To provide relief to small taxpayers in terms of GST exemption, the government has increased the GST exemption limit for MSMEs. The earlier GST exemption limit was INR 20 lakhs which is now doubled to INR 40 lakhs. This step will especially benefit the MSMEs in India – Micro, Small, and Medium Enterprises.
However, the threshold will be INR 20 lakhs for some northeastern and hilly states. Notably, their earlier exemption limit was INR 10 lakhs. The decision will come into effect from April 1 this year. The decision was taken in the GST council which was headed by Finance Minister Arun Jaitley. And this was the 32nd GST council meeting.
The council has also provided relief to composition vendors. The composition scheme registrants can now pay taxes quarterly. And they can also file a single annual return. In addition, the turnover limit for composition scheme is also extended to INR 1.5 crores. The service providers can also avail the composition scheme at the rate of 6%. Their annual turnover limit is set at INR 50 lakhs.
States are given a week’s time to choose between the two GST exemption thresholds – INR 2o lakhs or 40 lakhs. The good news is that with this increase in GST exemption, about 20.64 lakh taxpayers will move out of GST (including taxpayers registered under composition scheme). It is estimated that 50% of the taxpayers will move of GST which will impact INR 5,225 crore annual revenue approximately.
“Each one of the decisions is taken to help SMEs in India,” said FM Arun Jaitley. “For those who utilize the composition scheme, from April 1 towards, it will be quarterly tax payment but only one annual return. So this takes off a lot of compliance burden on them,” he further said.
The Finance Ministry also said in a statement that software shall be provided by the GSTN to the small taxpayers for accounting and billing.
Benefits of GST Exemption Relief to MSMEs
also read: GST Return: How to file GST Return online?
The following are the benefits of GST exemption for MSMEs:
- With the annual turnover threshold increased for MSMEs to INR 40 lakh, approximately 2 million MSMEs will be able to opt out of the GST.
- With the increased annual turnover limit of INR 1 crore, more business owners can now opt for composition scheme.