Ask ten shopkeepers what the GST registration limit is, and nine will say ₹40 lakh. Ask them whether it applies to them, and most will assume it does. A large number of them are wrong — and they find out when a notice arrives, not before.
This is the first of five parts. Over the next five days we will walk through the entire chain: who must register, what happens when you sell goods and services together, how bundled sales are taxed, whether the composition scheme is worth it, and what you must do the very day you cross a limit. Each piece stands on its own, but read together they cover the ground most small businesses get wrong.
Let us start at the beginning.
GST is a tax on "supply"
Section 9 of the CGST Act, 2017 levies GST on the supply of goods or services or both. The word "supply" under Section 7 is deliberately wide. It covers sale, transfer, barter, exchange, licence, rental, lease and disposal made for consideration in the course or furtherance of business. Schedule I even treats certain transactions as supply where no consideration passes at all.
But a person becomes liable to pay GST only when he is liable to be registered. So the real question for a small business is rarely "is this a supply?" It is "have I crossed the line?"
Two limits, constantly confused
There are two entirely separate thresholds in GST law, and mixing them up is the single most common error:
They have nothing to do with each other. Today we deal only with the first.
The registration table
For a person supplying goods exclusively:
For a person supplying services (or goods and services together):
Normal category States include West Bengal, Maharashtra, Delhi, Gujarat, Karnataka, Tamil Nadu, Uttar Pradesh, Rajasthan, Kerala, Bihar, Punjab, Haryana, Madhya Pradesh, Odisha, Chhattisgarh, Jharkhand, Andhra Pradesh, Telangana, Goa, Himachal Pradesh and most Union Territories. Assam and Jammu & Kashmir, though technically special category States, have opted for the ₹40 lakh limit on goods.
The States that retained ₹20 lakh for goods include Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Tripura and Uttarakhand.
Verify your own State before acting. The Council permits States to choose, and the choices are not uniform.
What counts as "turnover" is wider than you think
Section 2(6) defines aggregate turnover as the aggregate value, computed on an all-India PAN basis, of all taxable supplies, exempt supplies, exports, and inter-State supplies between distinct persons on the same PAN. It excludes CGST, SGST, IGST and cess.
Three consequences follow, and each one catches people out.
First, exempt turnover counts. A trader selling ₹30 lakh of taxable stationery and ₹15 lakh of exempt unbranded foodgrain has an aggregate turnover of ₹45 lakh, not ₹30 lakh. He has crossed ₹40 lakh.
Second, it is PAN-wise, not shop-wise or State-wise. A proprietor with a shop in Kolkata doing ₹25 lakh and a branch in Patna doing ₹20 lakh has an aggregate turnover of ₹45 lakh. Neither branch alone crosses anything. Together they do.
Third, aggregate turnover is not the same as taxable turnover. Turnover decides registration. Taxable turnover decides tax.
Three quick illustrations
Mr. Sen runs a hardware shop in Howrah. Turnover for the year is ₹37 lakh, all goods, all within the State. He is below ₹40 lakh, so registration is not mandatory. He may still register voluntarily — to claim input tax credit, and because registered buyers prefer suppliers who can pass on credit.
Ms. Iyer is a freelance interior designer in Bengaluru billing ₹24 lakh a year. Her threshold is ₹20 lakh, not ₹40 lakh. The higher figure is simply not available to a service provider. Registration is mandatory.
A grocery wholesaler in Manipur has turnover of ₹26 lakh. In Kolkata he would need no registration. In Manipur the goods threshold is ₹20 lakh, so registration is mandatory. Same business, same numbers, different answer — purely because of the State.
The practical takeaway
Track your aggregate turnover on a rolling monthly basis, not at year-end. Include exempt sales. Add up every branch on your PAN. And remember that the number you must compare it against depends on what you sell and where you sell it.
Which brings us to the question that undoes most of the businesses who thought they were safe.
Tomorrow, in Part 2: You sell goods worth ₹36 lakh and charge ₹3 lakh for installation. Total ₹39 lakh — comfortably under ₹40 lakh. So you are safe, correct? Not even slightly. We look at what happens the moment a goods dealer bills a single service, and why the answer is a cliff rather than a slope.
Every situation differs. Talk to us before you act on anything above.
This article is general information, not professional advice. Tax law changes frequently — please confirm your position with us before acting.