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

AVS

2 months ago

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

sehej singh

2 months 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

Anoop Tikamdas Lalwani

3 months 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.

MAHESH VORA

3 months 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.

REPLY

BR

In Reply to MAHESH VORA 3 months 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

3 months ago

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

IRANNA JAGADEV

3 months ago

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

Smeeta Gulvady

3 months ago

Hi am a trainer by profession registered under GSt.request kindly advise threshold level for me for services of training and when does this apply

REPLY

Nikhil Vadia

In Reply to Smeeta Gulvady 3 months ago

If doing within state then Rs. 20 lakh, out side the state nil.

rajesh vs

3 months ago

isn't your point no. 8 same for a composite dealer too

REPLY

Nikhil Vadia

In Reply to rajesh vs 3 months ago

Yes

Vijay Yadav

3 months ago

In the case of a restaurant oe fast food business the new limit of Rs. 40Lakh is not applicable then?

REPLY

Nikhil Vadia

In Reply to Vijay Yadav 3 months ago

For that business. GST of 5% without ITC is least risky option.

Anoop Tikamdas Lalwani

3 months ago

Whether 20L or 40L, what difference difference does it make for a small trader or manucafacturer to move in or out of gst. If he is out, he gets NO REFUND/Adjustment on gst paid on purchases- making him NO COMPETITIVE. If he is gst registered, the overheads, regular gst payment/ money recovery problems etc, late/delayed payments from customers/ companies/buyers etc, Higher money blockages- doing NORMAL BUSINESS, HIGHER CHARGES to be paid to CAs and consultants- the list of HEADACHES is endless. It is better to do business from outside India, as " India now stands much higher in rating- in sense of EASE OF BUSINESS????- for outsiders"

REPLY

Siddharth Dwivedi

In Reply to Anoop Tikamdas Lalwani 3 months ago


Siddharth Dwivedi In Reply to Vijay Yadav1 second agoHello sir please share your number with me need to talk business

Ajoy Shah

In Reply to Anoop Tikamdas Lalwani 3 months ago

Perfectly said.To be competitive in Taxable items u need to be registered or u r out of business.So limit makes no sense whatsoever.

Anand Vaidya

3 months ago

Whatever be the activity, we can be sure the gov+IAS+lower level fatcats will mess it all up.

REPLY

ramjiyahoo

In Reply to Anand Vaidya 3 months ago

Well said

SuchindranathAiyerS

3 months ago

One more faulty and ill conceived and badly implemented policy which the BJP attempts to redo on the fly: From Intensive Action-Research, Modi is moving to desultory Survey –Feedback. Belated relief? Perhaps.

GST exemption threshold doubled to Rs40 lakh, Kerala allowed to impose calamity cess
In a major relief for MSMEs, the GST Council on Thursday doubled the exemption threshold for small businesses from Rs 20 lakh to Rs 40 lakh and also allowed Kerala to impose a natural disaster cess of upto 1 per cent for a period of upto two years.
 
Till now, businesses with turnover up to Rs 20 lakh were exempt from paying Goods and Services Tax (GST).
 
Announcing the decisions after the GST Council meeting here, Finance Minister Arun Jaitley also ruled out any further cuts in tax rates and said "reductions will be made only when revenues move up".
 
He said while under original GST structure, it was envisaged for those with turnover upto 20 lakh to get exemption, the threshold for some northeastern and hill states was kept at Rs 10 lakh.
 
"We have decided to continue with the twin structure with two slabs. While the Rs 20 lakh threshold has been doubled to Rs 40 lakh, for smaller states, the exemption has been kept at Rs 20 lakh," Jaitley said.
 
Even before the decision, some states, including Jammu and Kashmir and Assam, had amended their laws to increase the Rs 10 lakh threshold to Rs 20 lakh.
 
Jaitley said the states with the new limit of Rs 20 lakh will have the option to "opt up" and states with Rs 40 lakh limit will have the option to "opt down" over concerns of erosion of assessee base.
 
He said while the decision would make over 20 lakh businesses eligible for exemption, all of them may not avail it in order to continue to enjoy benefits of GST like input tax credit.
 
The Council also considered a report of the Group of Ministers on imposing a cess in case of calamities and natural disasters. The GoM was set up after a demand for a cess was raised by Kerala after it was hit with severe floods in August last year.
 
"Kerala is now entitled to impose maximum cess of 1 per cent on intra-state sales for a maximum period of two years," Jaitley announced adding that the GST Council can can allow some states to levy cess in case of natural disasters.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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COMMENTS

Adheer Pai

3 months ago

Allowing states to impose additional cess defeats the purpose of GST. Eventually each state will start imposing cess based on vote bank politics.

MT

3 months ago

Even for housing societies , threshold increased to 40lakhs ?

Tax advocates approach Government to rectify mistakes in GST returns
Citing procedural difficulties due to absence of clarity, the All India Tax Advocates Forum (AITAF) on Thursday urged the Finance Minister to allow assessees to rectify mistakes incurred in their monthly GST returns in the Annual Return form GSTR 9 for the financial year 2017- 18.
 
"Ever since the GST was introduced in July 2017, the government had to sort out ground level procedural difficulties relating to filing of multiple monthly GST returns. In the absence of clarity, assessees could hardly get any opportunity to rectify mistakes incurred in their monthly GST returns while filing the Annual GST returns for 2017 18," AITAF President M K Gandhi said in a statement. 
 
"Since the government has decided to extend the due date for filing Annual Return GSTR-9 and form GSTR-9C (Audit Report) for 2017-18 till March 31, 2019, the assessees should be allowed to correct mistakes made by them while filing monthly return GSTR-3B and GSTR-1," he said. 
 
Gandhi said that in the absence of clarity about matters relating to refund of Input Tax Credit (ITC) and mismatch between sales and purchase, the assessees had a "harrowing experience in filing the monthly GST returns". 
 
Most of the assessees have not yet got opportunity to rectify their mistakes in their monthly GST returns, Gandhi said.
 
"Because of ambiguity on the part of the government to put in place a workable system of tax reconciliation under which the mismatch between tax payments and final sales return are rectified, the assessees are facing manifold problems in claiming ITC," said AITAF chief appealing to the government to allow assessees to make necessary amendments and corrections to settle their claims.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

 

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