Most of the trouble a small business has with tax in its third year was decided in its first month — by which registrations were taken, which were skipped, and whether anyone kept the invoices. This note is the list.
The registrations, and what each is for
| Registration | Who needs it | Why |
|---|---|---|
| PAN | Everyone. A proprietor uses their own; a firm, LLP or company needs its own. | Every tax filing, every bank account, every contract. |
| TAN | Anyone who must deduct tax at source — see the note on TDS. | Without it you cannot deposit TDS or file the quarterly statements. |
| GST | Compulsory once turnover crosses the threshold (below), or from day one for inter-state supply of goods, selling through an e-commerce platform, or several other cases. Optional before that. | Charge and collect GST, claim input credit, issue tax invoices. |
| Udyam (MSME) | Any micro, small or medium enterprise. Free, online, no renewal. | Priority-sector lending, the 45-day payment protection, and a number of state schemes. Customers who are companies must report unpaid dues to you. |
| Shops and Establishments | Most premises with employees, under the Tamil Nadu Act. | A licence for the premises; usually asked for by banks. |
| Professional tax | Employers and the self-employed, through the local body. | A small half-yearly levy; missing it attracts a penalty out of proportion to the amount. |
When GST becomes compulsory
As reviewed on 16 September 2026, registration is required when aggregate turnover in a financial year crosses ₹40 lakh for goods or ₹20 lakh for services (lower limits apply in the special-category states; Tamil Nadu is not one). Aggregate turnover is the total across all your registrations under one PAN, including exempt supplies. Some businesses must register from the first rupee regardless of turnover — inter-state supply of goods, selling through platforms that collect tax at source, and anyone liable under reverse charge, among others.
Once liable, you have 30 days to apply (Form REG-01). Registering late does not push the liability back: tax is due from the day you crossed the line, without the input credit you could have claimed.
Should a small business register before it must?
Yes if your customers are businesses that want input credit, or if you buy a lot of taxed inputs. No if your customers are the public and your inputs are small — registration then adds monthly compliance and 18% to your price for no benefit. This is a decision worth making deliberately rather than by default.
The composition scheme
A simpler GST for small businesses with turnover up to ₹1.5 crore (₹50 lakh for most service providers), as reviewed on 16 September 2026: a low flat rate on turnover, a quarterly payment (CMP-08) and one annual return (GSTR-4), instead of monthly returns. The trade-off is real — you cannot charge GST on your invoices, cannot claim input credit, and cannot supply inter-state. It suits a local trader with retail customers; it does not suit anyone selling to businesses.
Six records to keep from the first invoice
- A numbered invoice for every sale, in one unbroken series for the year. Gaps are the first thing an officer asks about.
- Every purchase bill, with the supplier's GSTIN if you are registered — input credit depends on it.
- A bank account for the business alone. Mixing personal and business money is the single most expensive habit a proprietor can have.
- A record of cash received and paid, because cash above certain limits is disallowed as an expense and can bring penalties on the receipt side too.
- Payroll records from the first employee: salary, PF, ESI and professional tax.
- Fixed-asset bills — the laptop, the machine, the vehicle — kept for as long as you own the asset, not just the year.
This note is general information, not advice on anyone's facts. Send an enquiry about a specific matter.