GST threshold set at Rs 5 lakh for Northeast & Rs.10 Lakh for the rest

Traders with a turnover below R10 lakh a year won’t have to reg­is­ter for or pay the goods and ser­vices tax (GST), and those with annu­al sales of R10 lakh to R50 lakh will need to pay the tax at a rate low­er rate than the stan­dard GST rate.

The con­ces­sion­al tax rate would, how­ev­er, not be avail­able for traders mak­ing inter­state trans­ac­tions irre­spec­tive of their turnover, they said. The quan­tum of con­ces­sion will be decid­ed by the pro­posed GST Coun­cil which will also deter­mine the stan­dard GST rate. The thresh­old lev­els were finalised by the empow­ered com­mit­tee of state finance min­is­ters that met here for the sec­ond con­sec­u­tive day on Friday.

For north­east­ern states, the thresh­old could be R5 lakh.

The pro­posed min­i­mum turnover lev­els for GST to kick in would mean two things: Thou­sands of small traders with annu­al sales below R10 lakh would go out of the tax net (in many states the VAT thresh­old is R5 lakh and below, though in oth­ers it is R10 lakh and above.) Some tiny units will come come under the tax net giv­en that the cen­tral excise duty is now payable only for units with R1.5 crore turnover.

Experts said keep­ing the turnover thresh­old for GST as low as R10 lakh would be a prob­lem for small busi­ness­es giv­en the com­pli­ance require­ment and use of sophis­ti­cat­ed IT net­work in tax pay­ment and claim­ing of cred­its that small traders may not be equipped for. “In any tax regime, 80–90% of rev­enue would come from the lim­it­ed num­ber of lead­ing assess­es, while the admin­is­tra­tive cost would far out­weigh the rev­enue from small tax­pay­ers,” said R Muralid­ha­ran, senior direc­tor, Deloitte in India.

The Cen­tre had pitched for a thresh­old of R25 lakh, and even reg­is­tra­tion by traders below the thresh­old so that they could be cap­tured in the tax net as soon as their sales breach the limit.

How­ev­er, state finance min­is­ters did not agree to that. Amit Kumar Sarkar, part­ner, Grant Thorn­ton India, said that a R10-lakh thresh­old would more than off­set any rev­enue loss for states keep­ing VAT thresh­old of below R10 lakh giv­en the sub­stan­tial gains like­ly from their abil­i­ty to tax ser­vices (by way of state GST) in the pro­posed regime.

More than half of the cur­rent traders in the tax net will be out of it if the GST thresh­old is fixed at 25 lakh, as sug­gest­ed by the Centre.

Ker­ala finance min­is­ter and chair­man of the empow­ered com­mit­tee of state finance min­is­ters (EC) KM Mani told reporters after the two-day meet­ing of the pan­el at Kovalam near here that the frame­work for reg­is­tra­tion of traders and busi­ness­es under the new indi­rect tax regime has been finalised. The fin­er points of the frame­work on GST reg­is­tra­tion would be incor­po­rat­ed in the GST laws to be passed by cen­tral and state governments.

Mani said the EC could approve the report on reg­is­tra­tion but not those on returns and refunds as state finance min­is­ters made cer­tain sug­ges­tions, based on which these reports would be revised. How­ev­er, con­sid­er­ing the impor­tance of the time-bound work of GSTN — the not-for prof­it com­pa­ny set up by the Cen­tre and states to cre­ate the IT infra­struc­ture need­ed for the new tax sys­tem — the com­mit­tee has autho­rised it to go ahead with the pro­pos­als as they stand. “Small changes, if need­ed, GSTN can always tweak its plat­form to incor­po­rate the changes,” Mani said.

Rash­mi Ver­ma, addi­tion­al sec­re­tary (rev­enue) in the finance min­istry, said, “The thresh­old below which traders will not be required to reg­is­ter will final­ly be decid­ed by the GST Coun­cil, but the EC has rec­om­mend­ed that traders below Rs 10 lakh sales need not reg­is­ter. It is option­al for them. If they want to, they can.”

Mani also said the empow­ered com­mit­tee has approved the reports on GST on inter­state trade (IGST) and GST on imports. The frame­work on IGST finalised on Thurs­day seeks to remove all irri­tants that busi­ness­es face at present in pay­ing tax­es using the cred­its they have earned on tax­es paid pre­vi­ous­ly on raw mate­ri­als and ser­vices. Under this, states will not have any right to restrict input tax cred­its on inter­state trans­ac­tions as the idea is to facil­i­tate free flow of tax cred­its and thus move towards a com­mon nation­al mar­ket. Sources also said cross-util­i­sa­tion of CGST or SGST cred­it will be allowed for pay­ment of IGST.

The GST rate, finance min­is­ter Arun Jait­ley said recent­ly, would be much low­er than the 27% pro­posed by Del­hi-based think tank NIPFP as a rev­enue-neu­tral rate.

Source: Finan­cial Express