GST registration: when you must, when you may, when composition wins

Arthora Guides · Updated August 2026 · 7 min read

Three different businesses ask the same question — "do I need GST?" — and get three different right answers. It depends on what you sell, where you sell it, and through what channel. Here are the actual rules, and the composition trade-off that most small businesses evaluate wrong.

The turnover thresholds

"Aggregate turnover" is the trap: it is PAN-wide — all your branches and trade names across India added together, including exempt sales. A kirana with ₹35 lakh of goods and ₹6 lakh of rental income is over the line even though neither number alone crosses it.

When turnover doesn't matter at all

Some situations force registration from the first rupee:

• Inter-state supply of goods — sell goods from Rajasthan to a buyer in Gujarat and you need a GSTIN regardless of size. (Services got a threshold-level relaxation; goods did not.)
• Selling through an e-commerce operator that collects TCS — the marketplaces demand a GSTIN at onboarding. (Small intra-state sellers of goods got carve-outs, but plan for a GSTIN if marketplaces are your channel.)
• Reverse-charge liability — if you receive supplies on which the recipient pays the tax, you register to pay it.
• Casual and non-resident taxable persons — an exhibition stall in another state means a temporary registration for it.
• Agents, input service distributors, TDS/TCS deductors under GST.

Voluntary registration — when below the line

Registering before you must costs you compliance (monthly/quarterly returns forever) and earns you two things: your buyers get ITC on your invoices — decisive if you sell B2B, because registered buyers quietly prefer registered vendors — and you get ITC on your own purchases. B2C businesses below the threshold usually gain nothing; B2B businesses usually should register early.

The composition scheme: less compliance, real costs

Businesses with turnover up to ₹1.5 crore (₹75 lakh in special states) can opt for composition: pay a flat percentage of turnover instead of regular GST.

The compliance is genuinely lighter — a quarterly payment (CMP-08) and one annual return (GSTR-4). But read the price tags:

• No ITC — the GST on everything you buy becomes your cost.
• No tax on the invoice — you issue a bill of supply; your B2B buyers get no credit, so they buy from someone else.
• No inter-state sales. Local only.
• The tax comes out of your margin — you cannot collect it from the customer.

The pattern: composition suits B2C businesses with local customers and thin purchase-side GST — the neighbourhood restaurant, the retail counter. It punishes anyone selling to registered businesses.