9 Facts to Know about the New GST Limit of Rs40 lakh

The GST council announced the new limit for registration under GST to be Rs 40 lakh at its 32nd meeting last week. This decision has been applauded as it will help small taxpayers go out of the tax net.However, small businessmen will have to take help from tax experts as to whether it will be beneficial for them to avail this exemption as it comes with many complications. The main issues to be kept in mind are:

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1. Applicability Next Year: This limit is applicable from FY 2019-20 onward i.e 1^st April 2019
2. Applicable only for goods: The new exemption limit is only applicable for sale of goods. The threshold limit continues to be the same for supply of services.
3. Not for Interstate Sales: The limit is only applicable for intra-state sales.
4. Amendments: GST being a dual tax (Central and state), the limit for turnover will have to be changed in both the Acts. This will have to be done for each state in Central Goods and Services Act, 2017 as well.
5. Registration: Section 24 of GST Act specifies some circumstances where registration is mandatory and there is no amendment in that section. Therefore any small businessman registered due to that will have to continue with the registration. Exporters and those selling on websites like Flipkart, Amazon, Snapdeal will have to continue with their registration.

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6. No Clarity on Service Income: It is not clear whether the raised exemption limit will apply if a small amount of income is deriving from supply of service in case of a person selling goods.  For example, a person may have sales of Rs 35 lakh and rental income of Rs 2 lakh. It is unclear whether the exemption of 40 lakh will apply. Since the increase in limit is for goods only and there no separate limit for goods and services for aggregate turnover, once registered, GST has to be charged on all outward supplies whether goods or service.
7. Turnover Calculation: Section 22 of GST Act uses the word aggregate turnover (taxable goods plus taxable services plus exempt/nil rated goods plus exempt/nil rated services) while describing persons who are liable for registration. Hence, small shop-owners will have to see their turnover in totality before deciding hence giving rise to complications even for a basic issue like registration.
8. GST Paid Becomes Cost: All GST paid on purchases will become a cost to the person and no tax can be charged on outward supplies.
9. Draconian Consequences: As per Sec 17(5)(i), if a person decides that tax is not payable but GST department asks for tax and the person loses in an appeal, he may not be eligible for input tax credit on purchases.

Source: https://www.moneylife.in/article/9-facts-you-must-know-about-the-new-gst-limit-of-rs40-lakh/56112.html