There Are Four Special Category States for GST Registration, Not Eleven

Search for the GST registration threshold and you will be told, more or less everywhere, that it is Rs. 20 lakh — Rs. 10 lakh in the special category states — and then given a list of eleven of them. The list usually runs: Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand.

That list is real. It is simply not the list that decides your registration threshold. For a professional supplying services, the special category states under section 22 of the CGST Act number four: Nagaland, Manipur, Mizoram and Tripura. Everywhere else in India, including seven of the states on that eleven-state list, the threshold is Rs. 20 lakh.

Where the eleven-state list comes from

The eleven states are named in article 279A(4)(g) of the Constitution. That clause exists so the GST Council can make special provision for them — hill states, north-eastern states, states with difficult terrain and thin revenue bases. It is a constitutional category, and for its own purposes it is entirely correct.

The mistake is assuming section 22 of the CGST Act adopts it. It does not adopt it whole.

What section 22 actually says

Section 22(1) sets the general rule: every supplier is liable to be registered in the state from which they make taxable supplies once aggregate turnover in a financial year exceeds Rs. 20 lakh. The first proviso lowers that to Rs. 10 lakh for supplies made from a special category state.

Then the section defines its own term. Explanation (iii) to section 22provides that “special category States” means the states specified in article 279A(4)(g) — except Jammu and Kashmir, Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim, Uttarakhand.

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Eleven states in the Constitution, minus the seven the Act removes, leaves four. That subtraction is the entire finding.

Jammu & Kashmir went first, when GST was extended to the state in July 2017. The other six were removed by s.11, CGST (Amendment) Act 2018 (No. 31 of 2018), w.e.f. 1 February 2019. That amendment is more than seven years old at the time of writing, and the lists have never caught up.

The four states, and everyone else

Your threshold follows your place of business — where you supply from — not where your clients are, and not where you happen to be working from this quarter.

And no, the Rs. 40 lakh figure is not yours

The other number in circulation is Rs. 40 lakh, and it is the most expensive one to misread, because believing it lets someone bill for a year past their real line while feeling comfortably under it.

Rs. 40 lakh comes from Notification 10/2019-Central Tax, issued under section 23(2), which exempts from registration a person “engaged in exclusive supply of goods”up to that turnover. Exclusive supply of goods. The equivalent provision inside section 22 — the third proviso — is worded the same way, confined to a supplier “engaged exclusively in the supply of goods”. If you write code, design, consult, translate, draw buildings or run campaigns, no reading of either provision reaches you.

There is a further trap in that notification, and it is the reason goods and services lists get blended together in the first place: the Rs. 40 lakh exemption also excludes intra-state supplies in ten states — Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand. That is a goods list, containing Puducherry and Telangana, which are not special category states under any provision. It gets copied around as though it were a services list. It is not.

What to check this week

If you are not registered: find your state in the table above and use that number, not the one you were quoted. Then add up aggregate turnover properly — every client, domestic and foreign, platform payouts at gross before fees, exempt supplies included. That total is what the threshold tests, and it is usually larger than the figure people carry in their head.

If you registered early on the eleven-state list: nothing here undoes it. You are registered and must charge, file and remit accordingly. Cancellation is available but it is a real process with its own consequences, and it is worth deciding deliberately rather than in reaction to this page — we walk through when it makes sense here. The useful thing to know is that voluntary registration was probably not the mistake it feels like if most of your clients claim input credit.

If you are near the line either way: the decision is not only legal. The registration guide covers what changes on the day you cross, and what aggregate turnover does and does not include.

One caveat we will not paper over

The second proviso to section 22(1) lets the Government raise any special category state’s Rs. 10 lakh limit as far as Rs. 20 lakh, at that state’s request and on the Council’s recommendation — by notification, with no amendment to the Act. We searched CBIC’s Central Tax notifications and found none issued for any of the four, and the GST Council’s own record of its 32nd meeting says the services threshold “would continue to be Rs 20 lakhs and in case of Special Category States Rs 10 lakhs”. But not finding a notification is not the same as proving none exists. Treat the four-state list as correct as at the date on this article, and worth re-checking annually.