When it comes to GST registration, most people talk about turnover limits — ₹40 lakh, ₹20 lakh, or ₹10 lakh. But what many business owners don’t realize is that there are clear categories of people who are completely exempt from GST registration, even if their turnover crosses these limits.
This exemption comes from Section 23 of the CGST Act. If you fall under these categories, you are NOT considered a taxable person, meaning you are not required to register, not required to charge GST, and not required to file GST returns.
This blog simplifies the entire concept of Section 23, explains who exactly is exempt, and gives practical examples so you understand whether you or your clients fall under this category.
Section 23 – Persons Not Liable for GST Registration
Section 23 overrides Sections 22 and 24.
“Meaning — even if your turnover crosses limits or even if Section 24 makes registration mandatory, Section 23 exemptions apply first.”
Under Section 23, the following persons are not liable to register:
- Persons exclusively engaged in supplying exempt goods or services
- Persons exclusively making non-taxable supplies
- Agriculturists, to the extent of produce from land
- Persons notified by the Government (via notifications)
- Persons making inter-State supplies of services up to ₹20 lakh / ₹10 lakh
- Persons making supplies through e-commerce for certain categories
- Persons making only reverse charge inward supplies
Let’s break down each in detail.
1. Persons Supplying Exempt Goods or Services Only
If a person deals only in exempt supplies, they are not liable for GST registration.
Exempt goods include:
- Fresh fruits & vegetables
- Cereals and pulses
- Milk
- Bread
- Books
- Handloom unprocessed cloth
- Organic manure
- Kerosene (PDS)
Exempt services include:
- Healthcare services
- Education services
- Charitable activities
- Renting of residential dwelling for use as residence
- Religious activities
If your entire turnover is from exempt supplies, GST registration is NOT required.
Example: A hospital earns ₹5 crore annually.
- Healthcare services are exempt.
- No GST registration required.
2. Persons Supplying Non-Taxable Supplies Only
Non-taxable supplies are supplies on which GST does not apply at all.
Examples:
- Petrol
- Diesel
- Alcohol for human consumption
- Aviation turbine fuel (ATF)
- Natural gas (currently partly non-GST)
Example: - A petrol pump earns ₹10 crore annually.
- Petrol & diesel are non-GST items.
- No GST registration required.
3. Agriculturists (To the Extent of Cultivation of Land)
An agriculturist is not required to register for GST for supplies of produce from land.
What is included?
- Wheat
- Rice
- Sugarcane
- Tea leaves
- Fruits
- Vegetables
- Cotton
- Coffee beans, etc.
What is not included?
Activities not directly related to cultivation, such as:
- Food processing
- Packaged goods
- Selling purchased produce
Example: - A farmer selling potatoes from his own field earns ₹30 lakh.
- No GST registration needed.
4. Persons Notified by Government (Special Exemptions)
The government has notified additional categories who are exempt from registration.
Some major notifications include:
Inter-State Service Providers up to ₹20 lakh (₹10 lakh for special states)
Inter-state supply of services is exempt up to the threshold limit.
Example: - A freelance designer in Rajasthan earns ₹8 lakh from Mumbai clients.
- Not required to register.
Handicraft Goods Suppliers (Earlier Mandatory, Now Threshold-Based)
Earlier they had compulsory registration, but now they are exempt up to threshold turnover.
ECO Exemption for Small Sellers (Goods Only)
E-commerce goods sellers are exempt if:
- Their turnover is below threshold
- They sell within the state
- They opt-in for the new provision
Example: A home-based seller on Meesho with ₹3 lakh turnover.
- Not required to register.
5. Persons Making Only Reverse Charge Inward Supplies
If a person only receives services/goods under reverse charge and does not make any outward taxable supply, they are not required to register.
Example:
A business hiring only GTA services but selling nothing (zero outward supply).
- No GST registration needed.
Note: If they make ANY taxable outward supply, RCM rules may force registration.
6. Persons Making Supplies Through ECO (With Exemptions)
Section 23 + notifications allow exemption for certain categories selling through e-commerce operators.
Goods Sellers (Intra-State Only)
If turnover < threshold → No GST required.
Service Providers
Still compulsory registration under Section 24, unless category-specific exemption applies.
7. Persons Making Inter-State Supplies of Services (Small Providers)
Up to ₹20 lakh / ₹10 lakh turnover, small service providers are exempt.
This includes:
- Freelancers
- Consultants
- Online tutors
- Digital marketers
- Coaches
Practical Examples to Understand Section 23 Better
Example 1: Exempt Goods Seller
A shop sells only fresh vegetables. Turnover = ₹1 crore
- GST registration NOT required.
Example 2: Exempt Service Provider
A private school earns ₹12 crore.
- Education services exempt
- No GST registration.
Example 3: Agriculturist
A farmer sells cotton from cultivation. Turnover = ₹25 lakh
- Exempt from registration.
Example 4: Inter-State Service Provider
A Kolkata tutor teaches students in Delhi online. Income = ₹6 lakh
- No GST registration.
Example 5: Non-GST Supplies
A liquor shop earns ₹50 lakh.
- Alcohol is non-GST
- Registration not required.
Example 6: Handicraft Seller
A Rajasthan handicraft seller supplies goods worth ₹12 lakh within the state.
- Threshold is ₹40 lakh
- No registration required.
Common Misunderstandings Around Section 23
“My turnover is high, so GST is compulsory.”
Wrong. If supplies are exempt or non-taxable → no GST.
“Selling through Amazon means compulsory GST.”
Wrong for goods sellers if they meet exemption conditions.
“Inter-state supply always needs GST registration.”
Only for goods suppliers (and with exceptions). Services have exemption up to threshold.
“Agriculturists must register if turnover exceeds limits.”
No. Agriculturists are permanently exempt.
Conclusion
Section 23 plays a very important role in GST compliance because it protects specific groups from unnecessary registration. Whether you are an agriculturist, an exempt supplier, a non-taxable goods provider, or a small inter-state service supplier — GST does not require you to register.
Understanding these exemptions helps small businesses avoid unnecessary compliance and paperwork, while still following the law correctly.
FAQs
1. Who is exempt from GST registration under Section 23?
Persons exclusively supplying exempt or non-taxable goods/services, agriculturists, and certain notified persons.
2. Are agriculturists required to register?
No. Agriculturists selling produce from cultivation are exempt.
3. Are inter-state service providers required to register?
Only if turnover exceeds ₹20 lakh/₹10 lakh.
4. Are exempt service providers (like hospitals) required to register?
No. Exempt service providers are outside GST.
5. Are e-commerce sellers exempt from GST registration?
Goods sellers may be exempt if turnover is below threshold and supply is intra-state.
6. Are petrol pump owners required to register?
No, because petrol & diesel are non-GST supplies.
7. Do reverse charge inward supplies require registration?
Not unless there is outward taxable supply.
