Small businesses can breathe easy now as the Goods and Services Tax Council has decided to double the basic threshold limit for goods suppliers.
However, the Council, which took a slew of decisions on Thursday, could not arrive at a consensus on lowering the levy on under-construction flats.
The 32 meeting of the Council chaired by Finance Minister Arun Jaitley decided to raise the basic threshold limit for suppliers of goods (for mandatory GST registration) to ₹40 lakh from the current ₹20 lakh. Also, some of the north-eastern and hilly states will have a new limit of ₹20 lakh from ₹10 lakh earlier.
However, there is no change in the limit for services. The threshold for registration of service providers would continue to be ₹20 lakh, and in case of special category States, ₹10 lakh.
“The States will have the freedom to change the threshold,” Finance Minister Arun Jaitley told reporters after the meeting. Any State, which would like to exercise the freedom, has to inform the Council’s Secretariat within one week. Jaitley said that this will be a one-time concession.
Stating that there will be notional revenue loss, Jaitley added that over 20 lakh assesses could go out of the GST net.
Archit Gupta, Founder & CEO of ClearTax, said that increasing the basic registration threshold will benefit small businesses as it will reduce their compliance cost and efforts. However, suppliers selling to other businesses must continue with full compliance if they want to pass on the input tax credit benefit to their buyers, he said. “Service providers will be relieved with the composition scheme; even though the rate is higher, their compliance cost will go down significantly,” he added.
The Council also decided on the new structure for the composition scheme that will come into effect from April 1, 2019. Trading, manufacturing and restaurant businesses with annual turnover of ₹1.5 crore can be part of the scheme. Though the tax rates will be same at one per cent (trading and manufacturing) and five per cent (restaurants), such businesses will now be required to file returns annually and not quarterly. But taxes should be paid quarterly along with a simple declaration.
Special composition scheme
The Council also decided to bring in a special composition scheme for small services providers.
Any such providers with an annual turnover of up to ₹50 lakh will be eligible. Here, the GST rate would be 6 per cent. The scheme will also cover mixed suppliers such as electricians and plumbers.