GST is mandatory for most ecommerce sellers from the first order, not from ₹40 lakh. Section 24(ix) of the CGST Act requires anyone supplying goods through an operator liable to collect tax at source to register regardless of turnover.
Three exemptions exist, and they are narrower than the internet suggests. The main one, for small sellers of goods through a marketplace, collapses the moment you ship a parcel across a state line.
Is GST registration mandatory for ecommerce sellers?
Yes, unless you fit a specific exemption. The default rule is compulsory registration with no turnover threshold at all.
Two provisions create the obligation. Section 24(ix) covers persons supplying goods or services through an electronic commerce operator required to collect tax at source under Section 52. Section 24(i) separately covers anyone making an inter-state taxable supply, which catches almost every online seller independently of the marketplace rule.
The ₹40 lakh and ₹20 lakh thresholds under Section 22(1) are the general rule for offline businesses. Section 24 overrides them. A seller listing on Amazon with ₹3 lakh of annual sales needs a GSTIN on the same terms as one doing ₹3 crore, unless the exemption below applies.
The exemption for small sellers of goods on a marketplace
Section 23(2) of the CGST Act, effective 1 October 2023, allows a person supplying goods through an operator to stay unregistered where turnover is below the Section 22(1) threshold. Notification No. 34/2023-Central Tax dated 31 July 2023 sets the conditions.
All of these must hold at once:
Supplies through the operator are made in only one State or Union Territory.
The person makes no inter-state supply of any kind.
The person holds a PAN under the Income-tax Act.
PAN, address of the place of business and the State are declared on the GST portal before any supply is made.
An enrolment number has been granted on the portal after PAN validation.
Aggregate turnover stays below the registration threshold applicable in that State under Section 22(1).
Two details decide most cases. Only one enrolment number is granted per State or Union Territory, and no supply can be made through an operator until the enrolment number exists. If registration under Section 25 is later obtained, the enrolment number stops being valid from the effective date of that registration.
The threshold in condition six is the one people get wrong. It is the limit applicable in that State, which for a business supplying only goods is ₹40 lakh in most States but ₹20 lakh in others. Confirm the figure for your own State rather than assuming ₹40 lakh.
Can you sell online without GST?
You can, on a marketplace, in one state, with an enrolment number, below the threshold, and never shipping outside that state. Most sellers fail the last condition in their first week.
Marketplace reach is the problem. Amazon and Flipkart list your product nationally by default. A single order from a customer in another state is an inter-state supply, and Section 24(i) then makes registration compulsory with no threshold, irrespective of the Notification 34/2023 route. Restricting delivery to one state is possible on some platforms and it caps your business at that state.
Selling on your own website is different again. Your own store is not collecting TCS from you, so Section 24(ix) is not triggered. The normal threshold applies, but Section 24(i) still does, so a Shopify store shipping across state lines needs registration from the first order.
Who needs GST and who does not
Situation | Registration required? | Basis |
|---|---|---|
Selling goods on a marketplace, shipping across states | Yes, from the first order | Section 24(i) and Section 24(ix) |
Selling goods on a marketplace, one state only, below threshold, enrolment number taken | No | Section 23(2) with Notification No. 34/2023-Central Tax |
Selling goods on a marketplace in two or more states | Yes | Notification No. 34/2023 condition fails |
Own website, goods, shipping across states | Yes, from the first order | Section 24(i) |
Own website, goods, single state, below threshold | No | Normal threshold under Section 22(1) applies |
Services through a marketplace, turnover below ₹20 lakh | No | Notification No. 65/2017-Central Tax |
Notified services under Section 9(5), such as restaurant or cab services | No, the operator pays the tax | Section 9(5) |
Holding stock in a fulfilment centre in another state | Yes, in that state | Separate registration per state under Section 25 |
Why inter-state supply cancels most exemptions
Section 24(i) makes registration compulsory for any person making an inter-state taxable supply, and there is no turnover threshold attached to it.
For goods, place of supply is where the movement terminates for delivery. A seller in Rohtak shipping to a buyer in Pune has made an inter-state supply, whatever the order value. There is no small-value carve-out and no first-order grace period.
This is why the Notification 34/2023 route suits a narrow group: local sellers on hyperlocal or quick-commerce platforms operating inside one state. For anyone selling nationally, the exemption is theoretical.
Selling services online follows a different rule
Notification No. 65/2017-Central Tax exempts suppliers of services through an electronic commerce operator from compulsory registration where aggregate turnover stays below ₹20 lakh, or ₹10 lakh in special category states.
A freelance designer taking work through a platform, or a tutor on an online marketplace, is covered. The exemption does not apply to a person liable to pay tax under Section 9(5), where the operator discharges the tax instead.
Note the asymmetry. A service provider below ₹20 lakh selling through a platform can stay unregistered. A goods seller in the same position cannot, unless they meet every Notification 34/2023 condition. The law treats the two differently and a great deal of online advice conflates them.
What happens if you sell without registering
The exposure is the tax itself plus penalty, and the platform will usually surface the problem before the department does.
Where registration was required and not taken, tax becomes payable on supplies already made, with interest at 18% per annum under Section 50 of the CGST Act. Penalty under Section 122 applies at ₹10,000 or the tax involved, whichever is higher. Input tax credit on purchases made during the unregistered period is not available to set off against that demand, so the liability lands gross.
The practical consequence arrives sooner. Marketplaces validate GSTIN at onboarding for taxable goods categories, and an account operating on an enrolment number that no longer qualifies gets flagged when order volume spreads across states.
Expert view: when to register even though you do not have to
Our recommendation to sellers who technically qualify for the exemption is to register anyway, in two situations.
Register if you intend to sell outside your own state within the next year. Taking registration later means a period of unregistered inter-state supply that has to be regularised, and the input tax credit on stock bought during that period is gone. Register if your input costs carry meaningful GST, which is the case for anyone paying platform commission, advertising or packaging bills, because an unregistered seller absorbs that GST as cost while a registered seller claims it.
Stay unregistered only if you are genuinely a single-state, low-volume seller with minimal taxable inputs and no expansion plan. That describes a small number of the sellers who ask us.
The full registration sequence is set out in our guide to GST registration for ecommerce businesses, and the state-by-state question of where stock creates a registration obligation is covered in our note on virtual place of business.
Not sure which side of the line you fall on? Talk to Keshav’s team at Complylocal Consultants about GST for ecommerce sellers.
