GST registration is a basic rule to identify taxpayers and ensure tax compliance. The central government sets the GST registration limit for suppliers of goods and services. Service providers register for GST when annual turnover exceeds the limit.
You’re wondering whether your business requires GST registration. Let’s understand GST registration limits in detail.
What are the 4 types of GST?
There are four types of GST as listed below:
- The Central Goods and Services Tax (CGST)
- The State Goods and Services Tax (SGST)
- The Union Territory Goods and Services Tax (UTGST)
- The Integrated Goods and Services Tax (IGST)
The Central Goods and Services Tax (CGST)
The Central Government levies and collects CGST. It is a tax levied on intrastate sales of goods and services.
It replaced previously levied central taxes such as Excise Duty, Central Sales Tax, Export Duty, Special Additional Duty, and so on. Central and state governments share the CGST revenue collected along with the SGST.
The State Goods and Services Tax (SGST)
The government of a specific state imposes State Goods and Services Tax (SGST). State governments tax intrastate (within their states) supply of goods and services. State governments are the sole beneficiaries of the revenues collected intrastate.
It replaced previous state-level taxes on transactions involving goods or services such as VAT, Entry Tax, Luxury Tax, Cesses, Surcharges, etc.
Both SGST and CGST apply when goods are traded interstate. However, only SGST is charged if the goods or services are intrastate.
The Integrated Goods and Services Tax (IGST)
The Central Government collects IGST, from both the Central Government and respective State Governments. After collecting the tax, the Central Government distributes the share agreed upon with the respective state and central Governments.
Goods and services transported between countries are subject to IGST. IGST rate is the sum of the CGST rate and SGST rate.
The Union Territory Goods and Services Tax (UTGST)
The Union Territory Goods and Services Tax is levied on the union territories. This is similar to the SGST, but it only applies to union territories. The purpose of imposing UTGST on the intra-UT supply of goods and services is to apply the tax to get similar benefits as the SGST. UGST is collected alongside CGST as a substitute for SGST.
The following are Union Territories:
- Lakshadweep
- Daman and Diu
- Dadra and Nagar Haveli
- Andaman and Nicobar Islands, and
- Chandigarh.
Is GST compulsory for all?
No, GST is not compulsory for all. Regardless of annual turnover, the following are subject to GST:
- Any casual taxable person
- Any Input Service Distributor (ISD)
- Businesses registered under old tax services such as VAT, excise, and service tax
- Agents or suppliers of goods through e-commerce portals
- Interstate Suppliers of Goods and Services
- Non-Resident Taxable Entity
- Taxpayers under the reverse charge mechanism
- TDS/TCS deductor
- Provider of online data access/retrieval services
- Persons making any interstate taxable supply. The threshold limit of Rs. 20 lakhs and Rs.10 lakhs in case of special category states of Mizoram, Tripura, Manipur, and Nagaland is available in case of an interstate supply of taxable services and notified handicraft goods.
- Other individuals and businesses as notified by the central/state governments.
Who needs no GST registration?
The following persons are exempt from registration:
- Engaged exclusively in the supply of goods/ services/ both which are not liable to tax
- Engaged exclusively in the supply of the goods/ services/ both which are wholly exempt from tax
- Agriculturalists to the extent of supply of produce from land cultivation
- Specific categories as determined by the government
Do startups have to pay GST?
Yes, all startups must pay GST.
Businesses with an annual turnover of less than Rs. 20 lakhs (services) and Rs. 40 lakhs (goods) are not required to register for GST. As a result, many startups and small businesses with revenues ranging from Rs. 5 lakh to Rs. 20 lakh (Rs. 40 lakh for goods) are exempt from the assessment.
What is the income limit for GST 2022?
With effect from April 1, 2019, the GST Council has raised the threshold GST registration limit. The threshold for various types of GST registration limits are:
| Category | Goods (in lakhs) | Services (in lakhs) |
| Regular Taxpayer | 40 | 20 |
| Mizoram, Tripura, Manipur, and Nagaland | 10 | 10 |
| Arunachal Pradesh, Meghalaya, Puducherry, Sikkim, Telangana, Uttarakhand | 20 | 20 |
| Jammu and Kashmir, Assam, Himachal Pradesh, and all other States | 40 | 20 |
Registration limits under the Composition Scheme are:
- Trader, Manufacturer – Rs. 1.5 Crore
- Restaurant Service – Rs. 1.5 Crore
- Trader, Manufacturer – Rs. 1.5 Crore
- Other Service Providers, subject to the preceding financial year turnover limit.Rs. 50 lakhs – Rs. 1.5 Crore
How can I avoid GST legally?
Tax evasion is an illegal attempt to reduce tax liability. You can’t save GST tax directly, there are ways to reduce your tax liability.
Separate registration:
You operate as a single company but are registered as two or more legal entities so your turnover is less than Rs 20 lakhs and you are exempt from tax.
Cash Transactions:
Cash leaves no trace. Thus, companies evade tax. In various states, a service provider with a turnover of up to Rs.10 lakh or Rs.2 lakh will be exempt from his GST.
Professionals in the fields of medicine, law, and accounting profit from this. They trade in cash and conveniently report earnings below that amount. Some form subsidiaries to avoid tax burdens.
Trade in Exempt Goods:
Some items are tax exempt such as pooja products, khadi, farm tools, clay pots, and local handicrafts. According to tax experts, companies in South India that deal in puja articles and products changed their category registration to religious articles to avoid taxes.
Choose your trading entity smartly:
You may choose to act as a sole proprietorship, partnership, limited liability company, using a family trust (or multiple trusts), or through a joint venture agreement.
Avoidance through Personal and Business Expenses:
Some taxpayers claim personal or spurious expenses as business expenses and receive an input tax credit on those spurious expenses. This kind of tax avoidance is feasible when the tax administrators swiftly issue the GST refunds to achieve efficiency in the tax structure.
GST exemption threshold:
Individuals/ businesses with turnover not exceeding Rs. 20 lakhs are exempt from GST.
To take advantage of tax relief, smaller accountants recommend splitting large businesses into smaller units.
Not Keeping Proper Records:
Some taxpayers, especially if the business is small, fail to keep proper accounting records of business transactions. Inadequate accounting records cause unintended delays, errors in electronic records, and tax returns. It is an easy way to avoid tax liability.
FAQ
What is the minimum turnover for GST?
The minimum turnover for GST is Rs. 20 lakhs.
Is GST applicable if turnover is less than 20 lakhs?
GST is not applicable on assesses with a turnover of less than 20 lakhs.
Can I do GST by myself?
Yes, you can file GST yourself. GSTN’s official portal allows business owners to file GST online.
Is GST always 7 percent?
Singapore has a 7% GST.
Singapore’s GST will rise from 7% to 9% in two stages, one percentage point each on January 1, 2023, and January 1, 2024.
Can individuals apply for GST?
Yes, individuals can apply for GST. GST applies to all persons such as individuals, HUF, companies, firms, LLPs, AOP, cooperative societies, trusts, etc.
Wrapping up
India implemented GST to replace some other indirect taxes and create a unified tax system. GST makes collection easier and boosts process effectiveness. You must get your business registered if your business exceeds the total turnover. If you have any questions or comments, please leave them in the section below.