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GST council sets exemption limit for tax at Rs.20 lakh (Relevant for GS Prelims, Mains Paper II and III)

Exemption limit of GST
The Goods & Services Tax (GST) Council has decided that businesses in the north-eastern and hill states with annual turnover below Rs.10 lakh would be out of the GST net, while the threshold for the exemption in the rest of India would be an annual turnover of Rs.20 lakh.

The Constitutional Amendment paving the way for the GST has a provision to accord special status to the north-eastern and hill states.

Relief for small scale traders
A higher threshold of Rs.20 lakh (as against earlier proposed limit of Rs.10 lakh) is a good news for many small scale traders and service providers as they would be saved from undertaking GST compliances and it also reduces a substantial burden for tax authorities to assess small time dealers.

Administrative control over Indirect taxes assesses
States would have sole jurisdiction over assesses (currently in the VAT net at present) having a turnover of Rs.1.5 crore or less, while the administrative control of businesses with a turnover exceeding that limit would be jointly with the central and state governments.

Service Tax payers to remain under the Centre’s jurisdiction
The Council also decided that the existing 11 lakh service tax assessees will continue to be under the jurisdiction of the Centre.

Since the GST will allow the States to also tax services, over time the revenue officials in the States will be trained after which they will begin assessing assessees in the services sector.

Compensation formula
The compensation that the Centre would pay to the States for losses of revenue because of the transition to the new regime would be routinely, quarterly or bi-monthly. The Council agreed to settle for 2015-16 as the base year for calculating the compensation.

Tamil Nadu had called for ascertaining quantum of compensation based on the average growth rate in the best three of the preceding six years. A formula would be set based on suggestions.



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