SMALLSCALE FIRMS MAY BE EXEMPTED FROM PAYING CGST

NEWDELHI: Small businesses, with annual sales of as much as ₹1.5 crore, may not need to pay central goods and services tax (CGST), or may get a refund of the same, if the GST Council clears the proposal at its meeting on Saturday.

The Union government is in talks with states on the issue, a person familiar with the matter said on condition of anonymity.

Under the indirect tax system that prevailed before GST, the central government taxed goods at the factory gate (called excise duty), while the states levied value-added tax (VAT). GST replaced both, with a central GST that goes to the central government and a state GST that goes to state coffers. Businesses with revenue of up to ₹1.5 crore did not have to pay excise duty under the previous regime, and a waiver or exemption on CGST now will restore the relief that was available to them earlier.

The state GST (SGST) that these entities pay will, however, remain as they were not exempt from VAT either. Hence, they will have to retain their GST registration, the person mentioned earlier said on condition of anonymity.

The CGST exemption will be a major relief for small firms that form the backbone of the rural economy and create jobs for millions of people. These entities had faced a liquidity crunch and business disruption following the withdrawal of high-value currency notes in November 2016. The central government hopes the tax relief, along with the recent tax cut on consumer items such as washing machines and air conditioners, will stimulate demand and boost economic growth and revenue receipts.