Understanding GST Threshold Limit: Calculating the Registration Requirement

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How do I calculate the GST Registration threshold?

The Goods and Services Tax (GST) threshold limit sets the minimum annual turnover that necessitates businesses, whether they are Sole Traders, Companies, Partnership Firms, or LLPs, to register for GST. It’s important to note that the GST Threshold Limit is distinct for Services and Goods but remains consistent across different types of businesses.

How to Calculate the Threshold Limit for GST Registration

Knowing the computation method for determining the threshold is essential; otherwise, one may end up not having GST Registration, which could lead to paying penalties or obtaining it without a requirement, leading to an unnecessary compliance burden.

The GST Threshold Limit Calculation should include the following:

  • Turnover of the person or entity across the country for the PAN number
  • All taxable supplies
  • All exempted supplies
  • Exports

And excludes the following:

  • Central Goods and Service Tax Amount,
  • State or Union Territory Goods and Services Tax Amount,
  • Integrated Goods and Services Tax Amount,
  • GST Compensation Cess
  • Transactions on which Tax is payable on the reverse charge mechanism.

Also Read: GST Registration: Who Needs to Register for GST?

The business must be cautious while computing the Annual Turnover, which determines the threshold limit. Suppose the business is engaged exclusively in the supply of exempted goods or services. In that case, the business is not required to obtain registration under GST, even if the turnover crosses the threshold limit. Exemption from GST means goods or services are taxable, but they are exempt from the levy of GST. The onus to prove that the goods or services are exempt is on the business. The business must be very careful while determining the taxability of goods or services and then classifying them further to determine the tax rate.

To provide ease of understanding, the following table provides an idea of which income is to be added while determining the Aggregate Annual Turnover.

SR.No Particulars Included in Aggregate Annual Turnover
1 Partners’ salaries from a Partnership Firm No
2 Salary as a Director of a Private Limited Company No
3 Incentives Received by the executive No
4 Interest on Partners Capital in Partnership Firm Yes
5 Interest earned on Post Office Deposits Yes
6 Interest earned on Bank Deposits Yes
7 Rental income on Residential Property Yes
8 Rental Income on Commercial Property Yes
9 Dividend Income No
10 Proceeds from the Maturity of the Insurance Policy No
11 Capital Gains Arising on the Sale of Securities No
12 Proceeds from the sale of Land No
13 Proceeds from the sale of Buildings during construction Yes
14 Proceeds from the sale of Buildings after Receipt of an occupancy certificate or any other equivalent Certificate No

Wherever required, the business should obtain professional opinions to avoid litigation in the future. Logo’s CaptainBiz provides an exhaustive cloud- and mobile-based bill book app to record and report transactions for the filing of GST Returns.

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CA K. S. B. Subramanyam Partner
CA K.S.B. Subramanyam is a Fellow Chartered Accountant and currently serves as the Chief Financial Partner at M/s Manohar Chowdhry & Associates, Chartered Accountants. He has been associated with the firm for nearly two decades and has played a pivotal role in its growth and success.

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