Tax & GST Registration in India: Legal Requirements, Penalties & Compliance Tips

 Introduction

For businesses in India, compliance with tax laws is not just a statutory requirement,  it is the backbone of smooth financial operations. From GST registration to TDS compliance, and from PF/ESI enrolments to regular filings, every entrepreneur must understand when these registrations become mandatory and what risks come with non-compliance.

This blog breaks down the legal framework of Tax & GST registration in India, the thresholds prescribed by law, the consequences of ignoring them, and practical tips to stay compliant.

What the Law Requires

1. GST Registration – CGST Act, 2017

○   Compulsory once turnover exceeds ₹40 lakhs for goods (₹20 lakhs for services).

○  For businesses in North-Eastern and special category states, the threshold is lower - ₹20 lakhs for goods and ₹10 lakhs for services.

○   Inter-state supply of goods: GST registration is mandatory irrespective of turnover.

○ E-commerce operators and suppliers selling through e-commerce platforms must register regardless of turnover.

2. PAN & TAN – Income Tax Act, 1961

○   PAN (Permanent Account Number): Mandatory for businesses, companies, LLPs, and firms for filing tax returns and financial transactions.

○ TAN (Tax Deduction and Collection Account Number): Mandatory for businesses deducting tax at source (TDS).

3. PF Registration – EPF Act, 1952

○      Mandatory if you employ 20 or more employees.

○      Covers both employer and employee contributions.

4. ESI Registration – ESI Act, 1948

○      Mandatory if you employ 10 or more employees earning up to ₹21,000/month.

○      Provides employees with health insurance and other benefits.

Why It Matters

• Ensures smooth financial and tax operations.

• Enables businesses to participate in B2B contracts, tenders, and government projects.

• Provides statutory benefits to employees, strengthening compliance and trust.

• Protects businesses from heavy penalties, prosecution, and reputational harm. 

  
  

 If Ignored: Legal Consequences

• GST Evasion: Penalties up to 100% of the tax due, plus interest @18% p.a. under Section 122 of the CGST Act.

• Failure to deduct TDS: Disallowance of expenses under Section 40(a)(ia) of the Income Tax Act and prosecution in severe cases.

• PF/ESI Violations: Penalties, fines, and in some cases imprisonment of responsible persons.

• Repeated Defaults: Can lead to cancellation of registration, business blacklisting, and loss of contracts.

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How to Avoid Issues

1. Track turnover and employee thresholds regularly: review monthly revenue and employee strength.

2. Maintain proper documentation: invoices, salary registers, digital records of transactions.

3. File returns on time: GST, TDS, Income Tax, PF, and ESI filings must be made within statutory deadlines.

4. Seek professional tax advice: Compliance planning with lawyers, CAs, and CSs helps avoid last-minute penalties.

5. Stay updated with amendments: thresholds and penalties are revised periodically, so businesses must adapt.

   
   
   
   

Conclusion

Tax and GST registration are not optional formalities, they are legal obligations that define the credibility and legality of your business. Non-compliance not only attracts financial penalties but can also lead to criminal liability in certain cases.

At Pairvii Legal, we assist businesses in navigating the complex tax and regulatory framework, from GST registration to labour law compliance ensuring you focus on growth while we take care of the law.