GST Registration for Small Business: Limits and Composition 2026

GST registration for small business becomes compulsory when aggregate turnover in a financial year crosses ₹40 lakh for suppliers of goods (in most states) or ₹20 lakh for service providers, with lower limits of ₹20 lakh and ₹10 lakh in special category states. Some sellers must register whatever their turnover, for example those making inter-state supplies of goods. Small businesses with turnover up to ₹1.5 crore (₹50 lakh for services) can choose the composition scheme and pay a flat 1%, 5% or 6%.

GST threshold limit: when registration becomes compulsory

Section 22 of the Central Goods and Services Tax Act, 2017 requires registration once your “aggregate turnover” in a financial year crosses the threshold. Aggregate turnover is counted on your PAN across India: taxable sales, exempt sales, exports and inter-state supplies, but not the GST itself.

• Goods only: ₹40 lakh in most states, under the option the GST Council gave states from 1 April 2019. Some states, mainly special category states, kept ₹20 lakh. Sellers of certain goods, such as ice cream, pan masala and tobacco products, do not get the higher limit.
• Services, or goods and services together: ₹20 lakh, and ₹10 lakh in special category states.

These limits have not changed in 2026. Check your own state’s limit on gst.gov.in before deciding.

Must register anyway. Section 24 lists persons who must register even below the threshold, including those making inter-state taxable supplies of goods, persons liable to pay tax under reverse charge, casual taxable persons and e-commerce operators. Since 1 October 2023, small suppliers of goods selling only within their own state through an e-commerce platform have a conditional exemption. These rules are technical, so confirm with a GST practitioner.

GST for shopkeepers: the rate changes of September 2025

On 22 September 2025, GST rates were rationalised. The old 5%, 12%, 18% and 28% structure moved to two main rates: 5% for essential and common items and 18% as the standard rate, with a special 40% rate for a few luxury and demerit goods. Rates changed on hundreds of items.

For a shopkeeper, this means three things. Check the current rate for every product you sell; do not rely on an old price list. Update your billing software’s tax codes. And remember that composition taxpayers do not charge GST to customers at all, so for them the change matters mainly through their purchase costs.

The composition scheme: is it right for you?

Section 10 of the CGST Act lets small businesses pay tax at a flat rate on turnover instead of the normal rate on each sale.

• Who can opt: manufacturers, traders and restaurants (not serving alcohol) with turnover up to ₹1.5 crore in the previous year (₹75 lakh in certain special category states), and service providers or mixed suppliers up to ₹50 lakh under s.10(2A).
• Rates: 1% of turnover for manufacturers and traders, 5% for restaurants, 6% for service providers and mixed suppliers (each split equally between CGST and SGST).
• Restrictions: you cannot make inter-state outward supplies, cannot collect tax from customers, cannot claim input tax credit, and must issue a bill of supply instead of a tax invoice. Manufacturers of ice cream, pan masala and tobacco products cannot opt.
• Returns: a quarterly statement-cum-challan (CMP-08) and an annual return (GSTR-4), instead of monthly returns.

Composition suits a kirana store or small restaurant selling to consumers. It suits a supplier to other businesses badly, because those buyers cannot claim input credit on your bills.

How to get GST registration online: step by step

1. Keep ready: PAN, Aadhaar, photograph, mobile and email, proof of business address (electricity bill plus rent agreement or ownership document), bank account details, and partnership deed or incorporation papers if relevant.
2. Apply on gst.gov.in in Form GST REG-01. Opt for Aadhaar authentication; it usually speeds up approval.
3. Simplified registration: from 1 November 2025, applicants who self-assess that their output tax will not exceed ₹2.5 lakh a month, or who are identified as low-risk by the system, can get registration within three working days.
4. Reply to any query raised by the officer within the time given on the portal.
5. Display your GSTIN certificate at the place of business and print the GSTIN on invoices and signboards.

The government charges no fee for GST registration. Fees you see online are for agents’ services.

Real-life example

Ramesh runs a hardware shop in Indore with turnover of about ₹32 lakh, all within Madhya Pradesh. His turnover is below the ₹40 lakh goods limit, so registration is not compulsory. But two contractors who buy from him want GST invoices for input credit. He registers voluntarily under the normal scheme, not composition, because composition would stop his buyers from claiming credit. His neighbour Sunita, who runs a small tea stall and sweet shop selling only to walk-in customers, stays below the limit and needs no GST registration at all.

Frequently asked questions

What is the GST registration limit for small business in 2026?

For suppliers of goods it is ₹40 lakh of aggregate turnover in most states, and ₹20 lakh for service providers. Special category states have lower limits. The Government confirmed in February 2026 that no revision has been recommended.

Is GST registration compulsory for selling on Amazon or Flipkart?

Not always. Since 1 October 2023, small sellers of goods supplying only within their own state through e-commerce operators have a conditional exemption. Inter-state online sales still require registration, so check before you list.

Can a composition dealer sell to other states?

No. A composition taxpayer cannot make inter-state outward supplies. If you plan to sell outside your state, the normal scheme is required.

Is there a penalty for not taking GST registration?

Yes. A business liable to register that does not do so can face tax, interest and penalty under the CGST Act. Register within 30 days of becoming liable.

Quick quiz

Starting or growing a shop? Law for Shopkeepers and Small Businesses covers GST basics with every other registration. The Business Compliance Pack, ₹799 adds ready formats. The certificate is a Lexfolio certificate of completion, not a professional qualification.

Sources

• Central Goods and Services Tax Act, 2017, ss.9, 10, 22, 24 and 25
• Central Goods and Services Tax Rules, 2017, rule 7 (composition rates) and the simplified registration scheme from 1 November 2025
• GST Council, 32nd meeting (January 2019) on thresholds; 56th meeting (September 2025) on rate rationalisation effective 22 September 2025
• Notification No. 34/2023-Central Tax (e-commerce exemption, from 1 October 2023)
• Lok Sabha Unstarred Question No. 1484, answered 9 February 2026

This page is for education and general information, not legal advice for a specific case. Law as on 29 October 2026.