In a bid to give relief to small businesses, the GST Council Thursday doubled the limit for exemption from payment of goods and services tax (GST) to Rs 40 lakh and announced that the higher turnover cap of Rs 1.5 crore for availing composition scheme of paying 1 per cent tax will be effective from April 1.
The Council also allowed Kerala to levy a 1 per cent calamity cess on intra-state sale of goods and services for a period of up to two years to mobilise revenues to meet the cost of rehabilitating parts of states that were ravaged by floods last year.
Finance Minister Arun Jaitley said the taxpayers with an aggregate turnover of Rs 40 lakh would now be exempted from the GST.
For the north eastern states, the exemption would now be Rs 20 lakh. Currently, businesses with a turnover of up to Rs 20 lakh is exempt from GST registration, while the limit for hilly and north eastern states is Rs 10 lakh.
Sources said the annual revenue loss on account of doubling exemption limit to Rs 40 lakh, considering that all states implement it, is Rs 5,200 crore.
Jaitley said the GST Composition Scheme, under which small traders and businesses pay a 1 per cent tax based on turnover, can be availed by businesses with a turnover of Rs 1.5 crore, against the earlier Rs 1 crore, with effect from April 1.
Also, service providers and suppliers of both goods and services up to a turnover of Rs 50 lakh would be eligible to opt for the GST composition scheme and pay a tax of 6 per cent.
Jaitley said those opting for the composition scheme would have to file just one tax return annually but pay taxes once every quarter.
The twin decision under the composition scheme would have an annual revenue impact of about Rs 3,000 crore.
Jaitley said these decisions would give a relief to micro, small and medium enterprises (MSMEs).
“A very large part of GST comes from formal sector and large companies. Each one of these decisions is intended to help the SMEs. You have given them various options. If they are in services sector, they can get 6 per cent compounding, if they are in manufacturing and 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,” he said.
On GST rate for real estate, the council has decided for form a seven-member group of ministers after differences of opinion emerged at the meeting, he said, adding there were diverse views on lottery. A ministerial panel will look into it as well.
Revenue Secretary Ajay Bhushan Pandey said even though currently the exemption limit is Rs 20 lakh, but still there are about 10.93 lakh taxpayers who are below Rs 20 lakh but are paying taxes.
“The increased (exemption) limit (of Rs 40 lakh) is applicable for those businesses who deal in goods and also do intra-state trade and not for those who do inter-state transactions,” Pandey said.
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 over 1.17 crore businesses which have registered under the Goods and Services Tax (GST), which was rolled out from July 1, 2017.
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.
Also, a composition taxpayer is not required to keep detailed records that a normal taxpayer is supposed to maintain.
The council in its November meeting had hiked the threshold for the composition scheme to Rs 1.5 crore, which will now be effective from the beginning of next fiscal.
“The Composition service provider is likely to be not eligible for input credit and consequently, output tax of 6% will be indirectly non-creditable for the Companies. The recipients will have to bear the taxes indirectly which will add to the input cost,” said Mahesh Jaising, Partner, Deloitte India on the composition rate decided in Thursday’s GST Council meet.