GST Exemption: Agriculturist and Small Traders

Ashish M. Shaji

14 Oct, 2020

GST has been making rounds in the news for quite some time now. The Goods and Services Tax is here to stay for a long time and has been passed after 13 years of detailing. Some of the businesses and industries are happy with the application of GST. This is because it would benefit them in many ways. Conversely, some business firms are not happy with the new GST regulations as they are taxed at higher rates than earlier. This will increase the cost of products and services for the end consumer. In this article we described about GST Exemption: Agriculturist and Small Traders.

GST has been applied by the government seeking to benefit the economy and the country. Many industries fall under the new GST tax slabs, and there are different slabs that are meant for different industries. However, there are a few traders; such as, agriculturists and small traders who are under GST exemption and its new tax slabs.

Businesses and individuals supplying goods can claim GST exemption if their aggregate turnover is under 40 lakh rupees in a financial year. Businesses and individuals involved in services supply can claim GST exemption if their aggregate turnover is under 20 lakh rupees. 

The GST council has also given the option of an instalment payment to small traders who will feel the constraint of the financial standing regarding paying the new tax. An agriculturist who is producing goods out of cultivation of the land will not be required to register under GST.

Advantages to Agriculturist from exemption

This will be a huge advantage to an agriculturist in terms of:

• Money constraint

It is a good decision that the agriculturists do not have to register under the GST tax slabs as they would have had huge money constraints in paying the new and increased taxes. The cash in-flow for farmers is minimal, to begin with, and hence would have been a burden to pay higher taxes for lesser income generated.

• Education

The GST laws require an understanding of the new laws and their application in a particular field and return filing requirements. Most of the agriculturists consist of uneducated farmers. For them it is extremely difficult to understand and follow the new tax rules.

• Reach

Most of the farmers have a minimal reach of technology. It will make GST compliance almost impossible for them. Therefore, it’s better if they are not required to be register under Goods & Service Tax.

• Less profits

Farmers and agriculturists do not generate huge profits on the food items that they cultivate and hence would have found it difficult to pay the taxes, which would have been increased under the new Goods & Service Tax laws^[1]. Therefore, it is a good decision to exempt them from registering under the Goods & Service Tax.

• Need-based products

The agriculturists cultivate need-based products; such as grains, pulses, vegetables, and many such food items. It’s not ethical to tax them heavily and is a good decision to exempt them from the GST laws.

Small Traders who have less than 40 lakhs of turnover are also exempted from registering and paying taxes under GST, and this is an advantage to them as they do not have to spend from their small margins of profits in order to pay the increased tax slabs of the new GST laws.

 Also, businesses that have a turnover of up to 1.5 Crore can opt for the Composition Scheme. They will have an option of paying lower taxes and do not have to comply with all the regulations of the new Goods & Service Tax laws and will be exempted to a larger extent. This applies to small traders, manufacturers, and service providing restaurants. They can file the tax directly online on the website and save the trouble of dealing with tax officers.

There are more pointers to be noted for small traders and their exemption under GST, such as follows:

• They are not liable to get GST Registration in India as they are not compelled to register if they have a turnover of fewer than 40 lakhs.
• Small traders with a turnover of less than 1.5 Crore will have to register, but do not have to pay all the taxes listed under Goods & Service Tax and can learn about the category of slabs that they fall under.
• This will also benefit the end customer. As the cost of the products and services which are provided by the small traders would not increase much.
• Small traders usually deal in need-based products, and therefore the council has made a good decision to keep them exempt from registering under the new Goods & Service Tax slabs.
• There are few items which are not listed under the Goods & Service Tax slabs, and those would be exempted from tax under all circumstances. It is advisable to be thorough with this list not to pay extra taxes on products or services.
• In North Eastern and Hill States, the limit of exemption is 20 lakhs of business turnover. For any trader with aggregate turnover above that, GST registration is mandatory.
• The council will also make 90% of the refund claims by the small traders within seven working days. This is to not keep their money blocked and their business to function smoothly.

Conclusion

There are many such advantages that the Council has made for agriculturists and small traders under GST and exempted them from GST registration to benefit them and help them carry out their businesses without hindrances as they provide more of need-based products to the end consumers.

Read our article:Filing of Form GST ITC-03: All you need to know