GST UPDATE MSME exemption limit doubled to Rs 40 lakh

GST UPDATE ON MSME exemption limit doubled to Rs 40 lakh

		MSME exemption limit doubled to Rs 40 lakh

		 

		The 32 GST council meeting concluded on 10 Jan 2019 provides major relief to MSME’s. The GST Council decided to double the exemption limit for Goods and Services Tax registration to Rs 40 lakh from Rs 20 lakh to ease cost of compliance for MSME’s who are engaged in supply of goods. No relaxation has been given to supplier of services.

		This means businesses with an annual turnover under Rs 40 lakhs will now be exempted from registration and payment of GST. In case of special category states such as North-Eastern and hilly states, the exemption limit will be doubled to Rs 20 lakh. However, this exemption limit would be applicable from 1st April, 2019 after passing required amendment bill. 

		States have been given an option to increase the exemption limit to Rs 40 lakh and will be given the discretion to opt for lower exemption and registration limit. States would have the option to decide about one of the limits within a week’s time. 

		Now the following questions pop up in the mind as we do the depth analysis of recommended exemption limit. The question is being explained with the help of an example; a taxpayer is registered in Rajasthan wherein threshold limit is 20 lacs. He wants to commence his business in Haryana as well with the same PAN where the threshold limit decided by the government is 40 lacs.

		However, at present his turnover in Rajasthan is 30 lacs.

		As per section 2(6) of the CGST Act, 2017, “Aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-state supplies of persons having the same Permanent Account Number, to be computed on an all-India basis but excludes Central tax, State tax, Union territory tax, Integrated tax and cess.

		Since in the discussed example, his turnover on PAN India basis exceeds 20 lacs, he will be required to compulsorily register in state of Rajasthan under the GST regime as per Section 22(1) of the CGST Act, 2017. If he registers in state of Rajasthan then he cannot avail the exemption limit of Rs. 40 Lakh in Haryana State.

		In the same example, if the taxpayer gets registered in Haryana with different PAN. He can enjoy the threshold limit of 40 lacs and need not to get registered if his aggregate turnover for that particular PAN is within the 40 lacs.

		GST law was implemented with the basic motive of One Nation, One tax. This decision has given the option to States to choose their own exemption limit of registration. This will create disparity between different states of country regarding registration limits and discrimination between the taxpayers registered in different states.

		In addition to this, if the taxpayer wants to withdraw his registration from April 2019 onwards as his estimated turnover for the upcoming financial years will be limited to 40 lacs, when he would be required to surrender registration?

		Every registered taxpayer is required to file his GSTR 3B return till the 20th of the next month. Taxpayers would be required to file return of March 2019 month till 20th April 2019. This indicates that he cannot surrender his certificate before 20th April. Then even if he surrender it on 20th April, what about the sales done between the period 1st April 2019 till his surrender application is approved by the department. The question arises whether he should charge GST between this period?

		One more demarcation in this decision is pertaining to applicability of exemption limit to taxpayers who are earning ancillary income of interest from FDR, rent from residential property etc. Denying exemption to these taxpayers will put such assessees at disadvantageous position.

		Well, confusions are inbuilt in the newly implemented GST regime and are expected that the same would be resolved while issuing necessary bills and notifications in respect to this decision.

		

		This is solely for the educational purpose.

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GST UPDATE ON MSME exemption limit doubled to Rs 40 lakh

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