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Adviser Money Making MC
24
March 2017
GST (The Total Investment & Insurance
Solutions)
“Small
business isn’t for the faint of heart. It’s for the brave, the patient and the
persistent”
Small
business will witness a complete transformation of the taxation system once the
goods and service tax (GST) (https://www.gst.gov.in/) comes into effect. The
proposed system shall be more transparent, more paperless, but requires more
compliance as well. On an average there would be additional 36 returns per year
to be filed on a single registration. Hence, the small taxable person should be
taken care of, to avoid unnecessary burden on him.
There
is no such term as ‘small taxable person’ under the GST law. We have given the
name to the category of persons who had a turnover of less than Rs50 lakh in
the preceding financial year. The Total
Investment & Insurance Solutions
In
this article, we shall discuss the possible exemptions and remedies available
to the small taxable person and also the complexities involved in the
procedure.
Small Taxable Person
As
per the exemption and remedies available, we can categorise the small taxable
persons into two divisions;
1.
Those having turnover of up to Rs20 lakh (already covered under basic exemption
limit)
2.
Those with a turnover up to Rs50 lakh (remedy available in the form of
composition levy)
Person having turnover up to Rs20 lakh
1.
The law itself grants the basic exemption of Rs20 lakh to the small taxable
person. Every supplier shall not be liable to GST if his aggregate turnover in
a financial year does not exceed Rs20 lakh.
2.
However, if the supplier is in the states of Arunachal Pradesh, Assam, Jammu
and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal
Pradesh and Uttarakhand, then the exemption will be available only if the
aggregate turnover in a financial year does not exceed Rs20 lakh.
3.
Aggregate turnover here means the aggregate value of all taxable supplies,
exempt supplies, exports of goods and/or services and inter-state supplies of a
person having the same permanent account number (PAN), to be computed on all
India basis and excludes taxes, if any, charged under the Central Goods and
Services Tax (CGST) Act, State GST (SGST) Act and the Integrated GST (IGST)
Act.
Let
us understand this by way of example:
Example No.1: Calculate
aggregate turnover and state whether the person is liable for GST exemption
GST1 (The Total Investment & Insurance
Solutions)
Aggregate
turnover in terms of clause (6) of section 2 is (Rs14+ Rs9 + Rs4) is Rs27 lakh.
The turnover is more than Rs20 lakh, hence not liable for GST exemption.
Example No.2: Calculate
aggregate turnover and state whether person is liable for GST exemption
GST2 (The Total Investment & Insurance
Solutions)
No,
person shall be not eligible for the basic exemption.
Important question
The
definition of aggregate turnover only includes taxable supplies, exempt
supplies, exports of goods and/or services and inter-State supplies. However,
it nowhere mentions non-taxable supplies. Hence, the turnover, as per the
definition, will be Rs13 lakh (Rs9 lakh+ Rs4 lakh). Hence, is he eligible for
the exemption?
The
answer is no. The non-taxable supplies shall also be added in the aggregate
turnover. This is due to the definition of exempt supply. Exempt supply means
supply of any goods and/or services which are not taxable under this Act and includes such supply
of goods and/or services which attract nil rate of tax or which may be exempt
from tax.
Hence,
if we could create a proper link and are able to understand the law, then
non-taxable supplies shall also be included. The Total Investment & Insurance Solutions
Person having turnover up to Rs50 lakh
(Remedy available in the form of composition levy)
1.
Any registered taxable person can opt for the composition levy if the aggregate
turnover in the previous financial year does not exceed Rs50 lakh.
2.
The officer may permit the registered taxable person to pay tax under
composition levy with some conditions. The
Total Investment & Insurance Solutions
3.
The minimum tax payable under composition levy shall be;
- 2.5%
of the total revenue, in case of manufacturer;
- 1%
in any other case. The Total Investment & Insurance
Solutions
Let
us analyse some of the cases that may be possible under composition levy.
Example
1: A person is registered under four states, with the following aggregate
turnover in the current year:
 |
| GST 3(The Total Investment & Insurance
Solutions) |
Check
the applicability of composition levy.
The
combined aggregate turnover of all the above states is Rs54 lakh. As per law,
the composition levy will be available till the person crosses Rs50 lakh mark.
After this, the composition levy will discontinue and normal provision will be
applied.
The
reason behind the availability of composition levy is that Rs54 lakh is the
turnover of the current year and not of the previous year. We have assumed that
the turnover of previous financial year is less than Rs50 lakh.
Example
2: A person is registered under four states, with the following aggregate
turnover in the previous financial year:
GST 4(The Total Investment & Insurance
Solutions)
Check
whether composition levy is applicable.
As
per the definition of aggregate turnover, we have to check the turnover
cumulatively and not state-wise. The total aggregate turnover is Rs144 lakh,
which is more than the Rs50 lakh benchmark, and hence the liable person is not
eligible for the composition levy.
Composition levy is not available in certain
cases
The
composition levy is not available under certain cases where the taxable person:
- Is
engaged in the supply of services;
- Supplies
goods on which tax is not leviable under this Act;
- Makes
any inter-State outward supplies of goods;
- Supplies
goods through an electronic commerce operator and who is required to collect
tax at source under section 56; The Total
Investment & Insurance Solutions
- Is
a manufacturer of such goods as may be notified on the recommendation of the
Council.
This
article has very important concepts for the small taxable person, which shall
include small general stores at well. Hence, it should be understood clearly,
because even a small mistake can lead to severe penalties. The Total Investment & Insurance Solutions
GST
is the biggest reform to date. Hence people should be prepared nationwide to
accept this change.The Total Investment
& Insurance Solutions
