Registering a Small Business in India: Udyam and GST

What registrations a new small business in India typically needs, what Udyam registration offers, and when GST registration becomes mandatory.

Starting a business involves paperwork. In India, two registrations matter to most small businesses: Udyam and GST.

Udyam registration

Udyam registration, introduced in 2020, is the government’s online registration for micro, small and medium enterprises (MSMEs). It is free, paperless and based on Aadhaar and PAN.

MSMEs are classified by investment in plant and machinery and turnover. Limits were revised upward in 2025, so check current thresholds.

Benefits of Udyam registration

Access to priority sector lending and collateral-free loans under credit guarantee schemes.
Protection against delayed payments: under the MSMED Act, buyers must pay registered micro and small enterprises within 45 days, and delayed payments attract interest.
Preference in some government procurement.
Eligibility for various subsidies and schemes.

GST registration

Businesses must register for GST if their annual turnover exceeds the threshold:

Generally 40 lakh rupees for businesses supplying goods, and 20 lakh rupees for services, with lower limits in some special category states.
Some businesses must register regardless of turnover, such as those selling across states in many cases or through e-commerce platforms.

Once registered, businesses must charge GST, file returns and can claim input tax credit on GST paid on purchases.

Composition scheme

Small businesses below a set turnover can opt for the composition scheme, paying GST at a low fixed rate with simpler filing, but without claiming input tax credit.

Other registrations

Depending on the business, others may be needed:

Shop and establishment licence from the state.
FSSAI licence for food businesses.
Professional tax registration in some states.
Company or LLP registration if forming such a structure.

Why registration matters

Formal registration can open doors to credit, larger customers and government support. Many informal businesses remain unregistered, missing these benefits.

The home bakery

A home baker registers on Udyam and gets an FSSAI registration. As orders grow to cafés, her turnover crosses the GST threshold, so she registers for GST. With formal records, she qualifies for a collateral-free loan to buy a larger oven.

Thinking registration is only a burden

Registration brings compliance costs but also access to credit, protection from late payments and bigger customers.

Key takeaways

Udyam is the free online MSME registration introduced in 2020.
It offers access to credit schemes and protection against delayed payments.
GST registration is required above turnover thresholds or for certain businesses.
Registration can open doors to credit and larger customers.