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Why GST registration is exempted for those who’s annual turnover is less than 40 Lakh ?

mack (Thinking-to-start-business) (154 Points)

29 November 2022

I saw that those who sell Products with an annual turnover (sales) exceeding 40 lacs or those who provide services with an annual turnover exceeding 20 lacs (For Normal Category States) would require registration for GST. But below this figure, a person doesn’t require GSTIN.

So how do people having turnover below this threshold pay GST to the government? if they are selling a product or service by what name they can add the tax to the product price ?

And if I am starting a Sole Proprietorship for an Export business having 0 turnovers but for export GSTIN is mandatory then I have to pay GST even if my turnover is 0 ? (I think I have to file 0 GST for that period)

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2 Replies

kl Bhavana (Student CA Final ) (417 Points)
Replied 29 November 2022

Hi Mack,

GST will be charged on invoice only if the supplier is registered under GST. That means if the Turnover is below threshold limit and hence not registered under GST then they wont collect GST from Customer and need not pay to government.

Coming to your query on exports, if you are doing Export of goods or services then it can be done without payment of GST. However you have to register under GST and take LUT.

Hope this clarifies.

Thanks
Bhavana K L
Chartered Accountant
bhavana @ lbkca.in
L B K & Associates

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mack (Thinking-to-start-business) (154 Points)
Replied 30 November 2022

I know that even if my threshold is more than 40 Lakh then also I can claim for GST refund for the sale of expoted goods or don't need to pay GST if using LUT. This is because the consumption of goods are happening out of India.

But I am not completely understood your first paragraph.

"GST will be charged on invoice only if the supplier is registered under GST. That means if the Turnover is below threshold limit and hence not registered under GST then they wont collect GST from Customer and need not pay to government."

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If considering I am a sole proprietor selling with-in India (not exporting) as a trader/distributor by adding my margin :

I understand that every person doing business and have GSTIN then they have to mention GST charges in the Invoice, so suppose considering I have less turnover than the limit and I purchase good and the purchase invoice has GST changes included, and now I am further adding my margin and selling within India but not having GSTIN (as my turnover is less than the threshold limit) so in that case, when I am selling the product which I purchase on the price include GST part also, so do I need to consider purchase price as a cost and then simply add my profit margin to further sell the same product by using an Invoice not showing GST charges? correct me if my understanding is wrong.