Who Must Register

“Do I need GST registration?” is usually asked as a question about turnover, and answered with a single figure. The figure is real, but it answers only part of the question. The Act has two routes to registration. One is a turnover threshold. The other is a list of activities that require registration whatever the turnover. A business with a turnover of a few lakh rupees can be on the second list, and a business well over the threshold can be outside both.

This guide covers sections 22, 23 and 24 of the CGST Act. The mechanics of applying, and what goes wrong, are the subject of the next guide.

The threshold route

Section 22(1) makes every supplier liable to register “in the State or Union territory … from where he makes a taxable supply” if its “aggregate turnover in a financial year exceeds twenty lakh rupees”. The threshold is lower for suppliers in special category States, at ten lakh rupees.

Three features of the provision matter more than the figure.

The test is aggregate turnover, not taxable turnover. Aggregate turnover, defined in section 2(6), is the value of all taxable supplies, exempt supplies, exports, and inter-State supplies of “persons having the same Permanent Account Number, to be computed on all India basis”. It excludes inward supplies taxed under reverse charge, and the GST and cess themselves. Exempt supplies count towards the threshold. So does turnover in other States under the same PAN.

Liability arises when the threshold is crossed. The section speaks of turnover that “exceeds” the limit in a financial year. Liability does not wait for the year to end.

Registration is State by State. The supplier registers in each State or Union territory “from where he makes a taxable supply”. A business crossing the threshold with operations in three States needs three registrations. Section 25(1) requires each within thirty days of becoming liable.

The higher threshold for suppliers of goods

A third proviso to section 22(1), inserted from 1 January 2020, lets the Government raise the threshold to up to forty lakh rupees “in case of supplier who is engaged exclusively in the supply of goods”, at the request of a State and on the Council’s recommendation.

The proviso is an enabling power, not a threshold. The forty-lakh figure in force comes from a notification, and it predates the proviso. Notification No. 10/2019-Central Tax, issued under section 23(2) and effective from 1 April 2019, exempts from registration “any person, who is engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed forty lakh rupees”. It then excludes four groups:

• persons required to register compulsorily under section 24
• suppliers of ice cream and other edible ice, pan masala, and tobacco and its substitutes; and, from 1 April 2022, fly ash bricks, aggregates and blocks, building bricks, bricks of fossil meals, and earthen or roofing tiles
• persons making intra-State supplies in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand
• persons who register voluntarily, or who choose to keep an existing registration

A supplier of goods must therefore check its State and its products against the notification, not just the Act.

An Explanation keeps one common case within the higher limit. A person still counts as engaged exclusively in the supply of goods if it also earns interest or discount on deposits, loans or advances, which is an exempt service.

Special category States

Explanation (iii) to section 22 defines special category States by reference to Article 279A(4)(g) of the Constitution, and then excludes most of them. The Article names Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand. The Explanation excludes Jammu and Kashmir, Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand.

That leaves four States for the ten-lakh threshold in the first proviso: Manipur, Mizoram, Nagaland and Tripura. A second proviso allows the Government, at a special category State’s request, to raise that threshold to up to twenty lakh rupees.

Turnover counted for someone else

Explanation (i) to section 22 provides that aggregate turnover “shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals”. An agent selling for several principals counts their sales in its own turnover.

Explanation (ii) runs the other way for job work. Goods supplied after job work by a registered job worker are treated as supplied by the principal. Their value “shall not be included in the aggregate turnover of the registered job worker”.

Transfers of a business

Section 22 also deals with registration that follows a business from one person to another.

Under sub-section (3), where a registered business is transferred “as a going concern”, whether by succession or otherwise, the transferee “shall be liable to be registered with effect from the date of such transfer or succession”. The transferee does not get a fresh threshold. The liability arrives with the business.

Under sub-section (4), on an amalgamation or demerger sanctioned by a High Court or Tribunal, the transferee is liable from the date the Registrar of Companies issues the certificate of incorporation giving effect to the order.

Who is not liable

Section 23(1) takes two categories out of registration altogether:

• any person “engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax”
• “an agriculturist, to the extent of supply of produce out of cultivation of land”

The first is narrower than it looks. “Exclusively” means a single taxable supply takes a person out of it, and the threshold in section 22 then applies to the whole aggregate turnover, exempt supplies included.

Section 23(2) allows the Government, by notification, to exempt categories of persons from registration. It operates “notwithstanding anything to the contrary contained in sub-section (1) of section 22 or section 24”. That last phrase was added by the Finance Act, 2023, with effect from 1 July 2017. It confirms that a notification can exempt a person even from the compulsory registration list.

The compulsory route

Section 24 opens “Notwithstanding anything contained in sub-section (1) of section 22”. For the persons it lists, the threshold does not apply. They must register from their first transaction of the kind described. The list:

1. persons making any inter-State taxable supply
2. casual taxable persons making taxable supply
3. persons required to pay tax under reverse charge
4. persons required to pay tax under section 9(5), as electronic commerce operators for notified services
5. non-resident taxable persons making taxable supply
6. persons required to deduct tax at source under section 51
7. persons making taxable supply on behalf of other taxable persons, “whether as an agent or otherwise”
8. Input Service Distributors
9. persons supplying through an electronic commerce operator required to collect tax at source under section 52, other than for supplies covered by section 9(5)
10. every electronic commerce operator required to collect tax at source under section 52
11. persons supplying online information and database access or retrieval services from outside India to a person in India, other than a registered person
12. persons supplying online money gaming from outside India to a person in India, an entry added from 1 October 2023
13. other persons notified by the Government

The first entry catches the most people. On the face of section 24, a small business making a single sale to a customer in another State must register, whatever its turnover.

The face of the section is not the whole picture, though, because section 23(2) allows exemptions from it. The Government has used that power three times for small suppliers, and the line it draws is between goods and services.

• Inter-State services. Notification No. 10/2017-Integrated Tax exempts “persons making inter-State supplies of taxable services” whose all-India aggregate turnover does not exceed twenty lakh rupees, or ten lakh in special category States.
• Services through e-commerce. Notification No. 65/2017-Central Tax exempts suppliers of services through an e-commerce operator that collects tax at source, within the same limits. It does not cover services for which the operator itself pays tax under section 9(5).
• Goods through e-commerce, within one State. From 1 October 2023, Notification No. 34/2023-Central Tax exempts suppliers of goods through such an operator whose turnover is within the section 22(1) threshold. The conditions are strict. The supplier “shall not make any inter-State supply of goods”, must not supply through operators in more than one State, and must hold a PAN and obtain an enrolment number on the common portal before supplying.

No notification gives a general exemption to small suppliers who sell goods across State lines. A business selling goods to a customer in another State must register under section 24(i), however small its turnover.

Liability and registration are different things

Section 22 and section 24 make a person liable to be registered. A person who is liable but has not registered is still a taxable person, defined in section 2(107) as one “registered or liable to be registered under section 22 or section 24”. The tax is due either way. What is lost by not registering is the ability to charge tax on invoices, to take input tax credit and to file returns, while the liability continues to accrue. The cost of registering late is therefore borne out of the business’s own margin.

The opposite case also arises. A person below the threshold and outside section 24 may still register voluntarily under section 25(3), usually because its customers want input tax credit. Once registered, it is a registered person with all the obligations that brings, whatever its turnover.

Working out whether registration is needed

The order of analysis is:

1. Is every supply exempt or non-taxable, or is the person an agriculturist supplying their own produce? If so, section 23(1) takes the person out.
2. Does any activity fall within section 24? If so, registration is compulsory regardless of turnover, unless a notification under section 23(2) exempts that case.
3. Otherwise, compute aggregate turnover under section 2(6): all-India, under the same PAN, including exempt supplies and exports, and including supplies made as agent.
4. Compare it with the threshold that applies to the State and the nature of supplies: ten or twenty lakh rupees under the Act, or forty lakh rupees for goods where notified.
5. If liable, register in each State or Union territory from which taxable supplies are made, within thirty days.

The next guide covers the application itself under section 25: what the process requires, how a registration can be cancelled, and the problems that arise most often.