LAW OF TAXATION

TOPIC:

A STUDY OF REVISED GST THRESHOLD LIMIT

Submitted By: Submitted To:

Anjali Rani Mr. Nizam Khan

16GSOL102093
Assistant

Professor
School of Law

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 A STUDY ON REVISED GST THRESHOLD LIMIT

CHAPTER I

INTRODUCTION:

India has adopted dual Goods and Service Tax (GST) model because of its unique federal
nature. Under this model, tax is levied concurrently by the Centre as well as the States on a
common base, i.e. supply of goods or services or both. The implementation of the Goods and
Services Tax in India was a historical move, as it marked a diverse change in indirect tax
system in the country. The amalgamation of a large number of taxes, levied at a central and
state level, into a single tax is expected to have big advantages. One of the most important
benefits of the move is the eradication of double taxation or the elimination of the cascading
effect of taxation. In India, the idea of adopting GST was first suggested by the Atal Bihari
Vajpayee Government in 2000, but it came to reality only on July 1, 2017. 1 Since then GST
Act has been amended several time in order to meet the needs and requirement of the
economy and to give it a boost. The threshold Limit of GST was revised in 2019 which
became effective from April 01, 2019 and the revised limits are effective till date. The
revised limit was expected to give a boost to the small business. The paper tries to study the
revised threshold limit of the GST and also tries to study the impact of such revised threshold
limit on the Indian economy. For this purpose, the secondary source of data in the form of
research article, newspaper articles, blogs, etc has been used. Threshold limits could have
been made same of both goods and service provider in north eastern states.

RESEARCH QUESTION:

a) What is threshold limit under GST?

1
GST:Meet the Man Behind India’s Biggest Tax Reform that’s been in making for 17 years,
INDIATODAY(April 01, 2020) https://www.indiatoday.in/india/story/goods-and-services-gst-reformers-atal-
bihari-asim-dasgupta-chidambaram-arun-jaitley-985352-2017-06-29.

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 CHAPTER II

THRESHOLD UNDER GST:

The term threshold is not defined in GST Act. Threshold limit means limit which allows the
person to do business without obtaining registration under GST.2

In terms of Section 24 read with Section 22, following persons are required to be
compulsorily registered under CGST Act:

1. Every supplier shall be liable to be registered under the CGST Act in the State from
where he makes a taxable supply of goods and/or services if his aggregate turnover in   
a financial year exceeds Rs. 20 lakh. However, in respect of Special Category States,
the aforesaid threshold registration limit has been reduced to Rs. 10 lakhs.
2. Person making any inter-state taxable supply (no threshold limit).
3. Causal Taxable Persons (No threshold limit).
4. Persons liable to pay GST under reverse charge (no threshold limit).
5. Electronic Commerce Operator in respect of specified categories of services if such
services are supplied through it.
6. Non-Resident Taxable Persons.
7. Persons who are required to deduct tax at  source
8. Persons who are required to collect tax at  source
9. Persons who supply goods and/or services on behalf of other taxable persons whether
as an agent or otherwise (no threshold limit).
10. Input Service Distributor.
11. Persons who supply goods and/or services through Electronic Commerce Operator
who is required to collect tax at source (No threshold limit).
12. Every Electronic Commerce Operator (No threshold limit).
13. Every person supplying Online Information and Database Access or Retrieval
Services (OIDAR Services) from a place outside India to a person in India, other  than 
a  registered taxable person.
14. Such other person or class of persons as may be notified by the Government on the
recommendation of the Council.
2
What is Threshold Limit under GST, HOW TO EXPORT IMPORT( March 26, 2020, 7:20 pm)
https://howtoexportimport.com/What-is-Threshold-limit-under-GST-9271.aspx.

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 CHAPTER III

A STUDY OF THE REVISED THRESHOLD LIMIT:

After passing of Constitution (122nd Amendment) Bill by the Parliament and upon receiving
the President’s assent GST Act came in force from July 01, 2017. Since then the Act was
amended time and again to suit the need of Indian market. On March 7, 2019, Central Board
of Indirect Taxes and Customs issued notification and revised the existing threshold limit
with the aim to give relief to small business. 3 The revised threshold limit effective from April
01, 2019 stands as follows:

a) Threshold Limit for Registration in case of goods (allover India) except persons engaged
in making Supplies in the state of Arunacahal Pradesh, Manipur, Meghalaya, Mizoram,
Nagaland, Puducherry, Sikim, Telengana, Tripura, Uttrakhanad has been increased to Rs.
40 lakhs from Rs. 20 Lakhs
Threshold Limit for Registration in case of Goods- Rs. 40 lakhs is not applicable in
following cases-
i) Persons required to take compulsory registration under Section 24 (Example -
Online Sale , E-Commerce Operator)
ii) Persons engaged in supply of Ice Cream and other edible ice, whether or not
containing cocoa, Pan Masala, Tobacco and manufactured tobacco substitutes.
b) Threshold Limit for Registration in case of Services except persons engaged in making
Supplies in the state of Arunacahal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland,
Puducherry, Sikim, Telengana, Tripura, Uttrakhanad is Rs.20 lakhs which is same as
before.
c) Threshold Limit for Registration in case of Goods & Services engaged in making
Supplies in the state of Arunacahal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland,
Puducherry, Sikim, Telengana, Tripura, Uttrakhanad is Rs. 10 lakhs which is also same
as before.
d) The Composition Scheme has also been revised for different service providers which are
as follows:
i) For Trader, Manufacturer having annual turnover of Rs. 1.5 Crore, rate is 1%.
ii) For Restaurant Service having annual turnover of Rs. 1.5 Crore, rate is 5%.

3
Analysis of GST Notification issued by CBIC on 07 th March, 2019, TAXGURU.IN( March 24, 2020, 11:30
p.m.) https://taxguru.in/goods-and-service-tax/analysis-gst-notifications-issued-cbic-07th-march-2019.html.

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 iii) For Other Service Providers subject to threshold limit of turnover in the preceding
Financial Year from Rs. 50 lakhs to Rs. 1.5 Crore, 3% CGST & 3% SGST.

The Composition Scheme is applicable upon following-

i) Not engaged in making any supply which is not leviable to tax under the CGST
Act.
ii) Not engaged in making any inter-state outward supply.
iii) Neither a Casual Taxable Person nor a Non Resident Taxable Person
iv) Not engaged in making any supply through an e-commerce operator who is
required to collect tax at source under section 52
v) Shall not collect any tax from the recipient on supplies made by him nor shall be
entitled to any credit of ITC
vi) Shall issue Bill of Supply instead of Tax Invoice
vii) The registered person under composition scheme shall mention the following
words at the top of the bill of supply namely-“Taxable Person paying tax in terms
of Notification No. 2/2019- Central Tax (Rate) dated 07.03.2019, not eligible to
collect tax on supplies”
e) Supply with consideration shall be treated as supply under GST and Supply without
consideration except activity under schedule I – not treated as supply under GST
f) The TCS Provisions has also been revised and for the purpose of determination of value
of supply under GST, Tax collected at source under the provisions of Income Tax Act,
1961 would not be includible as it an interim levy not having character of Tax
g) The following new return format was proposed:
i) If turnover up to Rs. 5 Crore in preceding Final Year , then Taxpayers can opt for
submitting return quarterly using Form GST RET 1 or Form GST RET 2 or Form
GST RET 3.
ii) Quarterly Return submission using Form GST RET 1- ITC on Missing Invoices
can be availed.
iii) Quarterly Return submission using Form GST RET 2 & GST RET 3- ITC on
Missing Invoices cannot be availed.
iv) Quarterly Return submission using Form GST RET 3- Outward Supply under
B2C & B2B category and inward supplies attracting reverse charge are to be
informed in this return.

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 v) Quarterly Return submission using Form GST RET 2- Outward Supply under
B2C category and inward supplies attracting reverse charge are to be informed in
this return.

Hence, the revised GST Limit is summarized above by the author.

CHAPET IV

IMPACT OF REVISED GST:

The revised GST threshold limits have various affect and effect on economy. While the
increased registration limit will help in providing more liquidity to small business and will
help in their growth, the service sector is still suffering from complications of composition
scheme thereby not being able to fully take the benefit of composition scheme. The revised
GST is having various impact on different sectors which is discussed below:

a) Even Small Traders (below the threshold Limit) would able to remain in business and
supply to big Dealers, without forcing the latter to pay Reverse Charge.
b) Small Traders need not have to collect Tax and pay it, but remain hassle- free.
c) Since Small Traders also have GSTIN, they would be under the GST Umbrella and their
Transactions can also be kept track of.
d) The benefit of composition of scheme is not available to taxpayers engaged in
manufacturing of ice cream and other edible ice, whether or not containing cocoa, pan
masala, all goods i.e., Tobacco and manufactured Tobacco substitutes. The service sector
was expecting a composition scheme but the government has further complicated the
composition scheme for service provider rather than passing an all encompassing
composition scheme. This will further complicate the process.
e) The amendment of registration threshold limit is beneficial especially for small and
medium taxpayers who do not need to get themselves registered under GST unless their
turnover exceeds Rs 40 lakhs. This applies only to those who are exclusive suppliers of
goods.

Hence, these were few of the impacts of revised GST that the research paper tries to
highlight.

CHAPTER V

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 RECOMMENDATIONS AND CONCLUSION:

The GST Act is still in its infancy and needs to be further evolved to better suit the
requirement of Indian economy. There is a continuous need to make the tax payment hassle
free and also simply the procedure as much as possible. The benefits of exemption should be
extended to both services sectors and goods providers. Following suggestions are made to
further improve the implication of GST in Indian market:

a) If, in aggregate, the Inter-state & Intra-state turnover is within the threshold Limit, the
dealer should be treated as “Small Scale Dealers” and should be entitled to the
concessions available to similar Intra- State Dealers.
b) Composition scheme should be extended to inter-state supply as well.
c) The government must translate existing GST Rules in vernacular language so that it
becomes easy for people to understand.
d) The threshold limit for PAN India supply should be increased so as to give sufficient
chance for these small service providers to grow.

GST has brought in ‘one nation one tax’ system, but its effect on various industries is slightly
different. The first level of differentiation will come in depending on whether the industry
deals with manufacturing, distributing and retailing or is providing a service.

GST is to boost competitiveness and performance in India’s manufacturing sector. Declining

But due to GST business which was not under the tax bracket previously will now have to
register. This will lead to lesser tax evasion. Goods and Service Tax, with end-to-end it has
tried to enable a tax mechanism, which is likely to bring more revenue to the government.

It is expected that the activity of tax theft will go away under Goods and Service Tax regime
in order to benefit both governments as well as the consumer. In reality, that extra revenue
that the government is expecting to generate won’t come from the consumers pocket but from
the reduction of tax theft which will benefit in future developments.

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However, the act is not sufficient enough to cater to the need to all the goods and service
providers of the economy. The act still needs certain amendments to make it suit the Indian
economy and surrounding which will help in further growth and development of Indian
economy and generate more tax revenue in the government pocket without creating a burden
on consumer’s pocket.