GST Returns

The New 3% GST Rate Scheme- Benefits, Eligibility, and Impact


The government has recently announced new GST rates under the GST notification number No. 2/2019-Central Tax (Rate). The notification dated 7th March 2019 introduced a new 3% GST Rate scheme for GST registered small scale businesses as well as for business units that will enroll in the financial year 2019-2020.

This scheme comes with its own set of eligibility criteria to be met by the business units. The scheme is implemented from the 1st of April 2019.

In this article, we will discuss the benefits, eligibility, and impact of this new GST scheme.

Eligibility Criteria to Register Under the 3% GST Rate Scheme

The 3% scheme for GST has various criteria for a business unit to reap benefits under the new GST rules. This scheme is applicable for business units who supply goods or services or supply both.

gst tax

The following condition should be fulfilled by the business owners to get a lower GST liability:

  • The business unit should have a turnover of fewer than 50 lakhs during the previous financial year (Pre-registered category) Or the business should obtain GST registration under the current financial year 2019-2020 (New registration category).
  • The business unit should not be making a supply of goods or services that are exempt from GST.
  • Business should not be making an inter-state supply of goods or services (Supply from one state to another).
  • The business units should not be involved in the selling of pan, tobacco, ice cream or any form of edible ice.
  • Business units should not be making any sale through an e-commerce platform.
  • The business units should not be enrolled under the GST composition scheme.
  • The aspirant should not be a casual or non-residential taxpayer person.

If an existing or new business unit meets the above criteria, then they can reap the benefits mentioned under the new GST rate scheme.

However, there is another set of conditions to fulfill. The business should also fulfill the post-registration requirements to stay as a beneficiary under this scheme.

Post Enrollment Criteria for new GST Scheme

The post-enrollment criteria should also be taken in practice by the enrolled business units to enjoy the benefits of the lower GST rate.

The prescribed conditions are as follows;

  • The business units should not collect any GST from its customers.
  • Business will not claim GST Input Tax Credit.
  • The business units should issue Bill of supply in place of GST invoice.
  • The business should mark the of the Bill of Supply with words “‘taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies.”
  • The business units should pay a 3% GST for all the outward supplies.
  • The business units should pay 3% GST on all inward supplies.

Procedure to register for the 3% GST Rate Scheme

In order to reap the benefits of lower GST rate, the eligible taxpayers should enroll on the GST website before 1st of May 2019 by filing GST CMP-02.

The procedure to apply under this scheme is different for GST registered business units and new GST registration.

GST 3% Rate Scheme

1) For an Existing GST Registration Holder

The GST holding entity should by filing GST CMP-2 by selecting “Any other supplier eligible for composition levy” under the category of ‘registered person.‘ In addition to the above step, the taxpayer must also file FORM GST ITC03.

2) For a New GST Registrant

The new business can opt for 3% GST scheme by choosing this option during the registration process on the GST portal[1].

The Impact and Benefits of new 3% GST Rate Scheme

The benefits of paying GST under this scheme can be available to the already registered business units from the 1st of April 2019.  New business units can get the benefits of meeting GST liability by taking benefits under this scheme from the date of registration.

The benefits of new 3% GST Scheme –

  • Flourish Small Scale Businesses

The GST council gave significant support to small scale business units operating within a single state. Such a move will reduce the tax liability of such units and increase their profitability.

  • Promoting Entrepreneurship

 The number of business units registering for GST will grow owing to reduced goods and services tax liability. 

  • Reducing Compliance Burden

A flat 3% GST slab will reduce the compliance complexity of the eligible business units.

  • Leads to Economic Development

The economy will benefit from this move as more number of small businesses will get register and GST registered small scale business will enjoy higher profits. Thus, it is complimenting the motive of introduction of the GST bill in India.


The 3% GST Rate Scheme has provided relief to a large number of business owners. This scheme will not only encourage trade and commerce but also help in the regulation of small scale business units.

It is expected from the GST council to roll in more such schemes in the future to benefit the business owners.

Read our article:Impact of GST on Sales Promotion Schemes in India

Akash Dubey

Akash Dubey is a Law Graduate and works as an Advisor at Enterslice. He is proficient in Legal and Financial Advisory. His expertise in the skills of Legal and Financial Research is an aid to his strengths as an Advisor.

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