32nd GST Council Meeting: Threshold limit for GST Registration raised to Rs. 40 lakh : 14-01-2019

The GST council in its 32nd meeting has recommended several changes under GST law in ease of doing business for MSMEs and SMEs. Considering the demand of small industries to raise threshold limit for registration under GST, the GST Council has decided to raise the threshold limit from 20 lakhs to 40 lakhs for GST registration for suppliers of goods. Further, the limit has been raised from 10 lakhs to 20 Lakhs in case of north-eastern and hilly States. However, an option has been provided to States to opt for higher threshold limit, i.e., every State has the right to choose either higher threshold limit(i.e., 40 Lakhs) or to keep same threshold limit (i.e., 20 Lakhs).

There is no change in the threshold limit for service providers. Currently, as per GST law, a supplier providing inter-State supplies is required to take mandatory registration under GST, irrespective of its turnover. Also, composition scheme is not available to dealers engaged in inter-State supplies of goods or services or both.

GST Council has also raised the threshold limit for composition scheme from 1 crore to 1.5 crores from April 1st, 2019. Moreover, composition scheme is also introduced for service providers whose turnover is less than 50 Lakhs besides restaurants. A summarised table to know the threshold limit of registration, availability of composition scheme and rate of taxes has been provided below-

Nature of supply Turnover or Receipts Registration Composition scheme Rate of tax for composition scheme
Goods Up to 40 Lakhs
More than 40 but up to 1.5 crore 1% of the turnover
More than 1.5 crore
Restaurant Services Up to 20 Lakhs
More than 20 Lakhs but up to 1.5 crore 5% of the turnover
More than 1.5 crore
Other services Up to 20 Lakhs
More than 20 Lakhs but up to 50 Lakhs 6% of the turnover
More than 50 Lakhs

Conclusion

Since several threshold limits for registration have been recommended by the GST Council as well as an option has been granted to States to choose for higher threshold. It will create confusion as different set of rules will be there for different States and will be against the basic principal of GST, i.e., One Nation, one Tax. Currently, States have power to notify different rules for E-way Bills and now, States have discretion to prescribe different threshold limits.

Further, there is no clarity on issue of determining threshold limit in case of mixed supply, i.e., dealer engaged in business of supplying both goods and services. Hopefully, the Government will come out with a separate notification and clarify about the threshold limit applicable on persons engaged in business of supplying both goods and services.

Source : Economic Times