GST Council Tax Reduction for SME - 32nd GST Council Meeting

Background Context

The 32nd meeting of the recently held meeting of GST council released the agenda for reducing the taxes and overhead burden laden on SMEs (Small and Medium Enterprises).

Photo by Kelly Sikkema / Unsplash

Ahead Measures Announced post Meeting

  • The limit Annual Turnover to be eligible for GST exemption has been revised and raised to the new level of ₹40 lakh for almost all states and ₹20 lakh for the companies incorporated and located in North Eastern and hill states. Earlier this was set to ₹20 lakh and ₹10 lakh.

The limit for Eligibility for the Composition Scheme

This limit bar has now increased and has been raised to an annual turnover of ₹1.5 crores (₹15 million ) with immediate effect starting from April 1st, 2019. Earlier, this was only accessible to manufacturers and traders, now this scheme has been extended to small service providers with an annual turnover of up to ₹50 lakh, at a fixed tax rate of 6%.

Kerala is an exception where they are allowed to levy the cess of 1% for the period of two years on intra-state resources and supplies, in order to provide funds to the relief efforts following the recent occurrence of the floods in the state.

Indications and outcomes of these measures

  • A very big amount of GST revenue is drawn from the formal sector and larger companies. The recent measures taken will help SMEs (Small and Medium Enterprises/Companies). Perhaps the influence of these measures will be minimal on revenue drawn.
  • The situation of allowing the State of Kerala to levy cess, because of the flood-affected area and their efforts to subsidize the flood situation could trigger precedence for other states to implement/deploy or demand supplementary tax.
  • This measure (raiding the GST threshold) would enable 1 million (10 lakhs) traders free from the compliance overhead burden of GST and raising the threshold of the Composition Scheme limit will be advantageous to more than 2 million (20 lakhs) small businesses with annual turnover between ₹1.0 crores and ₹1.5 crores(i.e. ₹10 million and ₹15 million).
  • Currently, the Composition Scheme allows the SME (Small and Medium Enterprise) to file returns quarterly at a minimal rate of 1%.

Need of the GST Council

GST councils can be considered and treated as policymakers and important decision-makers in the context of GST. GST council is responsible for important decisions regarding tax laws, tax rates, tax deadlines, tax exemption, tax dates, and special provisions for intended states. Ensure uniform tax bracket for goods and services across all Indian states.

How is the GST Council organized?

  • The provision or amendment made available through Article 279 (1) of the Indian constitution, specifies that the GST council has been constituted and established by the President of India within the time frame of 60 days (2 months) of the commencement/beginning of the Article 279A.
  • Article 279A also specified or mentions that the GST council will be the joint venture of Central Govt. and State comprising of the following members.
  • Chairperson: The Union Finance Minister of India.
  • In charge of Revenue of Finance: Union Minister of the State.
  • It is at the discretion of the State Govt. to appoint the Minister of Finance/Taxation or any other minister as a member of the GST council.