When does a small business need a GST registration?

In January 2021, I decided to launch my career counselling practice after I got certified in July 2020. I thought it was a monumental task to set up my business venture during the pandemic, in the service industry wherein face-to-face, personal interaction is a critical aspect. Communication is the key while counselling a student and I was wondering if it will be possible to do that effectively if we are connected digitally.

Also, another challenge was to get my business registered. I had no clue about the requirements so I started asking my friends who had set up their small businesses and I also joined a couple of women entrepreneur communities.

I was surprised to know, that it was not that difficult, and while many documents need to be submitted, everything could be done online.

One of the first things I needed to do was to understand more about the Goods and Services Tax because I was paying the GST on the psychometric tests that I was purchasing to share with my students. I didn’t know how to include the same while I charge the students and that’s when I did my research.

I would like to share my learnings with you.

GST is hailed as one of the most note-worthy tax reforms of the country. The main aim of this taxation system is to curb the waterfall effect of other Indirect taxes.

To understand this better, let’s first examine

What is GST?

GST is levied on the supply of goods and services. Many indirect taxes such as the excise duty, VAT, services tax etc. have been replaced by the implementation of the Goods and Services tax. It is one tax that is applicable all over India.

Do small businesses require a GST number?

As per the GST Act, if the financial turnover for a manufacturing unit is above Rs 40 lakhs or more, for the service sector, the financial turnover is Rs 20 lakhs or more then it’s required to register under GST.

For northeastern states, the limit is 10 lakhs. Anyone who is running an online business or providing any service needs to pay the GST if the business comes under the GST tax bracket as mentioned above.

What is GST Registration?


The process by which a taxpayer gets registered under Goods and Service Tax (GST) is GST registration. Once the registration process has been completed, the Goods and Service Tax Identification Number (GSTIN) is provided. The 15-digit GSTIN is provided by the Central Government and helps to determine whether a business is liable to pay GST.
Who is eligible to register under the GST?
  1. Individuals who have registered under the tax services before the GST law came into effect.
  2. Non-Resident Taxable Person and Casual Taxable Person
  3. Individuals who pay tax under the reverse charge mechanism
  4. All e-commerce aggregators irrespective of turnover – I’ll be discussing this more in another segment
  5. Businesses that have a turnover that exceeds Rs.40 lakh. In the case of Uttarakhand, Himachal Pradesh, Jammu & Kashmir, and North-Eastern states, the turnover of the business should exceed Rs.10 lakh.
  6. Input service distributors and agents of a supplier
  7. Individuals who supply goods through an e-commerce aggregator
  8. Individuals providing database access and online information from outside India to people who live in India other than those who are registered taxable persons
How does GST work?


For the Manufacturer:

The manufacturer pays GST on the raw material that is purchased and the value that has been added to make the product.

Service Provider:

The service provider will have to pay GST on the amount that is paid for the product and the value that has been added to it. However, the tax that has been paid by the manufacturer can be reduced from the overall GST that must be paid.


The retailer will need to pay GST on the product that has been purchased from the distributor as well as the margin that has been added. However, the tax that has been paid by the retailer can be reduced from the overall GST that must be paid.


GST must be paid on the product that has been purchased.

Documents required for GST Registration:

1. PAN card
2. Aadhaar card
3. Business address proof
4. Bank account statement and cancelled cheque
5. Incorporation Certificate or the business registration proof
6. Digital Signature
7. Director’s or Promoter’s ID proof, address proof, and photograph
8. Letter of Authorisation or Board Resolution from Authorised Signatory

Growth of E-Commerce in India:


In the last couple of years, it has been observed that there is an increase in the number of businesses dependent on E-commerce to reach new and more customers. Also, E-commerce emerged as a saviour for all of us during the pandemic. E-commerce gave the consumers more choice, better access to products and services and increased the convenience factor greatly.

According to Section 24(ix) of CGST Act, 2017 any person who supplies goods through e-commerce aggregators is required to compulsorily register under GST, irrespective of their turnover. Thus, even where the turnover does not cross the threshold limit, such MSMEs would be required to register under GST and undertake all subsequent compliances under GST.

If the same MSME was to establish a brick-and-mortar business, the MSME won’t be required to take a GST registration until the turnover hits a minimum threshold. This is discouraging for MSME who want to run an online business and this, in turn, restricts the growth of the country. If this rule is relaxed, Government can ensure more transparency and there will be less evasion of taxes as well by business owners.

Also, it is now becoming imperative for small suppliers, entrepreneurs to integrate their business into e-commerce to increase revenue and that starts with GST Parity. But for that, there is a need to relax and amend the GST requirement for online MSMEs.

Parity between offline and online sellers:


Enabling parity between offline and online sellers, with respect to the threshold for registration. According to the GST Rules:

Offline sellers under INR 40 lakh annual turnover and engaged in intra-state sales will have to obtain a GST Registration to sell online.

Offline sellers under INR 1.5 crores annual turnover and intra-state sales will not be able to continue with simplified GST compliance under the composite GST scheme when they want to sell online.

Amending the rules to allow small offline sellers to sell online (with intra-state restrictions) without needing a GST registration will increase GST and income tax collections for the Government of India, increasing its control and transparency to this cohort and improving the efficiency of collecting taxes.

Simplifying the existing Principal Place of Business (PPOB) registration requirement for GST:


The current GST Rules require sellers to register in each state where inventory is held. The registration process involves the submission of 12 different documents and is also time-consuming.

The following are the recommendations to simplify the registration requirements:


In the short term, GOI should reduce the need for documentation from the current list of 12 documents to 1 document, allow a fully online registration for Place of Business, remove the need to maintain books and records at the place of business and only keep the requirement as a place for communication (P0).

In the long term, eliminate the need for PPOB by enabling the sellers to get state-level GSTINs with a single national PPOB.

If the GST requirements as proposed are relaxed for the MSMEs, then the entrepreneurs can surely see a surge in their customer base leading to the generation of higher revenue which is directly related to the growth of the country.

Here I would like to share that while I was apprehensive while starting my business, I was pleasantly surprised that within a couple of months, I had Indian students based in New Zealand, Australia and Kuwait approach me for career guidance. This meant that everyone is more comfortable now and open to looking online for their needs and that extended even to the service industry and not only if you are selling a product. So, I definitely think that, if certain GST rules, such as submission of only one document for registration are added, it will become more encouraging for budding entrepreneurs to begin and dream of success.


Source: News18

26 thoughts on “When does a small business need a GST registration?”

  1. I didn’t know that GST registration could be done online. I do agree that the process needs to be made less complicated.

  2. Very detailed & informative post about GST . Surely GST is one of the greatest tax reform country has seen & it might take few years till all glitches can be resolved .


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