9 Facts You Must Know about the New GST Limit of Rs40 lakh

Nikhil Wadia 14 January 2019

Economy & Nation

The Goods and Services Tax (GST) council, at its 32nd meeting held last week, announced several changes including the fact that the new limit for registration under GST would be Rs40 lakh. This has been hailed as a major decision to help small taxpayers go out of the tax net and, hence, the related compliances and costs. However, this limit has come with far too many complications, as explained below, and a small businessman will have to take help of a tax expert before deciding whether to avail this exemption limit or continue to be in GST regime. The main issues, which will have to be kept in mind, are:

1. Next Year: This limit is applicable from FY19-20 onward, i.e., for financial year starting from 1 April 2019.

2. Goods, Not Services: The limit is applicable only for sale of goods. For service providers limit continues to be Rs20 lakh for all states except for special states where it is Rs10 lakh.

3. Not for Interstate Sales: The limit is not applicable if you are selling goods inter-state, i.e., from one state to another.

4. Amendments: GST being a dual tax (Central and state), the limit for turnover will have to be changed in both the Acts. This will have to be done for each state in Central Goods and Services Act, 2017 as well.

5. Registration: Section 24 of GST Act makes it compulsory to register in certain circumstances, and this Section is not amended. Hence, if a small businessman is registered due to that, he will have to continue with the registration. Exporters and those selling on websites like Flipkart, Amazon, Snapdeal will have to continue with their registration.

6. No Clarity on Service Income: If a person, who is selling goods, has even small service income like rent for neon signs or product placements at his shop, it is not clear whether the limit of Rs20 lakh or Rs40 lakh will apply to him. For example, a person may have sales of Rs25 lakh and rental income of Rs5 lakh, will he be covered by the new exemption limit? Since increase in limit is for goods only and there no separate limit for goods and services for aggregate turnover, once registered, GST has to be charged on all outward supplies whether goods or service.

7. Turnover Calculation: Section 22 of GST Act uses the word aggregate turnover (taxable goods plus taxable services plus exempt/nil rated goods plus exempt/nil rated services) while describing persons who are liable for registration. Hence, small shop-owners will have to see their turnover in totality before deciding. Even for as basic an issue as the limit for registration , what was the need to have so much complications.

8. GST Paid Becomes Cost: All GST paid on purchases will become cost to the person and he cannot charge any GST on outward supplies, i.e., sales.

9. Draconian Consequences: On top of all this, please remember Section 17(5)(i), which says that if you decide that tax is not payable but GST department asks for tax and you lose in appeal, you may not be eligible for input tax credit on purchases.

GST was supposed to remove distinction between goods and services or mixed supply of goods and services, since, under the erstwhile regime, many disputes were relating to this. Now we are slowly again going towards that as there will be separate limit for registration and we already have separate procedure for refund in case of export of goods and service. Also, for composition scheme, there will be separate limit of Rs50 lakh for services and Rs150 lakh for goods with different rates.

(Nikhil Vadia is a chartered accountant practicing since past more than 21 years in direct and indirect taxation, internal audit and management consultancy)

Comments

User

vikrambansal3108

5 years ago

An option was provided to the states to opt for the new limits or continue the earlier ones.

Note 1: Two hilly states J&K and Assam have also opted to raise the limit to Rs. 40 lakh. These two states had the option to remain under lower threshold limits as they fall under the Special Category States.

Your article is very good and explained in simple way.

mmvinoth

5 years ago

Planning to start food delivery business in my small town. My turnover will not go beyond 20Lakhs, do I need to still get GST?

er.vishal89

5 years ago

Hi,
My father runs a shop and has GST number. However annual turnover is less than 40 lacs and it is not interstate sale
Should he opt to cancel the GST number? What would be the complications or issues because of this?

Thanks
Vishal

Jayesh

7 years ago

I am freelance web designer. I turnover is less then 4 lacs. But I am selling my services interstate. Do I need GST registration ?

deepak ganig

Replied to Jayesh comment 7 years ago

Dear Sir,

Yes, GST Registration is Required

Vignesh Gunasekaran

7 years ago

I already registered for GST, now turnover less than new limit of 40 L. But I want my gstn number. What reason to choose in cancellation, so that my gstn is not canceled, and simply just my GST registration changes to Volunter (no need to pay Gst).
I have filed Annual return just few days back (it intimated to reach local administrative office). Only after checking this, officers will manually mail to cancel the registration? won't it take days/months? Meanwhile Ours composition scheme. have to pay GST for this quarter by next month?

deepak ganig

Replied to Vignesh Gunasekaran comment 7 years ago

If you Need GST Number then you need to register under GST act

Let us know if any clarification is required in this regard
Deepak N
8867463594

Shriti Goyal

7 years ago

An assessee is already registered having turnover 27.5lakh..I want to cancel registration.. Can i.??

Kusam Arun Kumar

Replied to Shriti Goyal comment 7 years ago

Yes, You Can, Simply apply for Cancellation of Registration under Services

Vignesh Gunasekaran

Replied to Kusam Arun Kumar comment 7 years ago

If I simply apply for cancellation, won't I lose my GST number (gstn) ?! some manufacturers won't give stocks to us if we don't have gstn. Also in the reason text box, can i choose 'Voluntary'? if I choose Voluntary still will I lose my gstn?

Vignesh Sivanandam

Replied to Shriti Goyal comment 7 years ago

Wanted to ask the same. Can someone answer please?

Shree Anandeshwar Travels

7 years ago

Kindly advise as I am running a tour & travel business and I was registered under 12% gst slab & was taking ITC input benefit but now i want to switch to 5% gst slab i.e without ITC input benefit...
Can I change it , is it possible and plz advise what all we have to do for it...

Kusam Arun Kumar

Replied to Shree Anandeshwar Travels comment 7 years ago

Leave the Input , Stop taking input and Pay 5% as Usual

NagarN

7 years ago

In regards to point no 2, do it need any registration till services within state ?

NagarN

7 years ago

GOOD INFO

AVS

7 years ago

What about point no. 6 whether it is cleared or not .

sehej singh

7 years ago

Hi Nikhil,
If I am provinding sports training and running an academy. Does the threshold for paying gst increase to 40 lakhs for my company ? Company is yet to be registered

Kusam Arun Kumar

Replied to sehej singh comment 7 years ago

For Sports Training, GST is Zero check with gst website

udai singh

Replied to sehej singh comment 7 years ago

You are providing a service so limit stands only 20lakhs..

Anoop Tikamdas Lalwani

7 years ago

A small time manufacturer or trader ( and there are lakhs of them throughout india), and not under gst - does not get the benefit of having already paid gst to another manufacturer or dealer or supplier-who is under gst. , the 2 nd person is then forced to increase the price and sell at a high rate to the final buyer. The same small manufacturer or trader if not in gst - cannot sell to a much bigger purchaser, who demands gst billing else he buys from a gst registered dealer or manufacturer. THUS GST is a death kneel for small time business- how does a Small time business man survive. I do not UNDERSTAND THE LOGIC OF GOVERNMENT TO INCREASE 20 lakhs limit to 40 lakhs, when the gst policy is so designed that forcefully, one has to get registered and bear heavy charges of consultants, CA and follow extensive laborious process of gst filing- neglecting the time requirement of improving ease of business, concentration on his product design, r & d , product economisation - to remain competitive. IT IS GOOD IF YOU ARE A BIGGER ORGANISATION. Practical thought has not gone into its implementation.

support

Replied to Anoop Tikamdas Lalwani comment 6 years ago

this is how chinese are beating indians..

MAHESH VORA

7 years ago

If there can be only one tax... it cannot be tax on consumption of goods and services... Such levy can kill the business, income and welfare of the citizens...

The only single levy should be annual tax on land and real estates.

Share you views.

Replied to MAHESH VORA comment 7 years ago

All people do not own land & real estates or get Income. Besides, land owners are not all big earners, though they may keep land. Many get no income from it by rent or proceeds of agricultural sale. Not much tax can be got from them & they need not bear the brunt of the burden caused by others. So Mr Chidambaram the then Minister of Finance said that even the man on the street & every tea shop owner must pay tax & extended Service Tax to many activities & trades. Later its %age was raised from a high level to a higher level. Even Insurance on Life & others were taxed, not letting even a hopeless dying person to save & use all money paid as Premium for Insurance, but made, to forgo as tax. GST is again levied on Fund Value before giving Pension. IRDA & LIC of India (though for its own want for profit) did not succeed in reversing it. It was raised again.No trader or business can survive easily by paying high tax.It is passed on to the hapless buyer of goods & services.The businesses escape easily. Essentials like Drinking water, food, communications & Telecomm are all prey to it though Govt & other orgns make Digital services the order of the day or Compulsory even for poor people who have no means to pay for E-services in browsing shops or Pvt home systems. (Killing the goose that lays the golden egg).
Family Planning failed in India. Though many years passed since it started by Pvt parties &Govt, many people got over 2 children. No Disincentive is there for them. Each generation from those 3 or more children caused huge rise in demands for space, services, food, water, air, etc.
Birth rate is high. People must reduce it. If not, no amount of taxing will meet our needs & wants.

MAHESH VORA

7 years ago

INDIA will move up in ease of doing business ranking..!! Let the world realise what the complication can be..!!

IRANNA JAGADEV

8 years ago

As per 9th statement, if he lose in appeal then ITC not allowed, will it be for for current year or continues..