One of the most important concepts in the GST framework is the idea of a “taxable person.” Whether you’re a business owner, freelancer, professional, or even someone planning to start a new venture, understanding whether you fall under this definition determines everything—from whether you need to register to whether you should collect GST, file returns, or follow compliance rules.
Even though the term sounds like heavy legal jargon, the idea is actually simple. A taxable person is anyone who is registered or required to register under GST. But here's the tricky part: even if you didn’t apply for a GST number, the law may still consider you a taxable person if you meet specific conditions. That’s why understanding this definition is crucial.
In this blog, we’ll break down the meaning, scope, and practical interpretation of a taxable person as per Section 2(107) of the CGST Act, using simple, clear explanations and real life examples.
What Is a Taxable Person Under GST?
As per Section 2(107) of the CGST Act:
“A taxable person means a person who is registered or liable to be registered under Section 22 or Section 24.”
This means if you fall under any of the following:
- You are registered
- You must get registered
- You are liable because you crossed a threshold
- You fall under compulsory registration
…then you are a taxable person under GST.
It doesn’t matter whether you:
- Want to register or not
- Know about GST rules or not
- Have filed any GST returns or not
The moment you meet the legal criteria, the GST law sees you as a taxable person.
Who Is Considered a “Person” Under GST?
GST defines “person” very broadly to include almost every type of business or entity. This includes:
- Individuals
- Hindu Undivided Families (HUFs)
- Companies (Public & Private)
- Firms (Partnerships, LLPs)
- Proprietors
- Societies, trusts, NGOs
- Local authorities
- Government departments
- Artificial juridical persons
Basically, if you are carrying out any business activity, you are counted as a “person” under GST laws.
Two Conditions That Make Someone a Taxable Person
There are exactly two ways you become a taxable person:
1. You Are Liable to Register (Section 22)
This applies when your aggregate turnover exceeds the threshold limit such as:
- ₹40 lakh (goods – most states)
- ₹20 lakh (services – most states)
- ₹10 lakh (Special Category States)
If your turnover crosses these limits from taxable supplies, you automatically become liable to register.
2. You Fall Under Compulsory Registration (Section 24)
Even if turnover is zero, certain businesses must still register, such as:
- Inter-State suppliers
- E-commerce operators
- Reverse charge recipients
- Agents
- Casual taxable persons
- Non-resident suppliers
- Input Service Distributors (ISD)
These persons are taxable by default.
Who Is Not a Taxable Person?
GST law clearly lists categories that are not taxable persons.
1. Agriculturists (for produce from cultivation)
A farmer selling crops he grows himself is not liable for GST registration.
2. Persons exclusively supplying exempt goods/services
Example:
- Charitable activities (registered under Sec 12AB)
- Petrol, diesel, alcohol for human consumption
- Healthcare services
3. Persons notified by government
Certain small suppliers making inter-State service supplies up to ₹20 lakh (or ₹10 lakh) are also exempt.
Anyone who falls under Section 23 is not a taxable person.
Understanding Through Examples (Very Important)
Example 1: Turnover Crossed Threshold
Rahul runs a small clothing shop in Delhi. His yearly turnover crosses ₹40 lakh.
- Rahul becomes liable for GST registration under Section 22.
- Therefore, Rahul is a taxable person, even if he doesn’t voluntarily register.
Example 2: No Business but Still Liable
Meera registers an entity to sell online via Amazon. Even if she has no sales yet:
- E-commerce suppliers fall under compulsory registration (Section 24).
- She becomes a taxable person, even at ₹0 turnover.
Example 3: Supplying Exempt Goods Only
A farmer grows and sells wheat from his own land.
- Agricultural produce is exempt.
- He is not a taxable person under GST.
Example 4: Two Branches in Different States
Company ABC has offices in Maharashtra and Karnataka. Each state registration is treated as a distinct person.
- Maharashtra ABC = One taxable person
- Karnataka ABC = Another taxable person
Even though it's the same company with the same PAN.
This concept is extremely important for ITC and invoicing.
What Makes the Concept of a Taxable Person Important?
The definition isn’t just for theory. It affects several practical parts of GST compliance.
1. Determines Whether You Need GST Registration
If you don’t qualify as a taxable person, you simply don’t register.
2. Determines Whether You Can Collect GST
Only taxable persons can legally collect GST on their invoices.
3. Determines Eligibility for Input Tax Credit (ITC)
Only taxable persons can claim ITC on purchases.
4. Defines Who Should File GST Returns
If you are a taxable person, you must file returns—even if your business is small.
5. Decides Tax Liability
If you are a taxable person, you must pay GST on all taxable outward supplies.
6. Helps Identify “Distinct Persons” for Multi-State Business
Each registration = separate taxable person This affects:
- Cross-charging
- ISD mechanism
- ITC flow
What About Persons with Voluntary Registration?
Even if your turnover is low, you may choose voluntary registration.
Once you voluntarily register:
- You automatically become a taxable person
- You must follow all GST rules
- You must file returns even with zero business
Voluntary registration makes sense when:
- Your clients demand GST invoices
- You want to claim input tax credit
- You want to work with corporations or e-commerce platforms
How Does GST Treat Territorial Waters?
If a business makes supplies from India’s territorial waters:
➡️ The taxable person must register in the nearest coastal state.
This rule avoids confusion for businesses operating offshore installations.
Taxable Person vs Registered Person (Don’t Confuse These Two)
These two terms are similar but not the same.
Taxable Person
Someone who is or is liable to be registered.
Registered Person
Someone who already has a GST registration.
- Every registered person is a taxable person
- But every taxable person is not necessarily registered yet
Example: A supplier who crosses ₹20 lakh turnover is a taxable person even before applying for registration.
Common Misconceptions About a Taxable Person
Here are frequent misunderstandings people have:
1. "I’m not registered, so GST doesn’t apply to me."
Wrong. If you’re liable for registration, the law still counts you as a taxable person.
2. "I provide services online, but my turnover is small."
If you provide services through an e-commerce operator, you may need compulsory registration.
3. "I deal in exempt goods; still I want a GST number."
You cannot register if you deal exclusively in exempt supplies.
4. "Being a taxable person means I have to charge GST."
You charge GST only after you get a registration.
Conclusion
The concept of a taxable person is one of the foundations of GST. It clearly identifies who must register, who must comply, and who must follow the tax structure. Once you understand whether you fall under this definition, everything else becomes easier—from registration to filing returns.
If you are:
- exceeding turnover limits,
- or falling under compulsory registration …then you are a taxable person as per GST law and compliance becomes mandatory.
In the next blog, we will cover:
👉 Aggregate Turnover: How It Is Calculated & Why It Matters This is a crucial topic because turnover decides whether you even become a taxable person.
FAQs
1. What is a taxable person under GST?
A taxable person is someone who is registered or required to be registered under GST based on turnover limits or compulsory registration rules.
2. Do I become a taxable person even if I don’t register?
Yes. If your turnover crosses the threshold limit or you fall under compulsory registration, you automatically become a taxable person.
3. Are agriculturists taxable persons under GST?
No. Agriculturists selling produce from cultivation of land are not considered taxable persons.
4. How is a taxable person different from a registered person?
A taxable person includes anyone who must register, while a registered person is someone who already holds a GSTIN.
5. Is voluntary registration allowed?
Yes. Even small businesses can opt for voluntary registration, after which they become taxable persons and must comply fully.
6. Do e-commerce sellers automatically become taxable persons?
Most e-commerce sellers fall under compulsory registration, making them taxable persons even at low or zero turnover.
7. How are multi-state businesses treated under GST?
Each state registration is treated as a distinct taxable person, even if they belong to the same company.
