GST Thresholds Limits and Composition Scheme for Businesses: A Comprehensive Overview
Introduction:
The GST Council, in response to the requests made by MSMEs, has raised the GST registration threshold limits. These adjustments were put forward during the 32nd GST Council meeting held on January 10, 2019, and were subsequently officially implemented by the CBIC. This alteration aims to simplify compliance with the GST regulations.
This article elucidates the modifications in the GST registration threshold limits. It delves into the previous threshold limits, the updated GST registration limits, and the individuals to whom these changes are applicable. Moreover, if you wish to verify the registration status of your vendors or buyers, you can make use of our GST search tool. By entering the GSTIN, you can swiftly obtain the desired results.
Overview of earlier limits, new limits and the date of applicability
| Aggregate Turnover | Registration Required | Applicability |
| Earlier Limits – For the sale of Goods/Providing Services | ||
| Exceeds Rs.20 lakh | Yes – For Normal Category States | Up to 31st March 2019 |
| Exceeds Rs.10 lakh | Yes – For Special Category States | Up to 31st March 2019 |
| New Limits – For Sale of Goods | ||
| Exceeds Rs.40 lakh | Yes – For Normal Category States | From 1st April 2019 |
| Exceeds Rs.20 lakh | Yes – For Special Category States | From 1st April 2019 |
| New Limits – For Providing Services | ||
| There has been no change in the threshold limits for service providers. Persons providing services need to register if their aggregate turnover exceeds Rs.20 lakh (for normal category states) and Rs.10 lakh (for special category states). | ||
Overview of earlier limits, new limits and the date of applicability
| Aggregate Turnover | Registration Required | Applicability |
| Earlier Limits – For the sale of Goods/Providing Services | ||
| Exceeds Rs.20 lakh | Yes – For Normal Category States | Up to 31st March 2019 |
| Exceeds Rs.10 lakh | Yes – For Special Category States | Up to 31st March 2019 |
| New Limits – For Sale of Goods | ||
| Exceeds Rs.40 lakh | Yes – For Normal Category States | From 1st April 2019 |
| Exceeds Rs.20 lakh | Yes – For Special Category States | From 1st April 2019 |
| New Limits – For Providing Services | ||
| There has been no change in the threshold limits for service providers. Persons providing services need to register if their aggregate turnover exceeds Rs.20 lakh (for normal category states) and Rs.10 lakh (for special category states). | ||
States who opted for the new limit
An option was provided to the states to opt for the new limits or continue the earlier ones (status quo).
| Normal Category States/UT who opted for a new limit of Rs.40 lakh | Normal Category States who choose status quo | Special Category States/UT who opted for new limit of Rs.40 lakh | Special Category States/UT who opted for new limit of Rs.20 lakh |
| Kerala, Chhattisgarh, Jharkhand, Delhi, Bihar, Maharashtra, Andhra Pradesh, Gujarat, Haryana, Goa, Punjab, Uttar Pradesh, Himachal Pradesh, Karnataka, Madhya Pradesh, Odisha, Rajasthan, Tamil Nadu, West Bengal, Lakshadweep, Dadra and Nagar Haveli and Daman and Diu, Andaman and Nicobar Islands and Chandigarh | Telangana | Jammu and Kashmir, Ladakh and Assam | Puducherry, Meghalaya, Mizoram, Tripura, Manipur, Sikkim, Nagaland, Arunachal Pradesh and Uttarakhand |
Note 1: Two hilly states J&K and Assam have also opted to raise the limit to Rs.40 lakh. These two states had the option to remain under lower threshold limits as they fall under the Special Category States. Even previously when these two states had the option to charge GST only on aggregate turnover exceeding Rs.10 lakh, they had opted for a higher threshold limit of Rs.20 lakh.
Note 2: Kerala can now charge ‘calamity cess’ up to 1% on all intra-state supply of goods and services to cope up with natural calamities faced by the state last year.
Financial Year for Calculating Aggregate Turnover:
When determining the applicability of the new threshold limits, the aggregate turnover during the current financial year (illustrated in the aforementioned example as FY 2019-2020) is taken into consideration. If a supplier’s aggregate turnover in the present financial year surpasses these threshold limits, GST registration becomes mandatory. Nevertheless, there are specific categories of individuals who are obligated to register under GST:
- Suppliers conducting interstate transactions
- Casual taxable individuals
- Individuals taxable under the reverse charge mechanism
- Non-resident taxable individuals
- Individuals required to deduct TDS under GST
- Individuals required to deduct TCS under GST
- Input Service Distributors
- Individuals involved in sales on behalf of others, whether as an agent or principal
- E-commerce operators facilitating suppliers to conduct transactions via their platform
- Suppliers using e-commerce operators liable for tax collection at source
- Online service providers delivering services from outside India to unregistered individuals in India.
Alterations in the Threshold Limits for Opting into the Composition Scheme:
Changes in the composition scheme include raising the annual turnover threshold to Rs. 1.5 crore, effective from April 1, 2019. Taxpayers registered under this scheme must pay taxes quarterly and file annual returns starting April 1, 2019. However, the threshold of Rs. 75 lakh remains unchanged for North Eastern states and Uttarakhand. This threshold also extends to restaurants (excluding those serving alcoholic beverages).
Extension of Composition Scheme to Service Providers The new scheme extends the composition scheme to service providers, offering a fixed tax rate of 6% (3% CGST and 3% SGST). Independent service providers and mixed suppliers of goods and services with an annual turnover of up to Rs. 50 lakh in the preceding financial year are eligible for this scheme.
Conclusion: These alterations mark a pivotal step towards enhancing the ease of doing business and fostering growth. The amended thresholds and the extended Composition Scheme are not merely administrative changes, but strategic decisions that empower businesses to navigate the complex terrain of GST with greater confidence and efficiency. As businesses continue to evolve and adapt, the GST landscape evolves alongside, ensuring a more inclusive and accommodating tax environment.
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