Goods and services tax threshold may Rs.25 lakh

A large num­ber of states have acced­ed to the Cen­tre’s pro­pos­al on a high­er annu­al turnover thresh­old of Rs25 lakh aimed at giv­ing relief to small and mar­gin­al traders and shop­keep­ers, rais­ing hopes for ear­ly final­i­sa­tion of the new tax frame­work. The empow­ered com­mit­tee of state finance min­is­ters had orig­i­nal­ly pro­posed for Rs.25 lakh as thresh­old but lat­er changed its stance after a few states such as Rajasthan and Tamil Nadu favoured a Rs10 lakh limit.

This would have meant that any goods sell­er or ser­vice provider with an annu­al turnover of Rs.10 lakh would be liable to pay the tax. That would bring 60% of traders in the tax net but only end up con­tribut­ing just 2–3% of rev­enue, sig­nif­i­cant­ly increas­ing the admin­is­tra­tive bur­den as well as the cost of collection.

The Cen­tre cur­rent­ly levies excise duty above a turnover of Rs1.5 crore and states levy val­ue added tax on a turnover of Rs 10 lakh or low­er. Ser­vice tax is levied on an annu­al turnover above Rs10 lakh. The Cen­tre is keen that small shop­keep­ers, traders and hawk­ers do not have to face any hard­ship under the new tax regime.

GST seeks to replace a mul­ti­tude of indi­rect tax­es with one, remov­ing bar­ri­ers to the move­ment of goods and ser­vices across state bound­aries and turn­ing the coun­try into a sin­gle mar­ket. The frame­work was orig­i­nal­ly sched­uled to be rolled out from 2010 but has been stuck due to dif­fer­ences between the Cen­tre and the states.