Is GST Compulsory for Selling Online? The Honest Answer

Mostly yes, with one real exception. The law asks anyone selling through a marketplace to register for GST from the first rupee. Since 1 October 2023, a small seller of goods who sells only within their own state and stays under the turnover limit can sell with a free enrolment number in place of a GSTIN.

Why does the law treat online sellers differently?

A shopkeeper selling only goods can usually stay out of GST until sales cross Rs 40 lakh a year. So why are you asked for a GSTIN on day one?

Because of section 24 of the CGST Act. It lists people who must register regardless of turnover. Clause (ix) covers every person who supplies through an e-commerce operator that has to collect TCS (tax collected at source, the small percentage a marketplace holds back and deposits against your GSTIN). The notification that gives goods sellers the Rs 40 lakh limit expressly leaves out anyone covered by section 24.

The thinking in 2017 was that online sales cross state borders easily and are hard to trace without registration. The cost fell on the smallest sellers. A home business with Rs 3 lakh of sales needed a GSTIN and monthly returns just to list ten products. The GST Council fixed part of this in 2023.

What changed on 1 October 2023?

Notification 34/2023-Central Tax, dated 31 July 2023 and in force from 1 October 2023, exempts a seller of goods through a marketplace from registration if turnover, in the previous year and the current year, is within the limit that applies in their state. The conditions are strict:

• You make no inter-state supply of goods. Every buyer is in your state.
• You sell through marketplaces in one state or union territory only.
• You have a PAN.
• Before your first sale you declare your PAN, business address and state on the GST portal, and the portal gives you an enrolment number after validating the PAN.
• You hold only one enrolment number in a state.
• The enrolment number stops being valid from the date you get a regular GST registration.

How to use it, in short:

1. Apply for an enrolment number on gst.gov.in with your PAN, address and state.
2. Give that number to the marketplace when you sign up as a non-GST seller.
3. Keep watching two things: your turnover, and that no order leaves your state.

The trade-off is real. Without registration you cannot charge GST or claim input tax credit, which is the GST you paid on your purchases. And your buyers are limited to one state.

What are the turnover limits?

Two cautions. First, turnover means your all-India sales under one PAN, including exempt sales. Second, Notification 34/2023 ties the limit to the registration threshold in your state without printing a rupee figure. Press reports and Meesho describe it as Rs 40 lakh, lower in some states. Sources also differ on the goods limit in Manipur, Mizoram, Nagaland and Tripura. If you are in a north-eastern or hill state, confirm your state's figure before you rely on it.

What about composition dealers and service sellers?

Composition dealers. The composition scheme lets a small registered business pay a flat low rate and file simpler returns. Until 2023 such dealers could not sell through marketplaces at all. From 1 October 2023 the law lets them sell goods through operators, and Notification 36/2023-Central Tax sets the procedure: the marketplace must not allow their inter-state sales, and it collects TCS and reports them in its GSTR-8. They are registered, so this is not a way to avoid GST. It is a lighter way to be in it.

Service sellers. If you sell a service through a platform, Notification 65/2017-Central Tax has exempted you from compulsory registration since 2017, as long as your turnover is within Rs 20 lakh (Rs 10 lakh in special category states). For a few services such as rides and restaurant food booked through an app, the app itself pays the GST under section 9(5).

What do marketplaces actually accept?

The law allows the enrolment route. Each marketplace decides whether to offer it. Meesho said publicly that from 1 October 2023 it takes sellers without GST registration, using the enrolment number, and shows their products only to buyers in the same state. For Amazon, Flipkart and others, check the current seller sign-up page for a non-GST or enrolment option before you plan around it. Do not assume.

Your situation: do you need GST?

A worked example

Meena makes candles in Pune and sells Rs 60,000 a month on one marketplace. That is Rs 7.2 lakh a year, far below Rs 40 lakh. If every order goes to a Maharashtra address, she can sell with an enrolment number. No GSTIN, no monthly returns.

In October a buyer in Bengaluru wants 50 candles. To accept that single order through the marketplace she must register first. Once registered, she charges GST on every sale, files GSTR-1 and GSTR-3B for every period, including months with no sales, and the marketplace starts collecting 0.5% TCS. On Rs 60,000 a month that is Rs 300, which she gets back as credit. In return she can sell to all of India and claim the GST she pays on wax, jars and packaging.

So the question is not only "am I allowed to skip GST". It is "is one state enough for my business".

What happens when you cross the limit or ship outside your state?

The exemption ends, because its conditions are no longer met. You then need a regular registration. The law gives 30 days from the day you become liable to apply. Your enrolment number lapses from the effective date of registration, and you give the marketplace your GSTIN. If you carry on unregistered, the department can demand the tax you should have charged, with interest and a penalty. That comes out of your margin, because you never collected it from buyers.

The mistake people usually make

They hear "no GST below Rs 40 lakh" and stop reading. The threshold alone does not protect a marketplace seller. Only the enrolment route does, and only while every sale stays inside your state. The mirror-image mistake is registering in a hurry, then forgetting that a GSTIN means a return every period even with zero sales, with late fees when you miss one.

Decide on purpose. If one state is enough for now, use the enrolment route and watch your numbers. If you want buyers across India, register and price GST in from the start.

Frequently asked questions

Read next