GST threshold level to bring more small cos under tax net

Font Size

Print

Feedback

Email

Discuss

Related Articles

Finance panel for 12% GSTNew direct taxes code likely to hit PFC opsNSSO to estimate GST taxpayer baseProposed MAT rate could be cut by 1%

New Delhi: The goods and services tax (GST), proposed to come into effect sometime next fiscal, will bring in far reaching changes in the country’s indirect tax administration regime, including a uniform threshold at both Centre and state levels of an annual turnover of Rs 10 lakh for goods and services. This will mean many small-scale units and manufactures will be brought into the tax net at the central GST level. At present, the threshold for central excise below which small scale firms do not have to register and are fully exempted is Rs 1.5 crore. For service tax, it is Rs 10 lakh.

Other key proposals in the draft discussion paper on GST, accessed by FE, include cash refund to replace the current scheme of area-based exemptions and a PAN-based identification number for taxpayers. State finance ministers in their meeting last Friday approved the 15-page draft discussion paper.

The proposed uniform threshold could however end up excluding many taxpayers from the GST net at the state level. At present, the threshold for value added tax (VAT) payment varies in different states but is in the range of Rs 2 lakh to Rs 10 lakh. While for most states, it has been kept at Rs 5 lakh, for the northeastern states it is Rs 2 lakh only. Tax experts say the move would exclude most tax payers from the state GST net, as about 60% to 70% of those paying VAT have an annual turnover of Rs 3 lakh to 5 lakh. In fact, the proposed GST model could keep about 90% of the taxpayers in the northeast out of its ambit.

The draft paper also indicates that services too could be taxed at multiple rates. The draft paper includes services in its definition of goods. Goods, it has proposed, will be taxed at multiple rates—a lower rate, a standard rate and a special rate for precious metals. It is however, silent on tax rates.

It also does not throw any light on how and where services like transmission, distribution and telecom will be taxed. It has not said whether such services would be taxed on an originating or end-use principle.

“We still have to look into the issue. But there are certain international principles on this, which we plan to examine and follow,” a senior government official said.