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GST Exemption Limit

When you start a business or if you own a business, there are various factors that you should consider and you must also know what they are. Nobody can run a business successfully without knowing the basic information like taxes, accounting, registration formalities, and many more. In this article, you can find details regarding the GST Exemption Limit. Earlier the GST limit was different, but now it has been changed by the government and has also introduced various schemes.

What is the exemption limit for GST – Comparison between the old limits and the latest changes?

Any business that receives an annual turnover of up to INR40 lakhs is now exempted from the GST, the Goods and Services Tax. Before introducing the new threshold limit, the GST registration limit was set to INR 20 lakhs and a few states have different GST limits. It is based on two different categories of state: the normal and special categories. The northeasters and other hill states are considered under the special category of the GST limit. Let us see the comparison between the old and the new limits of GST now.

  • The old limit for the sales of goods or services was set to INR 20 lakhs. This means any business whose annual income is more than 20 lakhs must take the GST registration and for the special category states, the limit was set to INR 10 lakhs.
  • But the new limits have been changed now and any business for sales of goods has been set to INR 40 lakhs for normal category states and INR20 lakhs for special category states.
  • However, the GST exemption limit for services has not been changed and it is still set to INR 20 lakhs for normal category states and INR 10 lakhs for special category.

The normal category states who selected the GST registration new limit of INR 40 lakhs consists of Kerala, Tamil Nadu, Chhattisgarh, Jharkhand, Bihar, Delhi, Andhra Pradesh, Gujarat, Haryana, Maharashtra, Goa, Punjab, Himachal Pradesh, Uttar Pradesh, Madhya Pradesh, Karnataka, Orissa, Rajasthan, West Bengal, Lakshadweep, Dadra, and Nagar Haveli, Daman and Diu, Andaman & Nicobar Island and Chandigarh.

On the other hand, one state that comes under the normal category state but chose the status of INR 20 lakhs is Telangana. Whereas Jammu and Kashmir, Ladakh, and Assam opted for the new limit of INR 40 lakhs, though these states come under the special category states. A few states in the special category who selected for the new limit of INR 20 lakhs are Meghalaya, Mizoram, Tripura, Manipur, Sikkim, Nagaland, Arunachal Pradesh, Uttarkhand, and Puducherry.

What is the exemption limit for GST registration and how to calculate it?

The current exemption limit for GST registration is INR 40 lakhs for the Indian states that come under the special category. The states under the special category have a limit of INR 20 lakhs. So, the aggregate turnover of a business should be calculated to understand if you have to undergo the GST registration.

To calculate this amount you need to value the activities done by the business including all the entities of the business having the same PAN number.

For your reference, you can check the below details to understand what is included in the value to calculate the aggregate turnover of the business.

VALUE OF (taxable supplies + exempt supplies + inter-state supplies+ exports) – (inward supplies + supplies taxable under reverse charge + non-taxable supplies + taxes)

GST exemption limit for service providers explained in detail

The news regarding the changes in the new GST registration limit made sudden confusion in people thinking that the limit has been increased for all businesses. But the GST registration limit for service providers has not been changed. So, still, the GST registration limit is INR 20 lakhs, which means any service provider whose turnover is up to INR 20 lakhs per annum is exempt from the GST registration.

GST exemption limit for small traders

When the new GST exemption limits were introduced, there was a composition scheme brought up. Under this scheme, businesses and small traders will be allowed to pay only 1 percent tax according to the turnover. The turnover is set to Rs.1.5 crore a year. The GST exemption limit is the same for any business for the supply of goods which is up to INR 40 lakhs. But for the service providers, the limit is up to 20 lakhs for normal category states. For special category states the limit is up to 20 lakhs for the supply of goods and up to 10 lakhs for service providers.


Do I have to register for GST if I supply exempt goods?

It is not required for you to register under the GST. The supply of exempt goods is non-taxable.

When preparing GSTR 1 return, should I record exempted supplies separately?

It is required to record the exempt supplies in GTSR- 1 return. Make sure to record the GST exempted supplies, the NIL rates, and Non –GST supplies separately.

Is a tax invoice required to supply GST-exempted goods?

No. A bill of supply is necessary to be given when the business supplies GST-exempt goods and services.

Does exemption from IGST automatically apply as discharge from CGST?

These two are not correlated; hence the exemption from IGST will not apply as an exemption from CGST.

Who grants the exemption from payment of taxes?

The Government has the power to grant GST Exception Limit on the recommendations of the GST council.

Should I generate an e-way bill in case of movement of exempt supplies?

An e-way bill is not required to be generated.

When a certain supply item becomes chargeable to tax that was earlier not taxable, what is the treatment in such a situation?

In such cases, the taxpayer will be entitled to claim credit of tax on inputs paid related to exempt supply on the stocks held. This claim on inputs can be claimed the preceding day when the supplies become taxable. Moreover, the credit of capital goods shall be reduced by 5% point for every quarter or part from the date of issue of the invoice.

How to understand if my business needs to be registered under GST?

For this, you need to calculate the turnover of your business in a financial year. If the turnover is above 40 lakhs, you must register under GST. But if you are a service provider, then your limit is only up to 20 lakhs.