GST, or Goods and Services Tax, was adopted in India in 2017 as a consolidated indirect tax mechanism to deliver transparency, uniformity, and simplicity in the Indirect taxation system. GST substituted different indirect taxes like VAT, octroi, excise,, etc. The GST rate on various products is established by the GST council, which includes the Finance ministers of every state.
When a company’s revenue exceeds the minimum turnover restriction for GST registration this registration becomes essential for such entities. Companies that meet the minimum annual turnover for GST registration must enroll for GST, though any company that does not attain the statutory level but still desires to gain from compliance with GST can register voluntarily.
Businesses that register for GST can generate tax-compliant invoices, obtain tax credits for inputs, gather and remit GST to the government, and participate in the regulated economy. Corporations that register will be given their own Unique Goods and Services Tax Identification Number (GSTIN) allowing them to claim input tax credits, collect and pay GST as well fulfil other things under the GST regime.
This blog analyses in detail GST registration, threshold limits, how the percentage will be calculated, and non-compliance impacts.
GST made all the indirect taxes single and uniform in all the states of the country. Negligence of registration can result in hefty fines and penalties, so you must get this if your business comes under the limit for GST registration.
Minimum Turnover for GST
The GST operates as a single tax on the supply of goods and services from the manufacturing segment to the consumer level. The GST Council, which is a body comprising the finance ministers of the entire state, decides the tax rate and other associated issues, like the GST turnover limit. As per recent amendments by the Central Government, the minimum GST turnover limit in India has been fixed at Rs 40 Lakhs.
Activities Subject to GST Taxation
Activities like the supply of goods and services, sale of goods and services to further commerce, and import of commodities into India are liable to taxation under GST.
Activities Exempted from GST Registration
These activities do not need GST registration:
- Supply of services or goods by unregistered persons to registered individuals
- Supplying services or goods that are not taxable
- Offering goods or services via an unregistered e-commerce operator.
Overview of Minimum GST Turnover Limit
Companies with an annual turnover of over Rs 40 lakhs (for goods) and RS 20 lakhs (for services) need to register for GST and disburse taxes on their taxable services and goods. Businesses with an annual turnover of below Rs 40 Lakhs are not required to enroll for GST, but can elect to register for GST voluntarily. This is helpful for businesses as it allows them to get input tax credits and other advantages. The minimum GST registration turnover limit in India is separate for a few special category states.
The special category states have the least threshold limit for GST registration, which is Rs 20 Lakhs (for the supply of goods) and Rs 10 Lakhs (for the supply of services). These special category states comprise Arunachal Pradesh, Mizoram, Tripura, Meghalaya, Manipur, Nagaland, and Sikkim.
The GST Council has also proposed that all other businesses above₹40 Lakhs turnover should get enrolled under GST irrespective of their state of registration. The limit is called ‘turnover for GST registration’, and this will hopefully provide some respite to small businesses so that they get the benefit of GST.
GST Council has also recommended for all business above Rs 40 Lakh turnover to register for GST irrespective of state of their registration This is the amount up to which it will be called as “tax turnover for GST registration”. Hopefully this will give some respite to the small businesses and enable them with utilization of GST benefits. It will also probably permit the government to gather taxes from all companies, regardless of their size.
Categories with Mandatory GST Registration Requirements
Irrespective of turnover, specific categories of persons must mandatorily register under GST. These comprise:
Casual Taxable Individuals: Individuals who sometimes undertake deals involving the supply of services or goods, either in a state where they have no specific place of business or from more than one state.
Interstate Suppliers: Those who supply goods and services through state lines.
Non-resident Taxable Individuals: Those who live outside India but supply goods or services to Indian residents.
Persons Taxable Within Reserve Charge Basis: Individuals who are subject to disburse GST under the reverse charge mechanism.
Persons Needed to Deduct TDS Within GST: Entities that are obligated to deduct tax at source under GST regulations.
Persons Needed to Deduct TCS Under GST: Those needed to gather tax at source.
E-commerce operators: There is no requirement to take into account minimum turnover for GST registration when someone sells goods and services online. They must submit the GST to possess a certificate. They need a GST account to sell and supply goods online. Irrespective of your turnover, you should have a GST registration certificate.
Input Service Distributors: Entities that get invoices for services utilized at many locations, which are then distributed to these locations.
Suppliers Who Deliver Goods via E-commerce Operators: These operators are accountable for gathering tax at source.
Voluntary GST Registration: Any businesspersons who believes that their annual turnover will surpass the fixed threshold in their area of business can enroll for GST voluntarily. Maybe the earlier year, the business did not exceed the limit, and this year, it may surpass. Then, the taxpayer may enroll for GST to pay taxes to the government as an accountable citizen. In this feature, there is no minimum turnover for GST.
Composition Tax Scheme: The composition scheme is the simplest taxation system under GST. It allows taxpayers to avoid hundreds of formalities of GST filing. Taxpayers with a turnover of Rs. 1.5 crore can enroll in the scheme. They can pay a specific rate on the turnover.
If you desire to learn about the kind of taxpayers, you can key in the taxpayer search option. Verify the “Taxpayer type” and enter the particulars wanted. You will know if the taxpayer belongs to a composition scheme. You have to input the GSTIN in the segment searching taxpayer type. If the taxpayer is paying periodic taxes, you will know. The outcome will also display if they have preferred another alternative.
How to Compute GST Turnover Threshold?
You should regard the following features while computing the GST turnover threshold:
Turnover of an organization or person for the PAN number countrywide.
All exempted supplies.
All taxable supplies.
Interstate Supplies.
Export of Services and Goods.
Alterations in the GST threshold limits that preferred the Composition Scheme?
On April 1st, 2019, the yearly turnover revenue standards for the composition plan were raised to Rs 1.5 crore. So, beginning from April 1st, 2019, taxpayers who have enrolled for the scheme must disburse taxes each quarter and deposit annual reports. For the Uttarakhand and Northeast states, the limit was not altered and stays at Rs 75 lakh. Moreover, restaurants (not offering alcohol) are liable for this limitation.
The latest composition scheme was made accessible to service providers. It provides a specific tax rate of 6% with 3% CGST and 3% SGST. Applicability To independent Services and Goods with turnover up to Rs 50 lakh in the last financial year only.
Wrapping Up
Keen to understand what it means for GST turnover thresholds from the perspective of businesses to remain penalty free? Fixed criteria are on the basis of state of operation and nature of the concern. Frequent tracking of turnover and observance of the applicable limits aid businesses in remaining compliant and gaining GST benefits