9 Crucial Facts You Must Know About The New GST Limit of 40 Lakh

The 32nd GST Council Meeting was held on 10th of January, 2019 and came up with many positive points for India’s taxpayers. One of the key highlights of the meeting was the decision to increase the basic exemption limit for suppliers of goods from Rs.20 lakhs to Rs.40 lakh. What changes will this move bring? How is it going to affect the taxpayers? Here are all the details you need to know about the new GST limits:

  1. With the threshold amount now being increased to Rs.40 lakh, a vital fact to remember is that this limit is applicable from the financial year 2019-20 onward, not for the current FY 2018-19.
  2. This limit is exclusively applicable on sale of goods, not services. The limit for service providers continues to be Rs. 20 lakh for most states except for those states where the declared limit is Rs10 lakh.
  3. This limit is not applicable while selling goods from one state to another, so, there is no change in the case of inter-state sales.
  4. With GST being a dual tax (both Central and State), the limit for turnover needs to be altered in both the Acts. The rectifications will have to be done for each state in the Central Goods and Services Act, 2017.
  5. As per Section 24 of GST Act, it is compulsory for some businesses to register in certain circumstances. No amendment has been made to this and they are required to continue with the same registration. For example, exporters, small businessmen and those selling on ecommerce portals like Flipkart, Amazon, Snapdeal will have to continue with their initial registration.
  6. It is still not clear if a person who has even a small service income at his shop comes under the 40 lakh threshold, or the initial limit of 20 lakh applies to him.
  7. Section 22 of GST Act refers to turnover aggregator (taxable goods plus taxable services plus exempt/nil rated goods plus exempt/nil rated services) , This brings complexity to even small shop owners who will have to carefully assess their turnover in totality and take a decision on registering.
  8. GST cannot be charged on outward supplies, i.e., sales, since all GST paid on purchases will become an incurred cost to the person.
  9. If you as a business decide that tax is not payable but the same is demanded by the GST department (Section 17(5)(i)) and you lose an appeal you make, you may not be eligible for claiming ITC (Input Tax Credit) on purchases later.