GST in India — Registration, Returns, ITC & Notices (2026 Guide)
What changed on 22 September 2025
The 56th GST Council, which met on 3 September 2025, restructured the rate schedule, and the change took effect on 22 September 2025. The general slabs are now Nil, 5% and 18%; the 12% and 28% slabs were removed, with a 40% rate applying to a short list of demerit goods. Separately, individual life and health insurance became exempt — term, ULIP and endowment policies alike, along with their reinsurance — where previously they carried 18%. Group policies, including employer-sponsored cover, are not exempt and continue at 18%. Two practical consequences follow. First, any rate you remember from before that date may simply be wrong now, and that includes rates quoted by AI tools trained on older material. Second, if you supply goods or services whose slab moved, your invoices, your accounting master data and your e-commerce listings all need checking — the rate applies to the supply, not to when you happened to update your system.
Who must register for GST?
Registration becomes compulsory once aggregate turnover in a financial year crosses ₹40 lakh for goods or ₹20 lakh for services, and special-category states apply lower limits — ₹10 lakh for services in Manipur, Mizoram, Nagaland and Tripura, so check the position for your own state rather than assuming. Aggregate turnover is computed on the PAN across all states and includes exempt and export supplies, which is why businesses that think of themselves as small sometimes cross the line without noticing. Threshold aside, several situations require registration from the first rupee: supply through an e-commerce operator, inter-state supply of goods, liability under reverse charge, and acting as a casual or non-resident taxable person. Voluntary registration is open to anyone below the threshold and is often worth taking — it lets you claim input tax credit and is frequently a precondition for B2B customers who want a compliant invoice. The cost of registering voluntarily is that every return obligation then applies to you, including nil returns in quiet months.
The GST returns you file
A regular taxpayer files GSTR-1 for outward supplies and GSTR-3B as the summary-and-payment return. Businesses with aggregate turnover up to ₹5 crore can opt into QRMP and file both quarterly while paying tax monthly, which reduces filing work without reducing the cash outflow. On top of that sits the annual return, GSTR-9, with the reconciliation statement GSTR-9C required above ₹5 crore. Composition taxpayers follow a shorter path: CMP-08 each quarter and GSTR-4 annually. The detail that catches people out is sequencing — GST returns file in order, so a single pending period blocks every later one, and late fees accrue on all the outstanding periods at once rather than on the oldest alone. A nil return is still a return, and can be filed in minutes, including by SMS. Skipping it because there was no business in that month is the most common way a small taxpayer ends up with a fee running across half a year, because the obligation attaches to the registration rather than to the turnover.
Input tax credit — what actually blocks a claim
Input tax credit lets you set the GST paid on purchases against the GST you collect, so that tax attaches to value added rather than to turnover. Four conditions have to hold together under section 16(2): you hold a tax invoice, you have received the goods or services, the supplier has actually paid the tax to the government, and you have filed the relevant return. The third is the one you do not control, which is why reconciling against the auto-drafted GSTR-2B before claiming matters — credit that is not reflected there is credit the department will question. Two further rules quietly reverse credit you thought was settled. If you have not paid the supplier within 180 days of the invoice date, the credit must be reversed and can only be reclaimed once you pay. And section 17(5) blocks certain categories outright regardless of business purpose — most motor vehicles, food and beverages, club and gym memberships, and works contracts for immovable property other than plant and machinery. There is also a hard deadline: credit for an invoice cannot generally be claimed after 30 November of the following financial year or the date of filing the annual return, whichever is earlier.
GST notices, and how to answer one
Most GST notices are routine and answerable, and the worst response is to leave one unopened. A discrepancy in returns usually arrives first as ASMT-10, which asks you to explain rather than pay. A demand proper begins with DRC-01A, an intimation offering the chance to settle before formal proceedings, followed by DRC-01, the show-cause notice, to which you reply in DRC-06. Read the section quoted before anything else, because it sets the stakes: section 73 covers demands where no fraud is alleged and carries a lower penalty, while section 74 alleges fraud, wilful misstatement or suppression and carries a much heavier one. If a section 74 notice has been issued on facts that are really a clerical or interpretational error, saying so clearly and early is the single most valuable thing you can do. Reconcile the department's figure against your own returns line by line, since demands are often built from a GSTR-1 versus GSTR-3B mismatch or a 2B difference that has an innocent explanation. You are entitled to a personal hearing, and asking for one is normal rather than confrontational. Sustained non-filing is a separate track: it leads to REG-17 cancellation proceedings, and restoring a cancelled registration is considerably more work than filing the return would have been.
The composition scheme, and when it is worth taking
Composition is a simplified alternative for small businesses: you pay a flat percentage of turnover instead of tracking output tax and input credit invoice by invoice, and you file quarterly rather than monthly. It is open to goods businesses up to ₹1.5 crore of turnover (₹75 lakh in several special-category states) and to service providers up to ₹50 lakh. The trade-off is real and worth stating plainly. A composition dealer cannot claim input tax credit, and cannot pass credit on either — so a registered customer buying from you gets nothing to set off, which makes the scheme a poor fit for B2B supply and a good one for B2C. You also cannot make inter-state outward supplies or sell through an e-commerce operator. In practice the scheme suits a local retailer, a restaurant, or a small manufacturer selling to end consumers, and suits almost nobody selling to businesses that care about their own credit position.
E-invoicing and e-way bills
These are two separate obligations that get conflated. E-invoicing applies to B2B invoices once aggregate annual turnover crosses ₹5 crore: the invoice is reported to an Invoice Registration Portal, which returns an IRN and a signed QR code, and an invoice without one is not a valid tax invoice for your customer's credit. Banks, insurers, goods transport agencies, SEZ units and a few other categories are outside it. E-way bills are about movement rather than billing — a consignment above ₹50,000 in value generally needs one before the goods move, with the transporter and vehicle details recorded and a validity that depends on distance. The two interact: where e-invoicing applies, e-way bill Part A can be populated from the reported invoice, which removes a duplicate data-entry step and one common source of mismatch between what was invoiced and what was moved.
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Frequently asked questions
Is GST registration free?
Yes — registering on the GST portal is free. You only pay tax once registered; our free guides and AI GST agent help you prepare.
What is the GST registration turnover limit?
Broadly ₹40 lakh for goods and ₹20 lakh for services (lower in special-category states). Inter-state and e-commerce sellers usually register regardless of turnover. Verify the current limit.
How do I reply to a GST notice?
Read the section quoted (e.g. Section 73 or 74), reconcile the demand against your returns, and file a reply (e.g. DRC-06) before the deadline. Our AI GST agent can draft it.
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General information, not professional advice. Rules change with each Finance Act / notification — verify with a licensed CA or advocate before acting.