Goods and Services Tax (GST) is India's main indirect tax on the sale of goods and services. Not every small business needs to register, but understanding the rules early helps you price correctly and avoid penalties.
When is GST registration required?
| Type of business | Registration threshold (annual aggregate turnover) |
|---|---|
| Supplying goods (most states) | ₹40 lakh |
| Supplying services (most states) | ₹20 lakh |
| Special category states | Lower limits, typically ₹20 lakh for goods and ₹10 lakh for services |
Registration is mandatory regardless of turnover if you:
- Make inter-state supplies of goods
- Sell goods through e-commerce platforms, with limited exceptions
- Are required to pay tax under reverse charge
- Are a casual taxable person or non-resident taxable person
Many small businesses also register voluntarily because large buyers prefer GST-registered suppliers, and registration lets you claim input tax credit on GST paid for purchases.
Documents needed
- PAN of the business or proprietor
- Aadhaar of the proprietor, partners or directors
- Proof of business address (rent agreement, electricity bill or ownership proof, plus a no-objection letter if needed)
- Bank account details
- Photographs, and for firms and companies, the deed or incorporation certificate
How to register
- Apply online on the official GST portal using Form GST REG-01.
- Verify your mobile number and email with OTP and get a temporary reference number.
- Complete the application and upload documents.
- Complete Aadhaar authentication or biometric verification if asked.
- After approval, you receive a 15-character GSTIN and a registration certificate.
There is no government fee. If a tax officer raises a query, respond within the given time.
Current GST rates
After the GST rate rationalisation that took effect in September 2025, most goods and services fall under two main slabs: 5% and 18%, with a higher 40% rate for luxury and "sin" goods, and many essentials exempt. Always check the specific rate for your product or service code.
The composition scheme
Small businesses can opt for the simpler composition scheme and pay tax at a low fixed rate on turnover:
- Eligibility: turnover up to ₹1.5 crore for goods (lower in special category states) and up to ₹50 lakh for service providers.
- Typical rates: 1% for manufacturers and traders, 5% for restaurants not serving alcohol, 6% for service providers.
- Trade-offs: you cannot charge GST on invoices or claim input tax credit, and inter-state sales of goods are not allowed.
Composition suits small retailers selling directly to consumers. Businesses selling to other GST-registered businesses usually prefer regular registration so customers can claim credit.
Returns you must file
- Regular taxpayers: GSTR-1 (sales details) and GSTR-3B (summary and tax payment), monthly, or quarterly under the QRMP scheme if turnover is up to ₹5 crore.
- Composition taxpayers: a quarterly statement (CMP-08) and an annual return.
File on time even when there are no sales, as late fees apply. In Part 5, we cover business bank accounts and digital payments.
Start a Small Business in India: the full series
- Part 1: Choosing Your Business Structure
- Part 2: Registrations and Licences Checklist
- Part 3: Udyam (MSME) Registration
- Part 4: GST Registration and Composition Scheme (you are here)
- Part 5: Bank Account and Digital Payments
- Part 6: How to Price Your Products and Services
- Part 7: Invoicing and Bookkeeping
- Part 8: Getting Your First Customers
- Part 9: Funding and Government Loan Schemes
- Part 10: Taxes and Compliance Calendar
Disclaimer: This article is for general information only and is not legal, tax or financial advice. Rules, limits and fees change from time to time, so please check official government portals and consult a chartered accountant or company secretary for your specific situation.
