If you have a business, you might want to read this. The GST council made a decision in their most recent meeting to double the current GST limit for MSMEs to ₹ 40 lakhs from the previous ₹20 lakhs. The composition scheme increased from 1 crore to 1.5 crores!
The prime goal of this decision is to simplify the cost of compliance for MSMEs in India.
Who does this GST limit extension affect?
According to the latest changes in the law, any business that generates less than ₹40 Lakhs as revenue no longer needs to pay GST or register. Taking all states into consideration, the exemption limit for North Eastern and hilly states are doubled to INR 20 Lakh.
All states get a week to decide one of the limits, as told by the finance ministry. However, service providers continue to have a limit of ₹20 Lakhs.
- If your business generates annual revenue that’s less than ₹40 Lakhs, you won’t have to pay GST.
- If you opt for the composition scheme, your exemption limit is extended to ₹1.5 CR.
- Service providers or a supplier of goods and services with a turnover of ₹50 lakh, now have the option to opt for the composition scheme.
Understanding composition scheme for service providers
The composition scheme earlier allowed businesses with an annual turnover or ₹1 Cr (and ₹75 Lakhs for some states) to voluntarily opt into a scheme where they pay a special rate of 1% (for manufacturers and other suppliers), and 5% (for food suppliers).
Service providers have a special provision in the latest regime. The annual threshold limit under the composition scheme for small service suppliers is now at INR 1.5 Cr. This scheme is now available for service providers and suppliers with an annual turnover of up to ₹50 lakh with a rate of 6%.
The pressure on companies to comply with tax regulations significantly reduces, with the onset of this decision. The increase in the threshold and reduction in return filing requirements to just one per year is a load off MSMEs.
What effect could it have on MSMEs?
Over 20 Lakh business taxpayers will benefit from this new exemption extension.
If the states are prompt, there may be multiple threshold limits set across the country for MSMEs, and hopefully, it will prove beneficial for both parties.
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