Changes in GST will boost SMEs but may complicate tax system

NEW DELHI: The goods and services tax (GST) was intended to bring uniformity and harmony to India’s indirect tax laws. But all that is set to change yet again with a few states opting out of the recently announced registration criteria for businesses, wherein the annual sales threshold for GST registration was doubled to ₹40 lakh.

While Delhi, Jammu and Kashmir, and Assam have opted for doubling the annual sales threshold for GST registration, Kerala has opted to retain it at ₹20 lakh, a person familiar with the development said. The remaining states, however, are expected to decide sometime this week.

During the announcement of the new threshold on 10 January, the GST Council, chaired by finance minister Arun Jaitley, had allowed states to opt for either of the two levels after some states objected to raising the threshold limit uniformly for all states to ₹40 lakh barring the hill states. The freedom applies only to supply of goods and not for services, which account for a little over half of India’s $2.7 trillion economy.

The states were given a week’s time to take a call, according to the official statement issued after the last Council meeting. “It is not proper to hurry them through a decision,” a second person privy to the talks at the meeting said, requesting anonymity. The Council’s decision gives states flexibility to decide their optimum tax base without hurting small businesses and merchants with red tape. Experts said state governments will exercise this liberty keeping in mind the number and size of businesses in its territory. Inter-state suppliers anyway require GST registration irrespective of turnover. The Council had favoured a higher threshold as small manufacturers with annual sales below ₹1.5 crore, who were exempted from central excise duty in the pre-GST era, had come under GST when registration for businesses was made compulsory for those with annual sales of ₹20 lakh or more. Traders with sales ranging between ₹5 lakh and ₹40 lakh, depending on their state, were required to register for value added tax (VAT) in the earlier regime.

While policymakers consider it expedient to give relief to small businesses from registration, experts say this will complicate the tax system further. “Different threshold limits in various states will take us back to the VAT regime where this was prevalent. Besides, it will add one more layer of complexity to pan-India businesses,” said M.S. Mani, partner, Deloitte India.

Source- Livemint.

The post Changes in GST will boost SMEs but may complicate tax system appeared first on GST Station.

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