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Is GST applicable if turnover is less than 40 lakhs?

by Soft2share.com

GST registration is an important compliance requirement for a business that falls under the mandatory registration requirements. Businesses that fail to comply with the regulations and do not pay GST can be levied huge penalties. The registration threshold limit for business which was earlier Rs 20 lakhs has now been increased to Rs 40 lakhs. So, only businesses with an annual turnover of over Rs 40 lakh are required to register for GST. The same limit for businesses operating in the North-Eastern state was increased to Rs 20 lakhs. This decision was taken to boost the MSME sector which had to deal with additional compliance with the lower limit.

Calculating turnover for GST

Aggregate turnover is an important value that will help you determine whether you fall in the exempted category or you need to do the GST registration. Aggregate turnover is the taxable value of supply goods and services exempt from the export of goods and services and inter-state supply. The aggregate turnover is calculated on the basis of the pan India activities carried out by all the entities of the concerned individual. Following is a formula to calculate aggregate turnover:

Value of all (taxable supplies+ exports + exempt supplies + inter-state supplies) – (Taxes + Value of non-taxable supplies + Value of inward supplies + Value of supplies taxable under reverse charge)

This value should give you an aggregate turnover. If this value is less than 40 lakhs, then businesses are not required to register under GST.


–       It is important to note that the increase in threshold limit is applicable only for businesses involved in the supply of goods. For service providers, the threshold limit will continue to be the same as the previous limit.

–       Businesses that are involved in the supply of inter-state goods will still have to register for GST irrespective of the aggregate turnover.

–       Section 24 of the GST Act has not been amended and any business that has been registered due to certain circumstances would continue to remain registered. Sellers selling via eCommerce websites such as Flipkart, Amazon, etc. will have to still register under GST.

–       Businesses have to carefully calculate the aggregate turnover as the criteria for registration is that value. An error in calculating the same could have problems for small-business a few years down the line.

–       There is no clarity on the service income and the threshold limit for the supply of service and goods is different. So, if your business is involved in the supply of goods, and you earn some income from rental or other such services, whether you are exempted or not will have to be determined. Not all cases are the same and it is best to consult a professional CA to get the best advice for your own business.

–       Persons that are required to register under Section 24 and suppliers of Ice Cream, and other edible ice, Pan Masala, Tobacco as well as its substitutes have to register under GST irrespective of the turnover.

–       While determining the aggregate turnover, it should be remembered that Section 17(5)(i) clearly states that if you believe you are not liable to pay tax, but the tax department thinks otherwise and you lose the appeal, you would not be eligible for an input tax credit.


The GST council strives to reduce the burden on businesses and make it easier for MSMEs to do business. These steps are taken periodically to assess the changing needs of the businesses. Along with the increase in exemption limit for GST, several items were shifted to lower slabs. Out of 230 items, 200 items were shifted to lower tax rates leaving only sin and luxury items in the 28% tax rate slab. Additionally, businesses opting for composting scheme can file a return just once a year provided, they pay tax every quarter.

Registering for GST is accompanied by several benefits apart from legal compliance. Your business is registered which gives you a branding opportunity and adds credibility. Registering for GST empowers you to get an input tax credit which is something non-registered businesses cannot do. It also improves the overall efficiency of your logistics. All your business purchases can benefit from tax input reducing the effective cost of purchase. The benefits of GST registration certainly outweigh the cons.

The procedure for GST registration of businesses that do not fall under the exempt category simple and hassle-free. Professional CA can help you in registration which can be done completely online without even visiting any government office. Provenience helps in GST registration with a dedicated account manager and at competitive costs. The process can be completed in merely 4-5 days with a completely online process. A dedicated account manager will share the details of all the documents required and will take care of the complete process.

So, even though the new GST threshold limit has been increased to Rs 40 lakhs, you can decide to opt for registration below the threshold as well on a voluntary basis if it benefits your business.    

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