Complete Guide to GST Registration Exemptions in India: Understanding Who is not liable for registration
The Goods and Services Tax (GST) regime in India mandates registration for most businesses, but the law provides several exemptions to reduce compliance burden for specific categories of persons. Understanding these exemptions is crucial for businesses to ensure they remain compliant while avoiding unnecessary registration requirements.
Statutory Provisions: Section 23 of CGST Act
Section 23 of the Central Goods and Services Tax Act, 2017, lays down the foundation for registration exemptions. The provision categorically states:
Sub-section (1): Automatic Exemptions
"(1) The following persons shall not be liable to registration, namely:—
(a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;
(b) an agriculturist, to the extent of supply of produce out of cultivation of land."
This means that if you're dealing exclusively in non-taxable or wholly exempt supplies, or if you're an agriculturist selling your own farm produce, you are automatically exempt from GST registration.
Sub-section (2): Government-Notified Exemptions
"(2) Notwithstanding anything to the contrary contained in sub-section (1) of section 22 or section 24, the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, specify the category of persons who may be exempted from obtaining registration under this Act."
This empowers the government to notify additional categories of persons who may be exempted from registration, which has been exercised through various notifications discussed below.
Key Exemption Notifications: A Detailed Analysis
1. Reverse Charge Mechanism Suppliers (Notification No. 05/2017)
Who is exempted?
Persons who are only engaged in making supplies where the tax is payable by the recipient under reverse charge mechanism (RCM) as per Section 9(3) of the CGST Act are exempt from registration.
Important Exception - Metal Scrap Dealers:
Originally, this exemption applied to all reverse charge suppliers. However, Notification No. 24/2024-Central Tax (effective from October 10, 2024) inserted a crucial proviso:
"Provided that nothing contained in this notification shall apply to any person engaged in the supply of metal scrap, falling under Chapters 72 to 81 in the first schedule to the Customs Tariff Act, 1975 (51 of 1975)."
This means metal scrap dealers are now required to register even if they only make supplies under reverse charge. This amendment aims to bring greater accountability in the metal scrap trade.
2. Exclusive Suppliers of Goods with Higher Threshold (Notification No. 10/2019)
Who is exempted?
Any person engaged in exclusive supply of goods whose aggregate turnover in the financial year does not exceed ₹40 lakh is exempt from registration.
Exceptions to this exemption:
(a) Persons required to take compulsory registration under section 24 (such as inter-state suppliers, e-commerce operators, etc.)
(b) Persons supplying specified goods listed in the notification table (detailed below)
(c) Persons making intra-State supplies in specified states: Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand
(d) Persons who opt for voluntary registration or wish to continue their existing registration
Specified Goods Excluded from This Exemption:
The notification lists specific goods whose suppliers cannot avail this ₹40 lakh threshold exemption:
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Note: The entry for fly ash products was amended by Notification No. 15/2022-Central Tax (effective July 18, 2022) to specifically mention "Fly ash bricks; Fly ash aggregates; Fly ash blocks."
Why are these goods excluded?
These goods are typically high-volume, high-value items or require stricter monitoring (like tobacco products). The government wants to ensure proper tax collection and compliance for these categories.
3. Service Providers Through E-Commerce Operators (Notification No. 65/2017)
Who is exempted?
Persons making supplies of services (other than supplies specified under Section 9(5)) through an electronic commerce operator who is required to collect tax at source under Section 52 of the CGST Act, having an aggregate turnover not exceeding:
- ₹20 lakh in general category states (all India basis)
- ₹10 lakh in special category states (all India basis)
Important: This exemption applies only to service providers, not goods suppliers. The e-commerce operator must be liable to collect TCS (Tax Collected at Source) under Section 52.
4. Goods Suppliers Through E-Commerce Operators (Notification No. 34/2023)
Who is exempted?
Persons making supplies of goods through an electronic commerce operator who is required to collect tax at source under Section 52, having aggregate turnover not exceeding the registration threshold (₹40 lakh or ₹20 lakh depending on state).
Strict Conditions Apply:
This exemption comes with stringent conditions:
(i) No inter-State supply of goods - Only intra-state supplies allowed
(ii) No multi-state operations - Cannot supply through e-commerce operator in more than one State or Union territory
(iii) PAN mandatory - Must have a Permanent Account Number under the Income-tax Act, 1961
(iv) Declaration requirement - Before making any supply, must declare PAN, business address, and State/UT on the common portal for validation
(v) Enrolment number - Must obtain an enrolment number on the common portal after successful PAN validation
(vi) One enrolment per State - Cannot have more than one enrolment number in a State or UT
(vii) No supply without enrolment - Cannot make any supply through e-commerce operator without an enrolment number
(viii) Registration supersedes enrolment - Enrolment number ceases to be valid from the effective date of GST registration if subsequently obtained
Effective Date: October 1, 2023
This notification creates a simplified compliance mechanism for small goods suppliers operating through e-commerce platforms while maintaining proper tracking through the enrolment system.
5. Casual Taxable Persons Supplying Handicraft Goods (Notification No. 32/2017)
Who is exempted?
Casual taxable persons making taxable supplies of handicraft goods are exempt from registration, subject to turnover limits:
- ₹20 lakh aggregate turnover (all India basis) in general states
- ₹10 lakh aggregate turnover (all India basis) in Special Category States (other than Jammu and Kashmir)
Mandatory Requirements:
- PAN Required: Such persons must obtain a Permanent Account Number
- E-way Bill Generation: Must generate e-way bills in accordance with Rule 138 of CGST Rules, 2017
Applicability:
This exemption applies to persons making inter-State taxable supplies of handicraft goods who are also availing the benefit of Notification No. 8/2017-Integrated Tax dated September 14, 2017.
What Qualifies as "Handicraft Goods"?
The notification provides an exhaustive table defining handicraft goods as products made by craftsmen predominantly by hand even though some machinery may be used. The list includes 33 categories:
Selected Examples:
- Leather articles (bags, purses, saddlery, harness, garments) - HSN 4201, 4202, 4203
- Carved wood products (boxes, inlay work, cases, casks, table and kitchenware) - HSN 4415, 4416, 4419, 4420
- Wood turning and lacquerware - HSN 4421
- Bamboo products (decorative and utility items) - HSN 46
- Grass, leaf, reed and fibre products (mats, pouches, wallets) - HSN 4601, 4602
- Paper mache articles - HSN 4823
- Textile handloom products (handmade shawls, stoles, scarves) - Including HSN 50, 58, 61, 62, 63
- Hand printed textiles - HSN 50, 52, 54
- Zari thread - HSN 5605
- Carpets, rugs and durries - HSN 57
- Hand embroidery textiles - HSN 58
- Theatre costumes - HSN 61, 62, 63
- Coir products (mats, mattresses) - HSN 5705, 9404
- Leather footwear - HSN 6403, 6405
- Carved stone products (statues, figures of animals, writing sets) - HSN 6802
- Stone inlay work - HSN 68
- Pottery and clay products (terracotta) - HSN 6901, 6909, 6911, 6912, 6913, 6914
- Metal tableware and kitchenware (copper, brassware) - HSN 7418
- Metal statues, decorative items - HSN 8306
- Metal bidriware - HSN 8306
- Musical instruments - HSN 92
- Horn and bone products - HSN 96
- Conch shell crafts - HSN 96
- Bamboo, cane/rattan furniture - As applicable
- Dolls and toys - HSN 9503
- Folk paintings (madhubani, patchitra, Rajasthani miniature) - HSN 97
- Chain stitch - Any chapter
- Crewel, namda, gabba - Any chapter
- Wicker willow products - Any chapter
- Toran - Any chapter
- Articles made of shola - Any chapter
This comprehensive list recognizes India's rich handicraft heritage and provides much-needed relief to artisans and craftsmen engaged in traditional arts.
Key Takeaways for Businesses
1. Know Your Category
Determine whether your business falls under any exempted category. Consider your:
- Type of supply (goods/services/both)
- Nature of goods/services
- Turnover threshold
- State of operation
- Supply method (direct/through e-commerce)
2. Monitor Threshold Limits
Even if you're exempt today, growing turnover may require registration tomorrow. Keep track of:
- Your aggregate turnover on an all-India basis
- State-specific thresholds if applicable
- Changes in your product mix or supply patterns
3. Recent Changes Matter
Stay updated with amendments like:
- Metal scrap dealers now require registration (October 2024)
- E-commerce goods suppliers' exemption with enrolment system (October 2023)
- Fly ash products specification (July 2022)
4. Voluntary Registration Option
Even if you're exempt, you may choose to register voluntarily to:
- Claim input tax credit
- Make inter-state supplies
- Appear more credible to customers
- Comply with customer requirements
5. Compulsory Registration Overrides Exemptions
Remember that persons required to take compulsory registration under Section 24 of the CGST Act cannot avail these exemptions. Compulsory registration applies to:
- Inter-state suppliers
- Casual taxable persons (except handicraft suppliers with conditions)
- Persons liable to pay tax under reverse charge
- E-commerce operators
- Input service distributors
- Persons required to deduct TDS
- And other specified categories
Compliance Tips
- Maintain Proper Records: Even if you're exempt from registration, maintain proper records of your supplies, purchases, and turnover to demonstrate eligibility for exemption if questioned.
- Monitor Your Supplies: If you're dealing in multiple types of goods or services, ensure you don't inadvertently start supplying items that disqualify you from exemption.
- PAN Requirement: Several exemptions now require PAN, so ensure you have one even if you're not registering under GST.
- E-commerce Suppliers: If you're selling through platforms like Amazon, Flipkart, or others, understand whether you need registration, enrolment, or complete exemption based on your turnover and type of supply.
- State-Specific Considerations: Special category states have lower thresholds (₹10 lakh vs ₹20 lakh). Some states are excluded from the ₹40 lakh goods threshold benefit.
- Handicraft Artisans: If you're an artisan making traditional handicrafts, familiarize yourself with the comprehensive list in Notification No. 32/2017 to understand if your products qualify.
Conclusion
GST registration exemptions provide significant relief to small businesses, service providers operating through e-commerce platforms, handicraft artisans, and certain other categories. However, these exemptions come with specific conditions, thresholds, and exclusions that must be carefully understood and monitored.
The government has been proactive in amending these notifications to address emerging challenges (like the metal scrap dealers' requirement) and to support growing segments (like e-commerce). Businesses must stay informed about these changes to ensure compliance while optimizing their tax obligations.
When in doubt, consult a GST professional to determine your registration obligations accurately. The cost of non-compliance far exceeds the investment in proper professional advice.
About the Authors
Disclaimer: This blog provides general educational information about the Sections 23 and relevant notifications of the CGST Act, 2017. While every effort has been made to ensure accuracy, this content should not be construed as professional tax advice. GST laws are subject to frequent amendments, notifications, and judicial interpretations. For personalized guidance specific to your business circumstances, please consult with a qualified tax professional. The author assumes no liability for actions taken based solely on the information provided in this article.