On 5th October 2017, the GST council, headed by the Finance Minister Arun Jaitley, announced a slew of changes in the GST. It was done to ease compliance norms for small and medium sector enterprises (SMEs).
[You may read this article to understand GST: The Goods and Services Tax Explained]
The GST council reduced GST rates for 27 items. Other decisions taken by the council are as follows:
Frequency of GST returns
To make GST filing less cumbersome, it has been decided that businesses with a turnover of up to 1.5 crores will be allowed to file quarterly returns, instead of monthly returns required earlier.
Mandatory Registration for GST
Business entities with a turnover of less than 20 lakhs (10 lakhs for special category states* except for Jammu and Kashmir) are not required to register under GST. These small businesses do not have to pay GST. But, if the business entities make inter-state supplies, they have to compulsorily register for GST, irrespective of the turnover.
This provision has been done away with for service providers. So, even those service-providers making inter-state supplies have been exempt from GST registration, provided their aggregate turnover does not exceed 20 lakhs.
*Special category states include the 7 North-eastern states, Sikhim, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.
GST on Reverse Charge Mechanism
- The GST is paid to the Government by the supplier of goods and services. But, in some cases, recipient of goods and services have to pay GST. This is known as reverse charge mechanism (RCM).
- There are several cases in which RCM is applicable.
- If a registered business buys goods or services from an unregistered supplier, the registered business (recipient) had to pay GST (RCM)
- The above rule has been suspended until 31st March 2018.
*Please note, RCM in other cases will continue.
GST on advance receipt
- GST has to be paid by the supplier on receipt of advance payment, even if the goods have not been actually delivered.
- This has caused a lot of inconvenience for the small businesses.
- So, the GST council announced that the businesses having annual aggregate turnover up to Rs. 1.5 crores are not required to pay GST at the time of receipt of advances.
- The GST shall be payable only when the supply of goods is made.
Composition scheme threshold limit increased
- Every entity with an annual turnover of greater than 20 lakhs will have to register under GST. However, an entity having a turnover between 20 lakhs and 75 lakhs can opt for composition levy scheme.
- Under the scheme, the entity can opt to pay a certain percentage of their turnover as tax, instead of GST. The rate is 1% for traders, 2 % for manufacturers and 5 % for restaurants.
- This threshold of turnover for opting for composition levy scheme will be increased to Rs 1 crores from Rs 75 lakhs.
*Composition levy scheme is attractive for the small businesses, as they have to pay a flat rate of tax that is lower than GST, file quarterly returns and has lesser compliance norms. The drawback is that businesses having inter-state supplies cannot opt for this scheme.
*Please note, the threshold limit for special category states was 50 lakhs (and not 75 lakhs). It has been increased to 75 lakhs for all special category states except Jammu and Kashmir and Uttarakhand. For, J & K and Uttarakhand, it has been increased to 1 crores like the rest of India.
To conclude, the Government has responded to the challenges faced by the small businesses in transitioning from the previous indirect taxes system to GST.