GST ex­emp­tion limit dou­bled to `40 lakh to help small biz

The coun­cil de­ci­sion may cost the ex­che­quer Rs 5,000 crore

Financial Chronicle - - FRONT PAGE -

THE GST coun­cil on Thursday dou­bled the ex­emp­tion thresh­old un­der the goods and ser­vices tax regime to Rs 40 lakh to give re­lief to small busi­nesses, but al­lowed states two ex­emp­tion thresh­olds of Rs 20 lakh and Rs 40 lakh to choose from and in­ti­mate the de­ci­sion in a week.

The coun­cil also raised the turnover limit un­der the com­po­si­tion scheme to Rs 1.5 crore from Rs 1 crore, to be ef­fec­tive from April 1, and al­lowed Ker­ala to levy a 1 per cent dis­as­ter cess on in­tra-state sale of goods and ser­vices for up to two years. Ker­ala had sought the cess to mo­bilise rev­enues to meet the re­ha­bil­i­ta­tion cost fol­low­ing the dev­as­tat­ing floods last year.

The rev­enue loss on ac­count of hike in ex­emp­tion thresh­old is es­ti­mated to be Rs 5,000 crore on the as­sump­tion that 50 per cent of the tax­pay­ers will go out of GST, an of­fi­cial said.

The coun­cil, which met un­der the chair­man­ship of fi­nance min­is­ter Arun Jait­ley, was ex­pected to raise the GST thresh­old to Rs 75 lakh, but Con­gress-ruled states and AAP-led Delhi govern­ment op­posed the move.

Con­firm­ing the devel­op­ment, As­sam fi­nance min­is­ter He­mant Biswa Sarma tweeted the pro­posal for rais­ing the GST reg­is­tra­tion ex­emp­tion thresh­old limit was Rs 75 lakh or at least Rs 50 lakh turnover, but the Con­gress and AAP min­is­ters re­sisted. Rev­enue sec­re­tary Ajay Bhushan Pandey told FC the de­ci­sion would help im­prove com­pli­ance of GST.

The coun­cil didn’t ap­prove the ex­pected GST rate cut on un­der-con­struc­tion houses from 12 per cent to 5 per cent with­out in­put tax credit. Re­alty and lot­tery is­sues have been re­ferred to the yet-to-be-con­sti­tuted group of min­is­ters.

Jait­ley said the GST com­po­si­tion scheme, un­der which small traders and busi­nesses pay 1 per cent tax based on turnover, would also be ex­tended to ser­vice providers with up to Rs 50 lakh turnover at 6 per cent rate. Along with the hike in com­po­si­tion scheme limit, the de­ci­sion could have an an­nual im­pact of about Rs 3,000 crore.

The coun­cil has de­cided for set up a seven-mem­ber GoM af­ter dif­fer­ences emerged on the real es­tate GST rate, Jait­ley said.

Pandey said af­ter dis­cus­sion the lot­tery is­sue was re­ferred to the fit­ment com­mit­tee. Jait­ley said those opt­ing for the com­po­si­tion scheme would have to file just one tax re­turn an­nu­ally, but pay taxes ev­ery quar­ter.

“A very large part of GST comes from for­mal sec­tor and large com­pa­nies. Each one of these de­ci­sions is in­tended to help SMEs,” he said.

“Few states felt if the turnover thresh­old is hiked to Rs 40 lakh, their as­sesses base would get eroded. So if they in­form the sec­re­tar­iat within a week, they would be given the op­tion to opt down. Puducherry has kept this op­tion. It’s an one-time ex­cep­tion and doesn’t af­fect busi­nesses with in­ter-state sup­plies,” Jait­ley said.

Un­der the com­po­si­tion scheme, traders and man­u­fac­tur­ers can pay taxes at a con­ces­sion rate of 1 per cent, while restau­rants pay 5 per cent GST. There are over 1.17 crore busi­nesses reg­is­tered un­der GST.

Of these over 1.8 mil­lion have opted for the com­po­si­tion scheme. A com­po­si­tion sup­plier is re­quired to pay taxes quar­terly and is not re­quired to keep de­tailed records com­pared with a nor­mal tax­payer.

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