Bringing the much-needed transparency in the indirect tax regime, the GST (Goods and services tax) in India are multipronged. By bringing all the indirect taxes under a single umbrella, GST has eliminated the cascading tax effect, making compliance easier. Touted as the greatest tax reform of independent India, GST benefits have been further extended to businesses, particularly small and medium enterprises (SMEs), in the recently concluded meeting of the GST Council.
In its meeting, the Council announced several measures aimed to enhance the profitability of business enterprises. The Council increased the GST exemption limit, thus giving business entities, particularly SMEs, a big boost. Read on to know the advantages of GST in India and new exemption limit announced by the GST Council in its 32nd meet:
Doubling of GST Exemption Limit
In what could bring a major relief for business organisations in the country, the GST Council has doubled the exemption limit from Rs. 20 lakh to Rs. 40 lakh. It means firms with an annual turnover of up to Rs. 40 lakh need not register for GST and pay any taxes. For enterprises in the hilly and north eastern states, this exemption has been doubled from the earlier Rs. 10 lakh to Rs. 20 lakh.
The new exemption threshold to be applicable from 1st April 2019 is expected to ease GST compliance for a majority of enterprises, especially SMEs, operating in the country. It must be noted that GST registration is applicable based on the annual turnover of a business.
Earlier this turnover was fixed at Rs. 20 lakh for other states and Rs. 10 lakh for hilly and north eastern states including Jammu & Kashmir, Arunanchal Pradesh, Uttarakhand, Himachal Pradesh, Nagaland, Sikkim, Manipur, Mizoram and Meghalaya.
Threshold Exemption Limit for those Enrolling under Composition Scheme
GST benefit has also been extended to those enrolled under the composition scheme. Under the composition scheme, businesses need to pay taxes quarterly and not monthly at a concessional rate of 1%. With record keeping easier under composition scheme, businesses can focus more on their task at hand.
While earlier the maximum threshold for enrolling under the composition scheme was Rs. 1 crore, this threshold has now been extended to Rs. 1.5 crore. What it means is that businesses get a little more flexibility and breathing space to enrol themselves under the composition scheme. As of now, if the annual turnover of a business is even a rupee more than Rs. 1 crore, the entity is not eligible to get the benefits of the composition scheme.
It’s estimated that more than 18 lakh businesses are enrolled under the composition scheme, since the GST roll out from 1st July 2017. Experts believe that the higher limit would encourage more business entities to opt for the composition scheme under GST.
The Council has also announced composition scheme for two new categories of businesses – services and those selling goods and services. As of now, these categories of businesses were not able to get GST benefit under composition scheme.
While opinions differ on whether GST in India has yielded the desired results or not, experts opine that the higher exemption limit would fillip the growth of enterprises, particularly SMEs, the growth drivers of the economy.