GST – Composition Scheme Threshold Limit Changes

After the 16th GST Council meeting held on Sunday, 11th June 2017 Finance Minister Mr. Arun Jaitly announced a further reduction in tax rates for 66 items, as well as an increase in the threshold limit for the composition scheme, which was earlier 50 lakh and is now increased to 75 lakh rupees. It means that any taxpayer with an aggregate turnover up to 75 lakh can apply for the scheme. This move is to include more small and medium sized businesses and traders under the composition scheme’s umbrella and to extend its benefits to a wider base of SMEs.
However, it is yet to be decided if there will be any change in the threshold limit for suppliers based in special category states. Any decision regarding this will be made at the next council meeting.
In today’s economy, where initiatives like ‘Made in India’ are introduced, there is a rapid increase in small and medium-sized enterprises. The government is providing many safeguards and subsidies on its parts to such SMEs to help them face market competition and stand on par with imports.
What is a composition scheme in GST?
The composition scheme provision provided under the GST laws is a relief granted to small businesses and taxpayers. Taxpayers registered under it are taxed at lower rates and are required to comply with lesser compliances as compared to normal taxpayers.
Section 10 of the Central Goods and Services Act, 2017 provided that every taxpayer with aggregate turnover less than fifty lakh rupees were eligible to apply for registration under the composition scheme. The act also provided that such threshold limit of 50 lakh rupees can further be increased up to 1 Crore rupees by the government at the recommendation of the council.
Positive Response to the Change
This decision to increase the threshold limit is widely appreciated by the general public and public officials alike. West Bengal Finance Minister Amit Misra had told reporters that “This is a big decision in favor of traders. It’s a people-centric decision, will benefit the common people. The biggest win is for SMEs today. The biggest development for small and medium enterprises (SMEs) and small businesses that contribute on a large scale to the GDP and job sector of the country,”
In the statement issued by the Finance Minister, he stated that the reason for such changes was the feedback and input they received from key industry players. This signifies a significant dialogue channel created by the ministry, which is a significant requirement for any government. Thus the government’s decision is highly praised, as now more taxpayers are included under its ambit, and can avail the benefits of lesser compliance requirements and reduced the financial burden as the tax rates are very low under the scheme.