Can You Run a Business in India Without GST?

December 22, 2025 by Team Instabizfilings

In India, Goods and Services Tax (GST) has become a cornerstone of the country's tax structure, affecting nearly every aspect of business operations. However, businesses are often confused about whether they can operate without registering for GST and under what circumstances it might be possible. To address this, let's dive into the details of the GST system in India and the updated rules for 2025.

What is GST?

GST (Goods and Services Tax) is a single, unified tax that is levied on the sale of goods and services in India. The GST system replaced multiple indirect taxes such as VAT, excise duty, and service tax, simplifying the taxation structure. It is a value-added tax system where businesses collect tax on behalf of the government at every step of the production and distribution process.

Businesses in India must register for GST if their turnover exceeds a certain threshold, and they need to follow the compliance requirements like filing GST returns, issuing GST invoices, and maintaining records.

Who Needs to Register for GST in India?

The requirement to register for GST largely depends on the turnover of the business and the nature of the goods or services it deals with. As of 2025, the registration rules have undergone some changes to accommodate smaller businesses and simplify the process.

Threshold Limit for GST Registration (Updated 2025)

As of the latest updates in 2025, GST registration is mandatory for businesses with an annual turnover exceeding the following limits:

For Goods Suppliers: ₹40 Lakhs (₹20 Lakhs for special category states) – For businesses dealing exclusively in goods.
For Service Providers: ₹20 Lakhs (₹10 Lakhs for special category states) – For businesses dealing exclusively in services.
For E-Commerce Operators: E-commerce platforms are required to register for GST irrespective of their turnover.
For Casual and Non-Resident Taxable Persons: GST registration is mandatory for businesses in this category, regardless of turnover.

Can You Run a Business Without GST Registration?

Yes, you can run a business in India without GST registration, provided your annual turnover is below the prescribed threshold limit. However, there are certain conditions and exceptions to keep in mind.

Businesses with Turnover Below the Threshold Limit

If your business turnover is below the threshold for mandatory GST registration, you are not required to register for GST. You can continue to run your business without the GST burden of filing returns, paying taxes, or maintaining GST-compliant records.

However, keep in mind the following:

No Input Tax Credit (ITC): Without GST registration, you cannot claim Input Tax Credit on the GST you paid on business purchases, which could make your cost of operation higher.
No GST Invoice: If you are not registered under GST, you cannot issue GST-compliant invoices. This might make it difficult to deal with clients who are registered under GST, as they may not be able to claim the Input Tax Credit on the goods/services you sell to them.

Small Business and Startup Exemptions

The government offers a composition scheme for small businesses with turnover below ₹1.5 Crores (₹75 Lakhs for special category states), allowing them to pay a reduced rate of GST and follow simplified compliance procedures. This scheme is optional and is designed to ease the burden on small enterprises.

Eligibility: Businesses with an annual turnover of up to ₹1.5 Crores can opt for the scheme.
GST Rate: The rate under the composition scheme ranges from 1% to 6%, depending on the nature of the goods or services you offer.
Simplified Compliance: You don’t have to file monthly returns; quarterly returns are sufficient under this scheme.

However, this scheme also means you cannot claim input tax credit, and you cannot sell goods to businesses that are GST-registered.

GST Exemptions for Specific Goods/Services

Some sectors and industries are exempt from GST, regardless of turnover. These include:

Healthcare & Education: Medical and educational services have been kept out of the scope of GST i.e., they are exempted.
Agricultural Products: Some agricultural products (such as grains, vegetables, etc.) are not subject to GST.
Export of Goods/Services: Products and services, which are sent out of India, are considered zero-rated under the Goods and Services Tax regime and therefore, no GST is levied on export sales.
Government Services: Certain government services like essential public utility services (water, electricity, etc.) may be GST ‍‌‍‍‌‍‌‍‍‌exempted.

Even if your business deals with exempt goods or services, you might still need to register for GST if your turnover exceeds the prescribed limit.

Consequences of Not Registering for GST When Required

Running a business without registering for GST when you are legally required to do so can have serious consequences. The government can impose penalties and interest on businesses that fail to comply with GST laws.

Penalty for Non-Registration: If you cross the threshold limit for GST registration and fail to register, you may face a penalty of up to ₹10,000 or 100% of the tax due (whichever is higher).
Interest on Late Payment of Tax: If you collect GST from customers but fail to remit it to the government, you will be charged interest at 18% per annum on the outstanding amount.
Tax Recovery: The government can initiate recovery proceedings to collect unpaid taxes and penalties, which may include seizure of goods and assets.

Updated GST Rules for 2025

In 2025, there have been several changes to the GST system to simplify compliance and reduce the burden on small businesses:

Simplified GST Filing Process: The GST filing process has been further simplified, with the introduction of a new unified online platform for filing returns, tracking payments, and managing accounts.
Exemption for Small Businesses: As mentioned earlier, small businesses with a turnover of up to ₹1.5 Crores (₹75 Lakhs for special category states) can opt for the composition scheme with simplified compliance.
E-Invoice Mandate for Larger Businesses: As part of efforts to reduce tax evasion, businesses with a turnover exceeding ₹10 Crores are required to generate and submit electronic invoices, ensuring transparency and easy tracking by authorities.
Quarterly Returns for Small Businesses: Small businesses can now file GST returns quarterly instead of monthly under the new relaxed rules for 2025.

Conclusion

Yes, you can run a business without GST registration in India if your turnover is below the prescribed threshold limit. However, there are pros and cons to not registering for GST:

Pros: No need to file GST returns, no compliance burden, and no tax payments to the government.
Cons: You will not be able to claim Input Tax Credit, which could increase your costs. Additionally, clients who are registered under GST may prefer dealing with businesses that are GST-compliant.

If your business turnover exceeds the threshold limit, you are legally required to register for GST and comply with its provisions. However, there are provisions like the Composition Scheme that allow small businesses to simplify their compliance while paying a reduced rate of tax.

For businesses planning to grow or work with larger clients, registering for GST can offer greater flexibility, transparency, and a competitive advantage. Always consult a tax expert or GST consultant to ensure that you comply with the latest GST rules and regulations specific to your business.

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