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A Sigh Of Relief For MSMEs: GST Exemption Limit Increased By The Council

New GST Exemption Limit

Just few days back, in the 31st meeting of GST Council, Government has reduced the GST rates on various products and now the NDA government has given a major sop to the taxpayers by doubling the GST Exemption Limit for payment of GST and compliance from Rs 20 lakhs per year to Rs 40 lakh.

In this article, we would discuss the new exemption limits for GST Registration for small taxpayers or micro, small and medium enterprises (MSMEs).

Before discussing the new limits in details, let us get familiar with a few topics which would make the understanding better.

Who must seek registration under GST?

Every supplier shall be liable to get registered under GST Law in the State from where he/she makes a taxable supply of goods and/or services if his/her aggregate turnover exceeds specific thresholds limits which we will discuss later in this article.

Below categories need to compulsorily obtain registration:

  • Those Persons who make any Inter-State taxable supply. For e.g. from Uttar Pradesh to Gujarat
  • Any Casual Taxable person
  • Non-resident Taxable person who does not have any fixed place in India.
  • Those persons who are required to pay tax under Reverse Charge
  • Persons who need to require to deduct tax at source (TDS)
  • Agents of a supplier
  • Input Service Distributor
  • Persons who supply goods or services through E-commerce companies
  • Every E-commerce Operator. For e.g. Amazon, Flipkart and Snapdeal etc.
  • An aggregator who supplies services under his own brand name

What is Composition Scheme?

Any individual or person with the aggregate turnover not exceeding Rs. 75 lakhs and for an amount of Rs. 50 Lakhs for North Eastern States shall be eligible to pay tax by composition scheme.

Now coming back to the decision which was taken in 32nd GST Council Meeting on January 10, 2019, the Government has given a massive relief to small businesses.

Who govern the GST rules and regulations?

The tax rates, rules and regulations for GST are completely governed by the GST Council[1] which consists of the finance ministers at centre and all the states.

It is the governing body of GST having 33 members which is chaired by the Union Finance Minister.

What was the decision taken in the 32nd GST Council Meet?

The GST Council has doubled the GST Exemption Limit from payment of goods and services tax (GST) to Rs 40 lakh. Earlier it was Rs. 20 lakh.

Also, for the north-eastern states, the exemption limit has been increased to Rs 20 lakh from earlier Rs 10 lakh.

GST Exemption Limits

Further decisions which were taken are as follows:

  • Those who render services, or mixed supply up to Rs 50 lakhs will be entitled to a composition rate of 6%. Around 20 lakh taxpayers will be eligible for benefit under the new relaxed limit.
  • Kerala has been allowed to impose a maximum cess of 1% for a maximum period of 2 years. It would be imposed only on transactions within the state.
  • This has been done to help the state with the recent floods.
  • The small companies would now have the option to opt out of the GST Tax net as the thresholds limits are increased.
  • On the topic of GST on real estate, the matter has been referred to a group of seven ministers.

The council has decided to form a seven-member group of ministers on the GST rate for real estate sector as after differences of opinion emerged during the meeting.

Lets sum up the Key Decisions of the Council

  • The limit for GST Exemption Limit from payment of goods and services tax has now been increased to Rs 40 lakh from the current Rs 20 lakh.
  • In the case of north-eastern states, the GST Exemption Limit has been increased to Rs 20 lakh from the current Rs 10 lakh.
  • Turnover limit for businesses availing composition scheme raised to Rs 1.5 crore from Rs 1 crore at present.
  • Those Service providers and suppliers of goods and services which has turnover of Rs 50 lakh are eligible for GST composition scheme by paying 6% tax.
  • Kerala allowed levying 1% calamity cess on intra-state sales for two years to meet rehabilitation cost. It is due to the heavy floods which took place last year.

Finance Minister Arun Jaitley views on GST Exemption Limit:

  • Arun Jaitley informed that those opting for the composition scheme would have to file just one tax return annually.  But have to pay taxes once every quarter.
  • He stated that a very large part of GST comes from formal sector and large companies.
  • Each one of these decisions is intended to help the SMEs. They have been given various options. If they are in service sector, they would be eligible to get 6 per cent compounding. On the other hand, if they are in manufacturing sector, and are trading up to Rs 1.5 crore, they can get 1 per cent compounding.
  • They can make use of exemption of up to Rs 40 lakh.
  • Under the composition scheme, traders and manufacturers can pay taxes at a concessional rate of 1 per cent, while restaurants pay 5 per cent GST. There are more than 1.17 crore businesses which have registered themselves under the GST, which rolled out from July 1, 2017. Out of these, over 18 lakh have opted for composition scheme.
  • While a regular taxpayer has to pay taxes on a monthly basis, a composition supplier is required to pay taxes on a quarterly basis. He is not required to keep detailed records compares with a normal taxpayer under GST.

Quick Analysis

The GST Council is providing lot of benefits to the common citizens of India by such endeavors. Well the decision of GST Exemption Limit might seem to be a political motive or any other reason; it is definitely proving a boon to the people. Let’s just hope more such benefits are underway.

Neelansh Gupta

Mr. Neelansh Gupta is a Legal Counsel having extensive in-depth knowledge of various laws. He has completed his graduation in law and has experience in IPR, Taxation and Corporate laws.

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