Why Is the GST Threshold ₹40 Lakh for Some Businesses but ₹20 Lakh for Others?
GSTZone Desk · Updated 2026
Short answer
The threshold varies along two separate dimensions: WHAT you supply (exclusively goods gets ₹40 lakh; services, or a mix of goods and services, gets ₹20 lakh), and WHICH state you’re in (a handful of special category states apply lower limits of ₹20 lakh for goods and ₹10 lakh for services).
In detail
It’s easy to assume GST has one universal small-business exemption figure, but the law actually built in this flexibility deliberately, recognising that a pure trading business has a fundamentally different cost and margin structure than a service business.
The ₹40 lakh figure is conditional, not universal — it applies ONLY to a supplier dealing exclusively in goods. The moment any service creeps into that same business (even a small one, like installation charges alongside product sales), the higher threshold no longer applies, and the business falls back to the ₹20 lakh general limit that governs services and mixed suppliers.
Separately, a set of special category states — mainly the north-eastern states, along with Himachal Pradesh and Uttarakhand — opted to keep lower thresholds when the higher limits were introduced, applying ₹20 lakh for goods and ₹10 lakh for services in those states specifically.
GSTZone tip
Before assuming which threshold applies to your business, answer two questions honestly: do I supply anything that could be classified as a service alongside my goods, and which state is my principal place of business actually registered in — both answers can move your applicable threshold significantly.
Related questions
If I have branches in multiple states, which threshold applies?+
Aggregate turnover is computed across all your branches under the same PAN nationally; the threshold rules then apply based on your business’s specific state(s) of registration and the nature of what each branch supplies.
Can a business voluntarily register even if it’s below its applicable threshold?+
Yes — voluntary registration is always available even below the threshold, and can make sense if your customers need ITC from you or if you want to claim your own input credits.
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