THRESHOLD LIMIT FOR REGISTRATION SHOULD BE RAISED IN THE INTEREST OF VERY VERY SMALL BUSINESSMEN

[KASTURI SETHI]

I am  writing this article in the interest of those very very  small businessmen  who deal in supply of taxable services and goods both and their aggregate turnover is below ₹ 60 lakhs per annum and they are availing threshold limit of ₹ 20 lakh for the purpose of exemption from registration as prescribed under Section 22 (1) of CGST Act, 2017. It is pertinent to mention that in pre-GST era, separate exemption threshold limits for registration were available in Central Excise and Service Tax sectors  for  small scale manufacturers and small scale service providers.

There are two types of threshold exemption limits under GST laws. One threshold exemption limit is for the purpose of registration and the other is for the purpose of exemption from GST. Initially, threshold limit was ₹ 20 lakhs for exemption from GST as well as registration i.e. for both purposes. The supplier of goods or services or supplier of goods and services both  could avail threshold limit of ₹ 20 lakhs. W.e.f. 1.4.19, threshold limit for exemption from GST was raised to ₹ 40 lakhs (other than special category States) exclusively for supply of goods vide Notification No.10/19-Central Tax dated 7.3.19 (effective from 1.4.19)  whereas there was  no change in respect of supply of services except the bar of inter-state supply of services was removed w.e.f. 13.10.17. Threshold limit for supply of services  was not raised and it  remained stuck at ₹ 20 lakhs till date which is clear from Section 22(1) of CGST Act which reads as under :-

“SECTION 22. Persons liable for registration. - (1) Every supplier shall beliable to be registered under this Act in the State or Union territory, other thanspecial category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees :

Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees :”

          A perusal of above reveals that a person who supplies goods and services both  can avail threshold limit  of ₹ 20 lakhs only for exemption from registration whereas  that person is entitled to exemption from GST separately for  goods and services which is ₹ 40 lakhs and ₹ 20 lakhs respectively. In other words, a person who deals in goods and services both cannot avail both threshold limits for the purpose of exemption from registration under GST laws. In pre-GST era separate  threshold exemption limits were available for registration purpose and for exemption from Central Excise duty and Service Tax. For example ; In Central Excise sector, SSI exemption for turnover ₹ 1.50 crore and in Service Tax sector small exemption of ₹ 10 lakhs  were admissible. The assessees were required to apply for registration only after crossing aggregate turnover of ₹ 1.40 Crore in Central Excise  and ₹ 9 lakhs in Service Tax sector.  Both kinds of  threshold exemption limits  were available i.e. exemption from registration and exemption CE duty & Service Tax. Per contra, in GST regime this benefit  is not available. Only single exemption   from registration is available and that is exemption limit of ₹ 20 lakhs for the purpose of registration. A person who supplies goods and services both can avail single exemption  of ₹ 20 lakhs   for the purpose of registration and not for ₹ 60 lakhs (₹ 40 lakhs for goods and ₹ 20 lakhs for services). The very purpose of raising threshold limit to ₹ 40 lakhs for goods is defeated inasmuch as the supplier is legally bound to obtain registration as soon as he crosses aggregate turnover of ₹ 20 lakhs (may be  Rs. ten lakhs for supply of  services and  ten lakhs for supply of goods) as per Section 22 (1) of CGST Act. Despite having aggregate turnover  much below ₹ 60 lakhs, that person is statutorily required to obtain registration under GST laws and maintain all records and file GST returns. Threshold limit of ₹ 60/- (₹ 40 lakhs for goods and Rs.twenty lakhs  for services) is stand nowhere as compared to small scale exemptions in pre-GST era. Such small businessmen have to hire C.A. or Accountant for the purpose of filing GST returns and maintenance of records. It is an unaffordable burden on small businessmen. It is a bitter fact that filing of GST returns and maintenance of records is very complex and time consuming. These small businessmen can get relief from this unnecessary burden of hiring a person, if Govt. raises threshold limit for ₹ 60 lakhs for those persons who deals in goods and services both.          

I hope that Govt. will do the needful in the interest of very very small businessmen.

(K.L.SETHI) 

CONSULTANT(GST&ST) 

The views of this article are author’s personal views and for academic interest only

Discussions to this article

[DR.MARIAPPAN GOVINDARAJAN]

Good suggestion. The limit may be increased to ₹ 1 crore.

[KASTURI SETHI]

Dear Sir,

Thank you very much. Your appreciation for the article matters a lot for me. Hope our voice will reach our Govt. in public interest.

Regards.

K.L.SETHI

[SANJAY MEHTA]

Good suggestion. It should be raised to 1 Crore.

[Pushpkumar Sahu]

Sir, the article has a wonderful discussion about giving benefits to small businessmen, Govt. Should review the scheme of composition and threshold.

Article is well drafted and presented

[KASTURI SETHI]

Sh.Sanjay Mehta Ji and Sh.Pushpkumar Sahu Ji,

Thank you very much for devoting your precious time and liking and appreciating my article.

K.L.SETHI

[Ganeshan Kalyani]

Sir, nicely written. Thanks.

[DEV KUMAR KOTHARI]

Dear Ld. Authors and readers of this article,

Raising limit for small traders and service provider will be good and make business of small enterprises easy.

However we must also look at option of final collection of GST instead of first collect then allow credit or refund policy. This will reduce work and avoid chances of large number of suppliers who supply to few large organization.

For example, a large organization say large factory or service organization can be made responsible to pay tax on output supplied without trouble of getting bills with GST for inputs and claiming ITC and then paying balance. Proper classification can help reduce procedures, collection and credit/ refund points and stop misuse of ITC.