December 26, 2022

GST Exemption Limit

Goods and Services Tax (GST) is one of the most significant tax provisions introduced in the Indian economy. According to the GST regime, if the annual sales of a business exceed the exemption limit specified by the authorities, then it needs to be enrolled for GST registration. Recently, the GST council increased the exemption limits for different businesses. The exemption limit is known as the threshold limit and GST registration limit. It is almost mandatory for all businesses in India to be registered under GST. If an individual carries out business without GST registration, then it is considered an offense where the person is charged with heavy penalties.

Let's read everything we should know about the new GST registration limits!

The GST Exemption Limit for Goods in the Normal Category States

It is compulsory for every individual engaged in the exclusive supply of goods with an average turnover of more than Rs. 40 lakhs in normal category states to have the GST registration. Earlier, the limit was Rs. 20 lakhs for goods suppliers in normal category states valid up to 31st March 2019, but it was then increased to the new limit of Rs. 40 lakhs as notified by the CBIC.

The GST Exemption Limit for Goods in the Special Category States

If an individual is involved in the sale of goods in the special category states where annual turnover exceeds Rs. 20 lakhs, he is mandated to register under the GST regime. The old exemption limit for such businesses was Rs. 10 Lakhs, valid till 31st March 2019. The constitution has defined some states as special category states. It includes the North-eastern and hilly states- Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Sikkim, Tripura, Nagaland, Himachal Pradesh, and Uttarakhand.

The GST Exemption Limit for Service Providers

If an individual is involved in service-providing business, he must get registered under the GST regime considering his turnover exceeds the exemption limit. Unlike businesses involved in the sale of goods, the GST exemption limit for service providers has not been changed. It is Rs. 20 lakhs for suppliers from normal category states and Rs. 10 lakhs for special category states.

GST Exemption Limit

New GST Exemption Limit State-Wise

All the Indian states have the option to either opt for the changed limits or continue with the existing ones. The following chart shows the state-wise GST threshold/exemption limit.

Normal Category States/UTs opting for new limit of Rs. 40 Lakhs Normal Category States/UTs opting for existing limit Special Category States/UTs opting for new limit of Rs. 40 lakhs Special category states/UTs opting for new limit of Rs. 20 lakhs                                                                                                                                                    Kerala, Chhattisgarh, Jharkhand, Delhi, Bihar, Maharashtra, Andhra Pradesh, Gujarat, Haryana, Goa, Punjab, Uttar Pradesh, Himachal Pradesh, Karnataka, Madhya Pradesh, Odisha, Rajasthan, Tamil Nadu, West Bengal, Lakshadweep, Dadra and Nagar Haveli and Daman and Diu, Andaman and Nicobar Islands and Chandigarh, Telangana, Jammu and Kashmir, Assam, and Ladakh, Puducherry, Meghalaya, Mizoram, Tripura, Manipur, Sikkim, Nagaland, Arunachal Pradesh and Uttarakhand                                                                        

Even though J&K and Assam had the option to remain under lower GST limits, these states opted to follow the increased limits. Moreover, Kerala can now charge a calamity cess up to one percent on all supplies.

While it is pretty clear how the GST exemption limit works, it is equally important to know some of the other related concepts. Let's have a look!

Aggregate Turnover

Aggregate turnover decides the eligibility of an individual for the exemption limit. Hence, it is noteworthy to know about it. Aggregate turnover is the aggregate value of all taxable and non-taxable supplies. Generally, it is considered as the average sales of a supplier. Computation for aggregate turnover often includes:

1. Taxable supplies

2. Exempted supplies

3. Interstate supplies

4. Non-GST supplies

5. Zero-rated supplies

6. Goods sent for job work

The authorities have asked suppliers (with aggregate turnover more than exemption limits) to be registered under the GST regime. But there are some specified categories of persons who need to get registered under GST compulsorily. It includes:

1. Casual taxable persons

2. Suppliers dealing in interstate supplies

3. Input service distributors

4. NRI taxable persons

5. Persons required to deduct TDS under GST

6. Persons required to deduct TCS under GST

GST Composition Scheme

The composition scheme is an additional plan of tax assessment planned for small taxpayers. Under this scheme, tax assessment is made at a reduced rate with fewer compliances subject to few restrictions.

The limit of annual turnover for the composition scheme has been changed and increased to Rs. 1.5 crore starting from 1st April 2019. The North-eastern states and Uttarakhand adopt the existing provisions for the limit of Rs. 75 lakhs.

The new scheme also introduces a fixed rate of 6%- 3% CGST and 3% SGST- for service providers. Independent service providers and mixed suppliers of goods and services, having an annual turnover of up to Rupees Fifty lakhs, have an option to opt for this scheme.

Altogether, GST exemption limit is a significant concept under the GST regime which you must know as a business owner under the Indian taxation system.


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