GST exemption for MSMEs: New thresholds to come into effect from April 1
The Goods and Service Tax (GST) Council has notified that its decision taken in its 32nd Meeting, held on January 10, 2019, are set to come into effect from April 1, 2019 and impact tax thresholds for MSMEs. According to a government release, there will now be two threshold limits for exemption from registration and payment of GST. This applies to MSMEs which are suppliers of goods.
According to a press release, the limits are Rs 40 lakh and Rs 20 lakh, and states will be given the option to decide on the limit. The threshold for service provider MSMEs will continue to be Rs 20 lakh. In special category states, this threshold will be Rs 10 lakh.
In relation to the composition scheme, a scheme will be made available for suppliers of services, or mixed suppliers, with a tax rate of six percent and having an annual turnover below Rs 50 lakh.
Further, the annual turnover limit of MSMEs for availing composition scheme for goods shall be increased to Rs 1.5 crore. However, this is only applicable to the turnover of the preceding financial year.
The government statement added that these notifications will come into effect from April 1, 2019. The GST Council had taken these decisions during a meeting held amid expectations of rate cuts on products like cement, bringing under-construction residential properties in the five percent slab and raising the threshold limit for MSMEs.
It had decided that the composition scheme shall be a method of taxation that allows MSMEs with annual turnover of up to Rs 1.5 crore (earlier Rs 1 crore) to pay tax at concessional rates and reduce compliance costs.
Minister of Finance and Corporate Affairs, Arun Jaitley, who had led the meet, had said that under the GST regime, service taxpayers with earnings of up to Rs 50 lakh per annum will be taxed at six percent, and there will be only one tax return for MSMEs who opt for composition scheme.