GST threshold set at Rs 10 lakh

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Experts said keeping the turnover threshold for GST as low as Rs 10 lakh would be a problem for small businesses given the compliance requirement and use of sophisticated IT network in tax payment.

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, official sources told FE.

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.

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