Quick answer: Most small businesses in India should start with a free Udyam (MSME) registration, which uses your Aadhaar and PAN and takes one online form. GST registration becomes compulsory only once your turnover crosses ₹40 lakh (goods) or ₹20 lakh (services) in most states, or earlier if you sell across state lines. On top of that you may need a state shop and establishment registration and a sector licence such as FSSAI for food. Figures below are as of October 2026.
Udyam registration: the free MSME certificate
Udyam is the government’s registration for micro, small and medium enterprises. It is done on the official Udyam portal, it is free, and the portal warns that no fee is payable to anyone. It is paperless and based on self-declaration: you do not upload documents. Your investment and turnover figures are pulled from PAN and GST records.
Whose Aadhaar you use depends on the structure: the proprietor’s for a proprietorship, the managing partner’s for a partnership, and the authorised signatory’s (with the entity’s PAN and GSTIN) for an LLP or company. PAN is required, and GSTIN is required where GST law applies to you.
What it unlocks: classification as an MSME for priority sector lending by banks, eligibility for most MSME schemes, and the legal protections around delayed payments from buyers.
Revised MSME limits (effective 1 April 2025): an enterprise is classified by investment in plant, machinery or equipment and turnover.
| Category | Investment up to | Turnover up to |
|---|---|---|
| Micro | ₹2.5 crore | ₹10 crore |
| Small | ₹25 crore | ₹100 crore |
| Medium | ₹125 crore | ₹500 crore |
Before April 2025 the micro limits were ₹1 crore and ₹5 crore, so many businesses that were “small” are now “micro”.
Udyam Assist: for informal micro units without PAN or GST
Many home and street businesses cannot use the Udyam portal because they have no PAN or GSTIN. The Udyam Assist Platform (UAP), built by SIDBI and launched in January 2023, is for these informal micro enterprises. You do not register yourself: a designated agency (banks, NBFCs, microfinance institutions and some government departments) registers you.
A Udyam Assist certificate is treated as a micro enterprise certificate for priority sector lending (RBI circular, May 2023). Once you get a PAN and GSTIN, you can move to the regular Udyam portal.
GST: when registration is mandatory
GST registration depends on your aggregate turnover in a financial year, which is counted across all your businesses under the same PAN, all India.
| Supplier type | Most states | Lower-limit states |
|---|---|---|
| Only goods | ₹40 lakh | ₹20 lakh in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand |
| Services, or goods and services | ₹20 lakh | ₹10 lakh in Manipur, Mizoram, Nagaland, Tripura |
You must register regardless of turnover if you:
- make inter-state supplies of goods (inter-state services under the threshold are exempt, as are some handicraft suppliers)
- are liable to pay tax under reverse charge on notified items
- are a casual taxable person (for example, selling at an exhibition in another state without a fixed place there)
- act as an agent supplying on behalf of someone else
You have 30 days from the date you become liable to apply.
Selling online: the small seller exemption
Since 1 October 2023, small sellers of goods can sell through e-commerce operators without GST registration if:
- turnover is within the registration threshold above
- all sales are within one state (no inter-state supply)
- you sell through platforms in only one state or UT
- you have a PAN and get an enrolment number by declaring your PAN, address and state on the GST portal
This exemption covers goods only. Services sold through platforms are not covered, so check before you list.
Composition scheme basics
If you do register but stay small, the composition scheme lets you pay a flat low rate on turnover instead of regular GST, with simpler returns.
| Scheme | Turnover limit (previous year) | Tax rate |
|---|---|---|
| Goods (traders and manufacturers) | ₹1.5 crore (₹75 lakh in some north-eastern states) | 1% |
| Restaurants (no alcohol) | ₹1.5 crore | 5% |
| Services (separate scheme) | ₹50 lakh | 6% |
The trade-offs are real:
- You cannot charge GST to customers or claim input tax credit, so B2B buyers may prefer registered regular suppliers.
- You issue a “bill of supply”, not a tax invoice, and must display “composition taxable person” at your place of business.
- No inter-state sales.
- Under the goods scheme you can sell through e-commerce platforms within your state (allowed since October 2023). The services scheme does not allow sales through platforms that collect tax at source.
How to register on the GST portal
- Keep ready: PAN, Aadhaar, a mobile number and email, a passport photo, proof of business address (rent agreement, electricity bill or consent letter if it is your home) and bank details.
- On the GST portal, choose New Registration and fill Part A with PAN, mobile and email. Verify by OTP to get a Temporary Reference Number (TRN).
- Log in with the TRN and complete Part B: business details, principal place of business, goods or services, bank account and documents.
- Opt for Aadhaar authentication when asked.
- Submit with OTP or digital signature and note your ARN to track status.
- The officer should approve or raise a query within 3 working days. If you get a query, reply within 7 working days.
There is no government fee. Since 1 November 2025, a simplified scheme gives registration within three working days to low-risk applicants whose self-assessed monthly output tax is up to ₹2.5 lakh. It is optional.
Shop and establishment registration
Every state has its own Shops and Establishments Act, run by the state labour department. It covers shops, offices and commercial premises, and usually has to be done within a set period of starting. Rules differ widely: some states exempt very small units or units without employees, some only need an online intimation, and fees vary. Search for your state’s labour department portal, or check whether your state lets you apply through its single-window system.
Sector licences: one line each
| Licence | Who needs it | Where to apply |
|---|---|---|
| FSSAI | Any food business, including home bakers and tiffin services. From 1 April 2026, basic registration covers turnover up to ₹1.5 crore; state licence up to ₹50 crore; central licence above that. | foscos.fssai.gov.in |
| Cosmetics licence | Making cosmetics (soaps, creams, oils for sale) needs a manufacturing licence from your state licensing authority under the Cosmetics Rules, 2020. Imports need CDSCO registration. | cdscoonline.gov.in |
| Drug licence | Selling medicines retail or wholesale needs a sale licence from the state drug controller. Many states use the Online National Drugs Licensing System (ONDLS). | Your state drugs control department / cdscoonline.gov.in |
| Trade licence | Issued by your municipal corporation or council for running a trade from a premises; rules and fees are local. | Your city municipal portal |
Choosing a business structure
| Proprietorship | Partnership | LLP | Private Limited | |
|---|---|---|---|---|
| Owners | 1 | 2 or more | Min 2 partners | Min 2 members, max 200 |
| Registration | None separately (Udyam, GST, bank account) | Partnership deed; registration with state Registrar of Firms optional but advised | Ministry of Corporate Affairs | Ministry of Corporate Affairs |
| Liability | Unlimited, personal | Unlimited, personal | Limited to contribution | Limited to share capital |
| Compliance | Lowest | Low | Moderate; audit only if contribution exceeds ₹25 lakh or turnover exceeds ₹40 lakh | Highest; annual audit mandatory |
| Good for | Home and solo businesses (most start here) | Small ventures with a trusted partner | Professional or family ventures wanting protection | Raising equity investment |
Day-one checklist for a home business
- PAN in your name (and Aadhaar linked to it)
- Separate bank account for the business (a current account in the business name, or a savings account used only for business)
- Udyam registration (free) or Udyam Assist through your bank if you have no PAN
- FSSAI registration if you sell any food
- GST: only if you sell goods across states, cross the threshold, or need it for B2B buyers. If you sell goods online within your state only, get the GST enrolment number instead
- Shop and establishment if your state requires it for your type of premises
Common mistakes
- Paying an agent for Udyam. Look-alike websites charge fees. The official portal is free.
- Ignoring the inter-state rule. One courier to another state can make GST compulsory, even at ₹50,000 turnover.
- Counting turnover per business. GST turnover is per PAN, across all your activities.
- Registering for GST too early and then missing returns. A registered business must file returns even with zero sales, and late fees build up.
FAQ
Q: Is Udyam registration compulsory?
A: No, it is voluntary. But most bank loans for MSMEs, government schemes and delayed-payment protections require it, so it is worth doing on day one.
Q: I make pickles at home and sell on Instagram in my city. Do I need GST?
A: Not unless your turnover crosses ₹40 lakh or you ship to another state. You do need FSSAI registration.
Q: Can I get Udyam without GST?
A: Yes, if GST law does not require you to register. You still need a PAN. Without PAN, use Udyam Assist through a bank or NBFC.
Q: Does the e-commerce exemption cover my tailoring or design services sold online?
A: No. The October 2023 exemption covers goods only.
Q: Can a woman register a business from her husband’s or father’s house?
A: Yes. Use a consent letter from the owner with their proof of address for GST and other registrations.
Q: Do I need a trade licence if I work from home?
A: It depends on your municipality and activity. Check with your local body before you put up a signboard or receive customers at home.
Official links
- Udyam registration: https://udyamregistration.gov.in
- Udyam Assist Platform (SIDBI): https://www.sidbi.in/en/udyam-assist-platform
- GST portal: https://www.gst.gov.in
- CBIC GST information: https://cbic-gst.gov.in
- FSSAI FoSCoS: https://foscos.fssai.gov.in
- CDSCO online (cosmetics, drugs): https://cdscoonline.gov.in
- Ministry of Corporate Affairs (LLP, company): https://www.mca.gov.in
Last checked: October 2026. Rules, limits and fees change; confirm with the official source before you apply. This guide is general information, not legal, tax or financial advice.
Sources: Udyam Registration portal, Important notes (October 2026); News On AIR, revised MSME criteria (March 2025); SIDBI, Udyam Assist Platform (October 2026); RBI circular on Udyam Assist (May 2023); GST Council, Registration under GST flyer (October 2026); CBIC Notifications 34/2023 and 36/2023-Central Tax (2023); CBIC Notification 14/2019-Central Tax (2019); CBIC Notification 2/2019-Central Tax (Rate) via TaxGuru (2019); Business Today, GST simplified registration (November 2025); FSSAI press release on reforms (March 2026); CDSCO Cosmetics page (October 2026); Delhi Drugs Control Department, ONDLS process flow (October 2026); Taxmann, LLP vs Private Limited (October 2026)
