GST for Startups: When Do You Need to Register?
Turnover thresholds are ₹40 lakh for goods and ₹20 lakh for services, but four situations make registration compulsory from your first rupee. Here is how to tell which one you are in.
Most founders register for GST far earlier than they need to, then spend two years filing nil returns. A few register far too late and get a notice. The rules are not complicated once you separate the two questions: has my turnover crossed a line, and am I doing something that makes registration compulsory anyway.
The turnover thresholds
| What you sell | Most states | Special category states |
|---|---|---|
| Goods | ₹40 lakh | ₹20 lakh |
| Services | ₹20 lakh | ₹10 lakh |
Special category means the north eastern states plus Sikkim, Himachal Pradesh and Uttarakhand. Jammu and Kashmir and Assam opted to use the higher ₹40 lakh limit for goods.
The number that matters is aggregate turnover, computed on your PAN across all states and all businesses, and it includes exempt supplies and exports, not just taxable sales. A consultant billing ₹1.9 lakh a month crosses ₹20 lakh in the eleventh month, so watch it from month nine, not month twelve.
When you must register whatever your turnover is
- You sell goods to another state. Interstate supply of goods needs registration from the first invoice. Services are treated differently: you stay under the ₹20 lakh exemption even when the client is in another state.
- You sell through an e-commerce platform that collects tax at source, so Amazon, Flipkart, Myntra and the rest.
- You are liable under reverse charge. Certain purchases, such as legal services from an advocate, put the tax obligation on you as the buyer.
- You are a casual or non-resident taxable person, for example a stall at an exhibition in another state.
Exports are a special case worth knowing. Exported services are zero rated, but you still need registration to claim it properly, and you file a Letter of Undertaking so you can export without paying IGST upfront. Almost every Indian software company billing overseas clients ends up registered for this reason.
Should you register voluntarily?
Register early if: your customers are businesses who want input credit, you are buying laptops, software, ads or office space where the 18% GST is a real cost you could claim back, or you are close to the threshold anyway.
Wait if: your customers are individuals who cannot claim credit, and your costs are small. Once registered you file returns every month or quarter forever, whether you invoice anything or not, and late filing carries fees.
One practical example. A design studio billing companies ₹15 lakh a year, paying ₹1.2 lakh in coworking fees, ₹80,000 in software and ₹60,000 in ads, is paying roughly ₹47,000 of GST inside those costs. Registering turns that into credit against the GST it charges clients, who claim it back themselves. Registering is clearly right.
A yoga studio billing individuals ₹18 lakh a year should stay out until it has to.
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What registration actually needs
You apply on gst.gov.in in Form REG-01 and it is free. Keep ready:
- PAN of the business, plus PAN and Aadhaar of the promoters
- Incorporation certificate or partnership deed
- Bank account proof, a cancelled cheque or a statement
- Proof of the principal place of business: ownership document, or a rent agreement with a No Objection Certificate and a utility bill not older than two months
- Board resolution or authorisation letter for the signatory
Address proof is where applications get stuck. The address on your REG-01 must match the rent agreement, the NOC and the utility bill exactly, character for character. An unsigned NOC is refused every time. Physical verification of the premises is common, so make sure someone can receive the officer and that a signboard is up.
A virtual office is a legitimate route here when you have no premises of your own. The provider gives you a rent agreement, an NOC and a current utility bill for a real commercial address. It is accepted, but only when the paperwork is complete and the operator can support a physical verification.
After you register
- GSTR-1, your sales detail, monthly, or quarterly if you opt for the QRMP scheme for turnover up to ₹5 crore
- GSTR-3B, the summary return where you pay, monthly for most
- GSTR-9, the annual return, once turnover crosses ₹2 crore
Rates were rationalised from 22 September 2025 into two main slabs, 5% and 18%, with a 40% rate reserved for luxury and sin goods. Most services, including office rent and software, sit at 18%. Check your own HSN or SAC code rather than assuming.
There is also a composition scheme: 1% for traders and manufacturers up to ₹1.5 crore, 6% for service providers up to ₹50 lakh, with quarterly payment and far less paperwork. The catch is you cannot claim input credit and you cannot issue a tax invoice your B2B customers can use, so it rarely suits a startup selling to companies.
The short version
Services under ₹20 lakh with individual customers: wait. Selling goods across a state border, or on a marketplace, or exporting: register now. Anything in between: work out how much GST is buried in your costs, and let that decide.
Thresholds and rates change with GST Council meetings. This reflects the position in August 2026, so confirm with your CA before you file.
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