GST Registration Decoded

GST Registration Decoded: Eligibility, Thresholds and Exemptions

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🧾 Introduction

Many small businesses delay GST registration believing that it becomes relevant only after crossing a certain turnover. However, in practice, several businesses are legally required to register under GST even before reaching the basic exemption limit. This often comes as a surprise when invoices are rejected by clients or notices are received from the department.

GST registration is not merely a procedural formality; it determines how a business can raise invoices, collect tax, and claim input tax credit. A clear understanding of eligibility, thresholds, and exemptions is essential for startups and entrepreneurs to avoid compliance gaps at the initial stage.

This article explains GST registration in a structured and practical manner. It focuses on who is required to register, who is exempt, and how incorrect assumptions about registration can lead to long-term compliance issues.

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📘 What Is GST Registration?

GST registration is the process by which a person becomes a registered taxable person under GST law. Once registered, the business is authorised to:

• Collect GST from customers

• Claim input tax credit on eligible purchases

• File GST returns

Registration also brings certain responsibilities, such as regular return filing and record maintenance.

GST registration is PAN-based, meaning all registrations linked to the same PAN are evaluated together for threshold purposes.

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🧠 GST Registration Threshold Limits

Basic Threshold

• ₹20 lakh – For suppliers of services and mixed suppliers

• ₹40 lakh – For suppliers of goods (subject to conditions)

These limits apply to aggregate turnover on an all-India basis.

Special Category States

For certain northeastern and hill states, the threshold is:

• ₹10 lakh

It is important to note that these thresholds apply only when compulsory registration provisions are not triggered.

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🏢 Cases Where GST Registration Is Compulsory

Irrespective of turnover, GST registration is mandatory in the following common situations:

• Inter-state supply of goods or services

• Supply through e-commerce platforms

• Persons liable under reverse charge mechanism

• Casual taxable persons

• Non-resident taxable persons

• Agents supplying on behalf of others

Many startups fall into compulsory registration without realizing it, especially service providers dealing with out-of-state clients.

The following flowchart helps determine whether GST registration is required based on the nature of supply, turnover, and compulsory provisions.

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📊 Practical Example

Example:

XYZ Marketing Services, a Delhi-based startup, earned only ₹12 lakh in a year. Since its clients were located across different states, the firm was making inter-state supply of services.

Despite being below ₹20 lakh turnover:

• GST registration was mandatory

• Invoices issued without GST were non-compliant

• Clients refused payment until revised invoices were issued

The issue arose due to misunderstanding of compulsory registration provisions, not turnover limits.

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⚠️ Common Misconceptions About GST Registration

• GST is required only after crossing ₹20 lakh

• Small startups are automatically exempt

• Registration can be taken later without consequences

• One GST registration is enough for all states

• GST applies only to product-based businesses

These assumptions often result in:

• Late registration

• Interest and penalties

• Loss of input tax credit

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✅ Who Is Not Required to Register Under GST?

GST registration is not required in cases such as:

• Persons exclusively supplying exempt goods or services

• Agriculturists supplying produce from cultivation of land

• Persons below threshold and not covered under compulsory registration

However, exemption must be evaluated carefully based on the nature of supply, not assumptions.

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📋 GST Registration Compliance Checklist

• Calculate aggregate turnover PAN-wise

• Identify nature of supply (intra-state or inter-state)

• Check applicability of compulsory registration provisions

• Determine state-wise registration requirement

• Apply for registration before issuing taxable invoices

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❓ Frequently Asked Questions (FAQs)

Q1. Can I delay GST registration until turnover crosses the limit?

No. If compulsory registration applies, registration is required regardless of turnover.

Q2. Is GST registration state-wise or PAN-wise?

GST registration is PAN-based but taken state-wise where business operates.

Q3. Can a business voluntarily register under GST?

Yes. Voluntary registration is allowed, but it brings full compliance responsibilities.

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🧠 Conclusion

GST registration is a foundational compliance decision that impacts invoicing, tax collection, and credit eligibility. Many registration-related issues arise not due to complexity, but due to incorrect understanding of thresholds and compulsory provisions.

For startups and small businesses, evaluating registration requirements at the planning stage helps avoid disruption in cash flow and client relationships. GST registration should always be assessed based on the nature of supply and business model, not just turnover figures.

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🔍 Professional Note

Early evaluation of GST registration requirements prevents avoidable penalties and downstream compliance complications.