DECREASE IN TURNOVER LIMIT FOR COMPOSITION LEVY IN THE STATE OF UTTARAKHAND

Composition Turnover Limit with Effect from 1 April 2019

CBIC has recently issued Notification No. 14/2019- Central Tax; Dated: 7 March 2019 to give effect to the decision to increase turnover limit for composition scheme to Rs  1.5 crores. However for special category states including the state of Uttarakhand the limit has been kept at existing Rs 75 Lakh only.

Thus there would be two turnover thresholds for opting for composition levy

1) General Category States- Rs 1.5 crore

2) Special Category States- Rs 75 lakh

(Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand)

Composition Turnover Limit before 1 April 2019

Notification No.- 8/2017- Central Tax; Dated 27-06/2017 as amended by Notification No. 46/2017- Central Tax; Dated:13-10-2017, Notification No.- 1/2018- Central Tax; Dated: 1-01-2018, and Notification No.- 5/2019- Central Tax, Dated: 29/1/2019 provides turnover limit of Rs 1 crore to opt for composition levy. For Special category states excluding Uttarakhand and Jammu and Kashmir turnover limit is Rs 75 Lakh.

Thus existing two turnover thresholds for opting for composition levy are

1) General Category States- Rs 1 crore (including Uttarakhand)

2) Special Category States- Rs 75 lakh

(Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh)

Notification No. 14/2019- CT supersedes earlier notification no.-8/2017- CT resulting in decrease of turnover limit for opting composition levy from earlier Rs 1 crore to Rs 75 Lakh in the state of Uttarakhand with effect from 1 April 2019. This will result in non-compliance and added tax burden on already struggling MSME sector in the state.

Turnover Limits applicable in various states for opting for composition can be summarized as under:

Sr. No. State Aggregate Turnover in the preceding FY to Opt for Composition Net Impact
Before 1 April 2019 After 1 April 2019
1 All states other than specified below 1 Crore 1.5 Crore Increase
2 Assam 75 Lakh 1.5 Crore Increase
3 Himachal Pradesh 75 Lakh 1.5 Crore Increase
4 Uttarakhand 1 Crore 75 Lakh Decrease
5 Jammu and Kashmir 1 Crore 1.5 Crore Increase
6 Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura 75 Lakh 75 Lakh No Change

Government should clear its intentions on the above anomaly at the earliest to avoid ill impacts on existing composition dealers in the state of Uttarakhand.

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