India’s GST framework is once again in the spotlight as the government considers a major policy shift, raising the GST registration threshold to ₹1 crore. This move, pushed by various stakeholders including banks, traders, and tax experts, is aimed at easing compliance pressure on small businesses and encouraging continued adoption of digital payments.

In this blog, we break down why this proposal is gaining traction, what’s driving it, and how it may impact your business or practice.

What Are the Existing GST Registration Limits?

Under Section 22 of the CGST Act, businesses supplying goods must register for GST when their annual turnover exceeds ₹40 lakh, while service providers must register once turnover crosses ₹20 lakh.

Even if no tax is payable, crossing the threshold makes GST registration and regular return filing mandatory.

Why Is There a Push to Raise the GST Registration Threshold to ₹1 Crore?

There are three key reasons behind this proposal:

• Ease of compliance: Small businesses often spend disproportionate time and cost on GST filings. Raising the threshold would immediately exempt many MSMEs from monthly/quarterly returns and reconciliations.
• Inflation and turnover growth: Since the current limits were fixed, average turnover capabilities have risen due to inflation and economic expansion, making the old slab outdated.
• Alignment with Income Tax presumptive schemes: Under Sections 44AD/44ADA, presumptive taxation is allowed up to ₹2 crore/₹50 lakh. Stakeholders argue that GST should mirror this logic so small taxpayers are not caught in a compliance trap under one statute while being exempt under another.

Digital Payments – The Hidden Trigger Behind This Proposal

The rapid growth of UPI and digital payments has brought a surprising side effect. GST notices being issued to small traders purely based on the high inflow of digital payments, even when those were not business income.

In many cases:

• Non-business transfers (family reimbursements, salary credits, internal fund movements) are captured as turnover.
• Merchants are receiving threatening notices asking why they are not GST-registered.

Result: Several small merchants have gone back to cash to avoid GST scrutiny stalling India’s progress towards a cash-lite economy.

A higher registration threshold is seen as a way to restore faith in digital transactions for small traders.

Taxpayer Concerns and the Amnesty Demand

Taxpayers and industry bodies are not just asking for a higher slab; they’re also pushing for a One-Time Amnesty Scheme. The proposal:

• Pay just 1% of your declared turnover as tax
• Waive penalties and interest
• Enable small businesses who received notices to become GST-compliant without fear

This could help thousands of small traders regularise past non-compliance and join the formal system smoothly.

Banks, RBI, and NPCI – Why the Finance Sector Is Involved

Banks and payment companies are actively backing the ₹1 crore threshold proposal because:

• GST notices based on digital data are discouraging UPI use.
• Higher thresholds mean more “comfort space” for merchants to adopt POS/UPI payments.
• They also recommend that Merchant Discount Rate (MDR) charges on UPI/payments should apply only to merchants above ₹1 crore turnover, keeping it free for small traders to promote digital adoption.

What Will Change If the GST Registration Threshold Rises to ₹1 Crore?

If the GST registration limit is revised to ₹1 crore, a large section of micro businesses would immediately fall outside the requirement to register. This would significantly reduce their routine compliance burden, monthly return filing, reconciliations, and audits; saving both time and money.

Digital payment usage, which had started declining among smaller merchants due to fear of GST notices, is also expected to recover. Traders will feel more confident accepting UPI and card payments if they know these transactions won’t automatically push them into compulsory GST registration.

From the government’s side, there may be a short-term dip in the tax base and return filings, but experts believe this will be offset by greater voluntary participation and improved digital adoption in the long run. For tax consultants and finance professionals, the focus of GST advisory could shift more towards mid-sized and large businesses, while still offering guidance to small clients on whether to opt in voluntarily.

What Should Taxpayers and Finance Professionals Do Right Now?

• Monitor policy announcements: This proposal could go before the GST Council soon.
• File past returns carefully: Until rules change, current slabs still apply. Must avoid late filings.
• Educate clients on UPI handling: Inform traders that not all digital inflows should be treated as business income.
• Prepare compliance strategies: If the slab increases, evaluate whether continuing GST registration makes sense for certain small clients.

Conclusion – A Shift Towards “Ease of Doing Business”

The proposed hike in GST registration limits reflects India’s attempt to strike a better balance between revenue collection and business convenience. Whether it’s excessive notices, digital payment confusion, or outdated slabs, a revision to ₹1 crore could bring much-needed relief to MSMEs and restore confidence in India’s fast-growing digital economy.

If approved, this change could be the biggest GST relief for small businesses since 2017 and taxpayers, advisors and enterprises should start planning now.

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