactions listed in Section 24, your threshold immediately drops to ₹0. You must register for GST before making the first transaction.

The most critical categories requiring compulsory registration include:

1. Inter-state taxable supply of goods: if you are based in Delhi and sell a physical product to a buyer in Haryana, you must have a GSTIN, even on the first sale. (Services have a crucial exemption, detailed in the next section.)
2. Casual taxable persons (CTP): a person making taxable supplies occasionally in a state where they do not have a fixed place of business (e.g., a jewellery vendor from Jaipur setting up a 5-day stall at an exhibition in Mumbai).
3. Non-resident taxable persons (NRTP): foreign entities or individuals occasionally supplying goods/services in India without a fixed domestic establishment.
4. Reverse Charge Mechanism (RCM) payers: if you are liable to pay tax under Section 9(3) or 9(4) on inward supplies (e.g., paying a Goods Transport Agency, legal services by advocates, or specific real-estate-developer procurements from unregistered suppliers).
5. Non-resident OIDAR providers: entities outside India providing Online Information Database Access and Retrieval (OIDAR) services to unregistered users in India.
6. E-commerce operators (ECO): platforms required to collect Tax Collected at Source (TCS) under Section 52 (Amazon, Flipkart, Swiggy, Zomato, etc.).
7. Input Service Distributors (ISD): an office of a supplier that receives tax invoices for input services and distributes the Input Tax Credit to other branches with the same PAN.
8. Tax Deductors at Source under GST (TDS): entities required to deduct TDS under Section 51 (mostly Government agencies, local authorities, and specified PSUs).

Inter-state supply — the most-misunderstood threshold

One of the most persistent myths among freelancers and consultants is that providing a service to a client in another state triggers mandatory GST registration under Section 24.

This is entirely false for service providers.

• For goods: Section 24 strictly applies. Any inter-state supply of goods requires compulsory GST registration, irrespective of turnover.
• For services: through Notification 10/2017-Integrated Tax, the Government created a carve-out. Persons making inter-state supplies of services are exempt from compulsory registration under Section 24, provided their aggregate pan-India turnover does not exceed ₹20 lakh (₹10 lakh in special-category states).

If you are a freelance web developer in Bengaluru (Karnataka) providing services to clients in Mumbai (Maharashtra) and New York (USA), you do not need a GSTIN until your total aggregate receipts cross ₹20 lakh in the financial year.

E-commerce operators + sellers — the specific carve-outs

Historically, small artisans and retail traders were shut out of the digital economy because Section 24 mandated compulsory GST registration for anyone supplying goods through an e-commerce operator (ECO) like Amazon, Flipkart, or Meesho.

Recognising this bottleneck, the GST Council introduced exemptions via Notification 34/2023-Central Tax (effective 1 October 2023):

• Intra-state e-commerce sellers: unregistered suppliers of goods can now sell through e-commerce operators without obtaining a GSTIN, provided:
  1. They do not make any inter-state supply of goods.
  2. Their aggregate turnover does not exceed the Section 22 limits (₹40L / ₹20L).
  3. They declare their PAN on the GST portal and obtain a unique Enrolment Number to provide to the ECO.
• Inter-state e-commerce sellers: if the seller wishes to ship goods across state lines via the ECO, standard GST registration remains mandatory.
• Service providers via ECOs: for gig workers supplying services through platforms (urban plumbers via Urban Company, drivers via Uber/Ola, etc.), Section 9(5) places the liability to pay GST onto the e-commerce operator. The individual service providers do not need GST registration based on these platform sales if their overall turnover is below ₹20L.

Composition scheme thresholds — different from regular

Do not confuse the threshold to register for GST with the threshold to opt into the Composition Scheme.

Once you cross the ₹40L / ₹20L limit and register for GST, you enter the regular tax framework (applying standard rates 5%, 18%, 40% — see GST rates explained). However, to minimise compliance complexity (including dealing with HSN codes and the complex ITC rules detailed in GST ITC rules), Section 10 allows small taxpayers to opt for the Composition Levy.

Composition Scheme thresholds (FY 2025-26):

• Manufacturers and traders (goods): aggregate turnover up to ₹1.5 crore in the preceding financial year (reduced to ₹75 lakh for specified North-Eastern states). Tax rate: flat 1%.
• Restaurants (without alcohol): up to ₹1.5 crore. Tax rate: 5%.
• Service providers (Section 10(2A)): aggregate turnover up to ₹50 lakh. Tax rate: 6%.

Note: composition dealers cannot collect tax on invoices, cannot claim ITC, and cannot make inter-state outward supplies. Understand the operational restrictions before opting in.

Voluntary registration — when it makes sense even below threshold

Under Section 25(3) of the CGST Act, a person who is not liable to be registered under Section 22 or 24 may register voluntarily. Once registered, all provisions of the GST Act — including tax collection, return filing, and penalty provisions — apply with equal force.

Even with a turnover of just ₹5 lakhs, small businesses frequently opt for voluntary registration for the following strategic reasons:

1. B2B client requirements: most large corporate buyers refuse to onboard unregistered vendors. Without a GSTIN, the buyer cannot claim Input Tax Credit on your invoice, making your services effectively 18% more expensive than a registered competitor.
2. Claiming Input Tax Credit (ITC): if a startup invests heavily in capital goods (servers, machinery) or incurs high 18% GST expenses (office rent, software licensing), they cannot claim those taxes back unless registered. Voluntary registration unlocks the ITC pipeline.
3. Unrestricted e-commerce and inter-state trade: to scale an inventory-led brand nationwide via Amazon or Shopify, you need unrestricted inter-state goods movement, which requires a GSTIN.
4. Export of goods and services: while exports are zero-rated, the standard procedure requires a registered exporter to furnish a Letter of Undertaking (LUT) to export without payment of IGST. You cannot generate an LUT without a GSTIN.
5. Government tenders: almost all State and Central government procurement portals (including GeM) require a valid GSTIN to bid on tenders.

Penalty for non-registration when liable (Section 122)

Attempting to fly under the radar after crossing the Section 22 or Section 24 thresholds is risky — the GST Network (GSTN) uses PAN-based data analytics, monitoring bank deposits, TDS deductions, and e-way bill trails to flag unregistered taxpayers.

If you are liable to register but fail to do so, Section 122(1)(xi) of the CGST Act prescribes:

• ₹10,000 OR
• 100% of the tax evaded (the tax due from the date you crossed the threshold until you actually register),
• Whichever is higher.

Section 50 imposes mandatory penal interest at 18% per annum on the unpaid tax. The most damaging consequence is the permanent loss of Input Tax Credit for the unregistered period — because you cannot issue tax invoices retroactively, you must pay the output tax liability entirely out of pocket without the benefit of offsetting it against the GST you paid on your raw materials.

Quick registration process overview

If your analysis indicates that you have crossed the threshold, triggered compulsory registration, or want voluntary registration, the operational process is entirely digital:

1. Form REG-01 (Part A): navigate to the official CBIC GST portal. You will need a valid PAN, mobile number, and email address. The system validates the PAN with the CBDT database.
2. Form REG-01 (Part B): fill out detailed business information. Upload:
   • Proof of constitution (partnership deed, certificate of incorporation, etc.)
   • Proof of principal place of business (electricity bill, municipal khata, rent agreement + NOC)
   • Details and photographs of promoters/directors
   • Bank account details (can be updated post-registration via an amendment)
3. Aadhaar authentication: the most critical step for rapid processing. If the proprietor or directors successfully complete Aadhaar authentication via the link sent to their mobile, registration is typically granted within 3–7 working days, without physical verification of premises.
4. Issuance of REG-06: on approval, you receive your 15-digit GSTIN and the GST Registration Certificate.

For execution support, see the GST Registration service. To understand your compliance obligations the moment your GSTIN becomes active, see the GST overview pillar.