New GST ITC Proposal: 3 Registration Categories That Change How You Get GSTIN

The GST Law Committee ITC proposal, discussed at the 55th GST Council meeting in December 2024, creates three registration categories based on ITC risk. Small businesses get GSTIN in 3 working days with only Aadhaar OTP. Trusted businesses face no ITC limit. Implemented via Rule 9A and Rule 14A from November 1, 2025 (CBIC Notification No. 18/2025).

If you applied for GST registration recently, you may have heard about faster approvals. From November 1, 2025, the government implemented the GST Law Committee ITC proposal through Rule 9A and Rule 14A of the CGST Rules. Eligible small businesses now get their GSTIN in just 3 working days, down from up to 30 days earlier.

This article explains what the proposal actually says, which category your business falls into, and what you need to do. No legal jargon. Just clear facts.

What Is the GST Law Committee and What Did It Propose?

GST Law Committee: A panel of senior tax officers that reviews GST law and recommends changes to the GST Council before major policy decisions are made.

In December 2024, ahead of the 55th GST Council meeting in Jaisalmer, the Law Committee submitted a proposal to simplify GST registration. The main idea was simple: not every new business carries the same risk of filing fake invoices or misusing Input Tax Credit (ITC).

So instead of making every business wait 30 days and go through the same process, the committee proposed three separate registration tracks based on how much ITC a business is likely to pass on.

GSTN data: More than 98% of new GST applicants either do not pass on ITC at all, or pass on ITC within Rs. 5 lakh per month. (Source: Business Standard, December 2024)

The GST Council approved the direction of this proposal. The government then implemented it through CBIC Notification No. 18/2025 dated October 31, 2025, inserting Rule 9A and Rule 14A into the CGST Rules, effective November 1, 2025. 

What Are the 3 New GST Registration Categories?

The proposal creates three tracks for GST registration. Each track has a different ITC limit, verification process, and registration speed.

Category 1: New or Small Business

A New or Small Business is a first-time GST applicant whose monthly GST output tax liability does not exceed Rs. 2.5 lakh. Under Rule 14A, this business gets registration within 3 working days through Aadhaar OTP verification and automated risk checks on the GST portal. No officer review is required for low-risk applications.

This covers the majority of new registrants in India, including:

•  Freelancers and consultants registering for the first time

•  Small shop owners and traders with local or intra-state operations

•  eCommerce sellers on Amazon, Flipkart, or Meesho starting out

•  Service providers voluntarily registering below the Rs. 20 lakh threshold

The scheme is optional. You choose to apply under Rule 14A. If the portal's risk system flags your application as high-risk, it moves to standard Rule 9 verification, which takes longer.

Note: Monthly output tax liability of Rs. 2.5 lakh roughly corresponds to a monthly turnover of Rs. 13-14 lakh at 18% GST. Most small businesses fall well within this limit.

Category 2: Deemed Trusted Business

A Deemed Trusted Business is a GST applicant with a clean, verifiable compliance history across GST, income tax, and other regulatory requirements. This includes Public Sector Undertakings (PSUs), government entities, and private limited companies that meet specific criteria. They get 3-day registration without biometric Aadhaar check and can pass on unlimited ITC.

Parameters for Deemed Trusted classification include:

•  Business type: PSU, government body, private limited company with clean track record

•  GST payment history over the last 3 years without major defaults

•  Income tax returns filed and paid consistently

•  No fraud, evasion notices, or pending serious compliance issues

For large, compliant businesses, this category removes friction entirely. No biometric verification needed. No ITC limit. This is a direct incentive for businesses to maintain clean compliance records year after year.

Category 3: Emerging Business

An Emerging Business is one that wants to pass on ITC above Rs. 2.5 lakh per month in output tax liability but does not yet qualify as Deemed Trusted. These businesses face additional controls, including a requirement to deposit money in the cash ledger before filing GSTR-1. This ensures that ITC being passed on is backed by actual tax payment.

This category is for businesses that are growing fast and need higher ITC capacity but do not yet have the 3-year clean compliance track record needed for Deemed Trusted status.

Example: A manufacturer in Rajasthan who started 18 months ago and is now supplying to buyers across 5 states. Their monthly ITC passing is Rs. 8 lakh. They apply for Emerging Business status and provide the required cash deposit to support that ITC passing.

Quick Comparison: All 3 GST Registration Categories

How Fast Is GST Registration Now Under This Proposal?

From November 1, 2025, small businesses that qualify under Rule 14A get their GSTIN in 3 working days. The GST portal uses automated risk scoring, Aadhaar OTP verification, and PAN-Aadhaar data matching. No tax officer needs to manually approve low-risk applications. About 96% of new applicants are expected to qualify for this fast track.

Real example from Business Standard (December 2024): "An artisan in Maharashtra who wants to sell on Amazon in other cities needs GST registration in each state. The quick 3-day registration would help such MSME dealers who are not passing on significant ITC."

How Does This Proposal Stop Fake ITC Fraud?

Fake ITC fraud happens when someone registers a business on GST, generates fake invoices, passes ITC to buyers, collects the credit, and disappears without paying tax to the government. This costs thousands of crores in revenue loss every year.

The GST Law Committee ITC proposal stops fraud by linking how much ITC a business can pass on to their registration category. A New/Small Business can only pass on ITC up to the output tax liability cap. A business that wants to pass on more ITC must either prove 3 years of clean compliance (Deemed Trusted) or deposit actual cash before filing GSTR-1 (Emerging Business). This means ITC must be backed by real money.

Additionally, Rule 9A allows the portal to flag high-risk applications using data analytics. These flagged applications go to standard Rule 9 review with officer scrutiny. So while genuine small businesses get fast approvals, risky applicants get more checks, not fewer.

For buyers who claim ITC through GSTR-2B, this means cleaner credit flow. Fewer fake suppliers in the system means fewer ITC mismatches and less risk of notices.

Can Your Business Move Between Categories?

Yes. The proposal lets businesses change registration category as they grow. A New/Small Business can apply to become Emerging when their turnover grows. An Emerging Business can apply to become Deemed Trusted after building a 3-year clean compliance track record. The process for moving up is through a jurisdictional tax officer review.

Here is how category transitions work:

•  New/Small Business to Emerging: Meet the deposit requirement or apply for a category change when your output tax liability exceeds Rs. 2.5 lakh/month

•  Emerging to Deemed Trusted: Submit to a detailed compliance review by a jurisdictional officer covering 3 years of GST and income tax history

•  Withdrawing from Rule 14A: File FORM GST REG-32 on the GST portal, provided you have filed returns for at least 3 months and no cancellation is pending

This mobility means the category is not a permanent label. It reflects where your business is right now in terms of size and compliance history. 

Who Benefits Most From This Proposal?

Businesses that gain the most:

•  New small business owners who need GSTIN fast to start operations or list on eCommerce

•  Freelancers and consultants who want to register without going through a long manual process

•  MSME suppliers in states like Rajasthan, UP, Gujarat who sell across states and need multiple GST registrations

•  Well-established private limited companies and PSUs that can qualify as Deemed Trusted for unlimited ITC

•  Buyers who source from small suppliers and want clean ITC in GSTR-2B

Businesses that face stricter conditions:

•  Growing businesses wanting to pass on large ITC amounts without the 3-year compliance history for Deemed Trusted status

•  Any applicant whose PAN-Aadhaar data is inconsistent or flagged by the portal risk system

•  Businesses in high-risk sectors that the GSTN system automatically routes to manual Rule 9 review

What Tax Experts Say About This Change

The Mondaq analysis of the GST (Fourth Amendment) Rules, 2025 notes that Rule 14A "offers a genuine compliance advantage for small suppliers engaged primarily in B2B transactions, enabling them to participate in the GST ecosystem with fewer hurdles." It also highlights that larger businesses sourcing from micro-suppliers should review their vendor-onboarding processes, as Rule 14A registration may become a preferred option for ensuring ITC continuity.

For first-time GST applicants, the practical takeaway is this: if your monthly output tax liability is under Rs. 2.5 lakh, opt for Rule 14A when applying on the GST portal. You are likely to get your GSTIN in 3 working days without submitting physical documents or visiting a GST office.

Frequently Asked Questions About the GST Law Committee ITC Proposal

Q1. What is the GST Law Committee ITC proposal?

The GST Law Committee ITC proposal is a plan to create three categories of GST registration based on how much Input Tax Credit (ITC) a business is likely to pass on. Small businesses with output tax up to Rs. 2.5 lakh per month get GSTIN in 3 working days through Aadhaar OTP only. Businesses with clean compliance history get unlimited ITC with no biometric check. Growing businesses wanting higher ITC limits must deposit cash before passing on that credit. This was implemented through CBIC Notification No. 18/2025 from November 1, 2025.

Q2. How do I qualify for 3-day GST registration under this proposal?

To get GST registration in 3 days, you need to apply under Rule 14A on the GST portal. Your monthly GST output tax liability (what you would pay to the government) must not exceed Rs. 2.5 lakh. You also need a valid Aadhaar and PAN that match in the system. When you apply, select the Rule 14A option. If the portal's automated risk check clears you as low-risk, your GSTIN is issued within 3 working days. If flagged as high-risk, the application goes to standard manual review.

Q3. What is Rule 14A in GST?

Rule 14A is a new rule added to the CGST Rules 2017 through the GST (Fourth Amendment) Rules, 2025, effective November 1, 2025. It allows small B2B suppliers whose monthly GST output tax liability does not exceed Rs. 2.5 lakh to get electronic registration within 3 working days. Registration under Rule 14A is optional. It requires Aadhaar OTP verification and portal-based risk assessment. Businesses can withdraw from Rule 14A by filing FORM GST REG-32 after filing at least 3 months of returns.

Q4. What is the ITC limit for a new small business under this proposal?

Under the GST Law Committee ITC proposal, a New or Small Business has a monthly output tax liability cap of Rs. 2.5 lakh. This is not a limit on ITC you can claim, but a limit on how much GST output tax you pass on to others through your sales. For most small traders, freelancers, and new eCommerce sellers, this limit is more than sufficient to operate normally. Businesses needing to pass on more ITC can apply for the Emerging Business category or work toward Deemed Trusted status.

Q5. How does this proposal help stop fake ITC fraud in GST?

Fake ITC fraud happens when someone registers a fake business, generates bogus invoices, passes on ITC to buyers, and vanishes without paying tax. The GST Law Committee ITC proposal limits the damage by capping ITC for new small businesses. Businesses wanting higher ITC must either prove 3 years of clean compliance (Deemed Trusted) or make a cash deposit before passing ITC (Emerging Business). This means ITC cannot be passed on without real money backing it, directly cutting off the mechanism used by fake ITC operators.

Q6. Does this proposal help eCommerce sellers and MSMEs?

Yes, directly. An MSME seller or artisan who needs GST registration in multiple states to sell on Amazon or Flipkart no longer has to wait 30 days per state. Under Rule 14A, each state registration for a low-risk small business can come through in 3 working days. This means faster onboarding on eCommerce platforms, quicker ability to issue GST invoices to buyers, and faster access to ITC once registered.

Q7. Does this change affect businesses already registered under GST?

Existing GST registrants are not automatically re-categorised under this proposal. The three-category framework currently applies to new registration applications filed from November 1, 2025 onward. However, if your business is growing and you want to move between categories, or if you are a larger company that sources from small suppliers, the Rule 14A pathway affects how your vendors register and how ITC flows from them to you. Watch for further GST Council notifications on whether existing registrants can opt into the new framework.

Q8. What should I do right now if I want to apply for GST registration?

If your monthly GST output tax liability is under Rs. 2.5 lakh, apply under the Rule 14A option on www.gst.gov.in. Keep your Aadhaar and PAN ready. Make sure your Aadhaar is linked to your mobile number for OTP. If your details are consistent and the portal risk check clears you, you will receive your GSTIN in 3 working days. If you are unsure whether Rule 14A fits your business, a GST registration expert can check your liability threshold and guide you through the right track.

 

Key Takeaways: GST Law Committee ITC Proposal in Simple Words

Here is what this proposal actually means for you:

•  Most new small businesses now get GSTIN in 3 working days, not 30 days, if their monthly GST output tax liability is under Rs. 2.5 lakh

•  The 3-category system matches registration controls to actual ITC risk, so genuine small businesses get less friction and fraudsters face more scrutiny

•  Your category is not permanent. As your business grows and your compliance track record builds, you can move to higher categories with higher ITC limits

•  Existing GST registrants are not affected right now, but suppliers who register from November 2025 onward will use this new framework

The GST Law Committee ITC proposal is one of the most practical improvements to GST registration since the system launched in 2017. For small businesses, eCommerce sellers, and MSMEs, faster registration means faster operations.

 

Want to get your GST registration done in 3 days? The team at GSTRegistration.co handles the entire process for you. We check your eligibility, prepare documents, and submit your application under the right category. Get your GSTIN fast, with no back-and-forth.

 About the Author

Rohit Kumar Jaluthariya  |  SEO and Content Strategist, LegalDev

Rohit is an SEO and Content Strategist at LegalDev, managing GST compliance content for gstregistration.co. He holds a B.Com degree with hands-on experience in SEO, content strategy, and Meta Ads. He specialises in turning complex GST updates into clear, practical guides for Indian businesses.