GST Exemption limit for Small Business in India

GST is proposed to be more transparent, paperless but requires more compliance. Through GST all the taxpayers will witness a complete change in the indirect taxation system of India. Although there is no such term as a small businessman under the GST law but means the person or the taxpayers who have a turnover of less than Rs 75 lakh in the preceding financial year. So in this guide we are talking about GST Exemption Limit for the Small Business.

Earlier the business crossing annual turnover of 5 lakh or 10 lakh (in some states) had to have VAT registration and payment. This was confusing as multiple VAT regulations across different states. This problem will be resolved by the GST as the businesses with a supply with the state ( Except the Interstate) turnover of less than Rs. 20 lakh would not have to register for GST or even collect it. Additionally, those with a turnover of Rs. 20 and Rs. 75 lakh may have to pay the GST at a lower rate, under the composition scheme. This only gives a big impetus to startups with a nominal turnover thus bringing them relief from collection and filing of GST returns, etc.

Small Businessman

There are two categories of small business persons in India:

  • Those having turnover of up to Rs 20 lakh (already covered under basic exemption limit)
  • Those with a turnover up to Rs 75 lakh (remedy available in the form of composition levy)

Basic Exemption Limit

  • GST Law itself grants the basic exemption of Rs 20 lakh to the small business person. If the aggregate turnover in a financial year does not exceed Rs 20 lakh then the supplier is not Liable under GST.
  • However, if the supplier is in north-eastern states then the threshold is Rs 10 Lakh.
  • Aggregate turnover means the aggregate value of all taxable supplies, exempt supplies, exports of goods and/or services and inter-state supplies of a person having the same permanent account number (PAN) and has to be computed on all India basis and excludes taxes, if any, charged under the Central Goods and Services Tax (CGST) Act, State GST (SGST) Act and the Integrated GST (IGST) Act.

Composition Levy

Section 10 of the GST law contains the provision with respect to the registration of a taxpayer under composition scheme. The basic principle underlying the composition scheme is to minimize the burden of compliance for small taxpayers.

Accordingly, the government has come up with composition scheme wherein any taxpayer whose turnover is below Rs 75 lakhs can choose not to register as a normal taxpayer. Instead, he may choose to get registered as a taxpayer under composition scheme and pay taxes on his supplies at a nominal rate. However, he shall not be eligible to issue a tax invoice and cannot utilize the credit of input tax paid as a result thereof.

  • Any registered taxable person can opt for the composition levy if the aggregate turnover in the previous financial year does not exceed Rs 75 lakh. (As increased by The GST Council on 11th from Rs 50 lakh.)
  • Now traders, manufacturers and restaurant owners with turnover below Rs 75 lakh can opt for the composition scheme and pay taxes at 1, 2, and 5 percent rates, respectively. The composition scheme seeks to relieve small businesses from the complexity of GST. Instead of GST, they pay a percentage of their turnover as a tax.

GST Exemption limit for Small Business

  • The officer may permit the registered taxable person to pay tax under composition levy with some conditions.

Composition levy is not available in certain cases

  • The composition levy is not available in certain cases where the taxable person:
    • Is engaged in the supply of services;
    • Supplies goods on which tax is not leviable under this Act;
    • Makes any inter-State outward supplies of goods;
    • Supplies goods through an electronic commerce operator and who is required to collect tax at source under section 56;
    • Is a manufacturer of such goods as may be notified on the recommendation of the Council.

So hope this guide is helpful for you as a small business. you need the GST Registration only when within the state your turnover cross more than 20 lakh rupees but if you are supply inter state goods or service then you have to requried the GST Registration from starting so there you can go with the composition schem to save the taxes and compliance like GST Return Filings etc.