The Goods and Services Tax (GST) Council held its 32nd meeting on 10 January 2019 in New Delhi. Various decisions were taken to provide relief to Micro, Small and Medium Enterprises.
The key recommendations made by GST council are as follows:
- The threshold limit of aggregate turnover in the preceding financial year for opting composition scheme for goods shall be increased to INR1.5 crore.
- Special category States1 would decide, within one week, about the threshold limit for opting composition scheme in their respective States.
- The Government, vide Central GST Amendment Act, 2018 has already increased the upper limit of the threshold to INR1.5 crore.
- At present, the threshold limit for opting composition scheme is:
- For suppliers located in states other than special category states – INR1 crore
- For suppliers located in special category states – INR75 lakhs
- Currently, composition dealers are required to file GSTR4 every quarter and pay tax on a monthly basis. In order to simplify the compliance process under composition scheme, the Council has decided that the taxpayers would need to file one return on annual basis with quarterly payment of tax (along with a simple declaration).
- A composition scheme shall be made available to services providers, with an aggregate turnover in the preceding financial year up to INR 50 lakhs. Under this scheme, the service providers shall be liable to pay GST at the rate of 6% (3% CGST + 3% SGST).
- The above scheme shall also be applicable to suppliers of goods and services, who are not presently eligible for composition scheme for goods.
- Post CGST amendment, only manufacturers and traders having a turnover of services of up to INR5 lakhs or 10% of total turnover, could opt for composition scheme. Composition scheme is not available to a person who is only a service provider other than a restaurant service provider.
- The above recommendations shall be made effective from 1 April 2019.
- The threshold limit for obtaining registration will be increased from INR20 lakhs to INR40 lakhs for the supplier of goods.
- The option is given to the states to opt for a higher threshold of INR40 lakhs. The states have to take a decision on this within a week.
- The threshold for registration of supplier of services has not been changed. The same continues at INR20 lakhs with a lower threshold in certain special category states.
- The above recommendation shall be made effective from 1 April 2019.
Levy of cess
The Council has approved the levy of cess on intrastate supply of goods and services within the state of Kerala at a rate not exceeding 1% for a period of up to 2 years. The purpose of levying cess is to mobilize revenue for natural calamities.
Matters referred to GoM
A seven-member Group of Ministers (GoM) shall be constituted to examine the proposal of composition scheme to boost the residential segment of the real estate sector. Also, a GoM shall be constituted to examine the GST Rate structure on lotteries.
The measures recommended by the GST Council in expanding the coverage of composition scheme coupled with the increased threshold may go a long way in providing relief to small enterprises and traders in terms of ease of doing business. Composition scheme for a supplier of services is a welcome step and might benefit small service providers as their level of compliance will substantially reduce.
As the Council has decided to make various changes effective from 1 April 2019, both the central and state government will need to amend the relevant provisions of Central and State GST Acts before the stipulated timeline.