THRESHOLD LIMIT UNDER GST

GST Update 08.01.2016

GST DAILY DOSE OF UPDATION:-

THRESHOLD LIMIT UNDER GST

As the proposed unified tax regime GST will subsume a number of taxes levied by the Central Government and the State Government, it becomes more important for the government to decide a reasonable threshold limit within which no tax would be leviable. Presently, the threshold exemption for service tax assessees is Rs. 10 Lakhs if the total value of taxable services provided during the preceding financial year is less than Rs. 10 Lakhs. Furthermore, the manufacturers are enjoying threshold exemption upto Rs. 1.5 Crores if the total turnover during preceding financial year is less than Rs. 4 Crores. Similarly, there are different threshold limits for Sales Tax implemented by different States. Not only this, there are different rates of taxes for levy of excise duty, service tax, VAT, Sales tax etc. Hence, with the merger of different tax rates into one single GST rate, the threshold limit is also required to be fixed as a particular amount for both goods and services.

As there is vast difference in the threshold limits for levy of excise duty for manufacturers and for the levy of service tax on service providers, and due to the fact that both the taxes are going to be merged as a single tax GST, a reasonable threshold limit for exemption needs to be decided by the government. Moreover, the threshold limit cannot be too high as it will lead to enhancing the Revenue Neutral Rate (RNR) and it cannot be too low as it will increase the inflation level. Moreover, as proposed in the Joint Committee Report on Business Processes for Registration, there will be a separate threshold limit specified for compounding dealers who opt for paying tax at specified percentage of the turnover without entering the cenvat credit chain. Accordingly, it is necessary that proper parity is maintained in specifying the two different threshold limits for the taxpayers.

The Centre has proposed Rs. 50 Lakh limit but the states are not agreeing the same. The states are saying that there is threshold exemption of Rs 10 Lakh in States and it should continue. Even it was proposed that the exemption limit for excise is Rs 150 Lakh and the same should continue. The state should collect CGST and SGST from Rs. 10 lakh to Rs. 150 Lakh and thereafter CGST should go to Centre. But it is not a feasible proposal as it will be difficult to do accounting of revenue in this case. However, as it will take considerable time to reach a consensus on the limit to be fixed as threshold limit, it is proposed that the threshold limit will be decided by the GST Council.

Comments

GST Update 08.01.2016

Post a Comment

Query