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Good news on GST for MSMEs

Indian Economy & Policy | January 31

Good news on GST for MSMEs


The 32nd GST Council, which is the most important decision making body under the GST regime, met on January 10. This meeting concluded with a range of much awaited and long overdue reliefs and exemptions for the Micro, Small and Medium Enterprises (MSMEs) sector.

 

The highlight was that smaller MSMEs will now get relief from registering under GST, as the government doubled the exemption threshold level, in terms of minimum annual sales from the earlier INR 20 lakh to INR 40lakh. So, effectively, those with annual sales of less than Rs 40 lakh will not have to register under GST and mandatorily file their GST returns. For hilly states and North Eastern states, the threshold has also been doubled to INR 20 lakh. These GST turnover limits will become effective from 1st April 2019.

 

Another positive for small business people was a change announced with respect to the GST Composition Scheme. Under this scheme, currently, small traders and businesses with a turnover of up to INR 1 crore can avoid GST formalities by paying GST at a fixed rate of 1% of their turnover. The Council decided that with effect from April 1this benefit can be availed by businesses with a turnover of INR 1.5 crore , against the earlier INR 1 crore threshold limit.

 

Other attractive features of the Composition Scheme are that enterprises that opt for this scheme will have to file just one tax return annually, against the earlier requirement to file GSTR-4 return every quarter; they will, however, have to pay taxes once every quarter. Additionally, small assesses, with a turnover of up to INR 1.5 crore can avail free accounting and billing software.

 

      The benefits of the Composition Scheme have also been extended to service providers, which until now was only applicable to manufacturers and traders, who have a turnover of less than Rs.50 lakhs. This scheme will be applicable to both service providers and receivers who are not eligible for the presently available scheme. These service providers can pay GST at the rate of 6% (3% CGST +3% SGST) of their turnover from the new financial year (1st April 2019). They will, however, not be eligible to claim Income Tax Credit once they enrol for the Composition Scheme.


     It was a good day for the MSME sector; even the Finance Minister, Shri Arun Jaitley tweeted, "The GST Council in its 32nd meeting today accorded massive relief for MSME sector."

 

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