Goods and Services Tax – GST – By: – KASTURI SETHI – Dated:- 7-7-2017 Last Replied Date:- 28-7-2017 – DOES THRESHOLD EXEMPTION REALLY EXIST UNDER GST ACT ? Answer is big NO . Threshold exemption of turnover of ₹ 20 lakhs is only in the name. Threshold exemption of ₹ 20 lakhs has been denied by Govt. by attaching following strings to the businessmen :- As per Section 24 of the CGST/SGST Act, the following categories of persons shall be required to be registered compulsorily irrespective of the threshold limit: i) persons making any inter-State taxable supply; ii) casual taxable persons; iii) persons who are required to pay tax under reverse charge; iv) electronic commerce operators required to pay tax under sub-section (5) of section 9; v) non-resident taxable persons; vi) persons who are required to deduct tax under section 51; vii) persons who supply goods and/or services on behalf of other registered taxable persons whether as an agent or otherwise; viii) Input service d
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hs is a small business man whether he is a manufacturer or dealer or service provider. Virtually, Govt. has snatched threshold exemption from small persons by imposing aforesaid conditions on them. It tantamounts to snatching fundamental right to live. These are the noiseless cries of small business which must be listened to by the Govt. In case the Govt. intends to woo the hearts of small businessmen, nay, middle class families, Govt. must remove all the caps imposed upon them and enable them to avail threshold exemption like in pre-GST period. A person with a turnover of 20 lakhs has to pay rent of premises, maintenance of premises, Income Tax and now GST and life is not restricted to the basic needs of Roti, Kapda Aur Makan. There are necessities like education and health expenses, savings for future etc. How far such meager threshold exemption with too much restrictions is justified ? The very purpose of threshold exemption is defeated by the aforesaid conditions imposed upon for a
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e.f. 1.7.17} 20 lakhs 20 lakhs GST(w.e.f.1.7.17) Now after a decade manufacturers, wholesale dealers, Retailers and Service Providers have been brought at par by way of allowing threshold exemption limit of turnover of just ₹ 20 lakhs each. Here it would be pertinent to analyse why any Govt. did not increase threshold exemption for such a long period which was overdue. Rate of inflation may be the possible factor for non-increase of threshold exemption for a decade. So it is worthwhile to have a look into the history of rates of inflation existed during last 15 years which are given in the table given below: YEAR RATE OF INFLATION BASED ON CPI THRESHOLD EXEMPTION ALLOWED TO MANUFACTURER THRESHOLD EXEMPTION ALLOWED TO SERVICE PROVIDER PETROL PRICE PER LTR. GOLD PRICE International currency 2003 3.719 1 Crore NIL 31.00 5718.95 2004 3.785 1 Crore NIL 37.33 6145.38 2005 5.566 1 Crore 4 lakhs 39.99 6900.56 2006 6.529 1 Crore 4 lakhs 46.40 9240.32 2007 5.512 1.5 crore 8 lakhs 42.37 999
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suffered a lot due to stagnant threshold limit for a decade. As per well-known Statisticians, statistical data does not indicate 100% accuracy. So the rate of inflation cannot be relied upon for all economic policies of Govt. Govt. cannot deny the sky rocketing prices of all commodities. The prices of gold, an international currency gives the true picture of sky rocketing prices of all the commodities as prices are influenced by international marketing forces. Govt. has done gross injustice to all manufactures, dealers and service providers by fixing threshold exemption of just ₹ 20 lakhs each. Ultimately, repercussion will be on poor and middle class families. Modvat facility was introduced in April, 1986 and thereafter it was called Cenvat Credit and Input Tax Credit. Even a period of three decades has lapsed, there is a large number of dealers and service providers who do not even know what is this credit facility and how they can get set-off. So all small manufacturers, deale
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ce piece indeed. . Congratulations – Reply By swaminathan venkataraman – The Reply = Makes for an interesting read; for that matter, in one's longstanding form conviction, in the ultimate analysis, any such threshold for 'exemption' is highly arbitrary, founded/stemmed on a dubious idea, – being a 'rule of thumb', arbitrarily fixed by bureaucracy,with no sanctity attached !Universally so, not merely in taxation regimes, but in every other- e.g. KAR rules, pending notification, under RERA – see the separate post of y'day !NOTE: It is time now; what needs but remains to be realised , going by wisdom to be gathered from past experience, is that, – it is any such arbitrarily fixed threshold, with no rhyme or reason, that accounts for most of the manipulations indulged in , by vested interests, and having the inevitable potential for corruption, top to bottom, – Reply By swaminathan venkataraman – The Reply = To Add: Reference is to the Post on Facebook, of y'day
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to new GST with respect to hotels, food products, sand, construction materials etc. – Reply By BALAJEE K S – The Reply = Good Article and analysis. Thank you so much Sir – Reply By KASTURI SETHI – The Reply = I am thankful to Dr.Sanjiv Agarwal, Sh.Baalajee K.S., Sh.Swaminathan Venkat Raman for liking my article. K.L.SETHI – Reply By PMR Gowrissankar – The Reply = Sihey cannot collect GSTr, indedd you have analysed the problem of assessees not knowing about existing taxes as they are not coming under tax net. In addition to above, my assessee which is a trust having income of 15 lakhs donation and rent from commercial buildings of ₹ 9 lakhs per annum who is adviced to take GST as the turnover exceeds 20 lakhs. What is the remedy for them as they could not collect GST from teneants who are all small traders? – Reply By KASTURI SETHI – The Reply = Dear Sir, Whether Trust registered under Section 12 AA of Income Tax Act ? – Reply By swaminathan venkataraman – The Reply = An UPDATE,
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e whether to pay under RCm and avail ITC or go for cost addition to goods supplied.The Associates of the Trade and Tax consultants must strongly put this across to governmwnt and to GST Council. – Reply By KASTURI SETHI – The Reply = Sh. Vinay Kunte Ji, Sir, Thrilled to peruse your comments and analytical approach. Thanks for your contribution on the issue. – Reply By Ashok Aggarwal – The Reply = Very nicely analysed article. Earlier small service providers were encouraged by companies because they were exempted and no tax was payable by recipient of service also. Now they will not get clients as the tax will have to be paid under reverse charge mechanism. Moreover the casual tax payer is not exempted and hence practically nobody would be exempted. Regards – Reply By KASTURI SETHI – The Reply = Sh.PMR Gowrissankar Ji, Sir, Section 2(6) of CGST Act defines (6) aggregate turnover means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is pay
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gs of the powers that be. SSI units began their exemption journey (if I am not mistaken) way back in the year 1985 [77, 85/85-CE] with exemption limit of 7.5 lakhs without any strings attached of having any SSI registration certificate issued by the Directorate of Industries and this exemption was allowed in the next FY if they had not crossed 7.5 lakhs. Later the SSI notification 175/86-CE saw upheavals in the form of the unwarranted notification 55/92-CE later and the corrective notification 67/92-CE. Let aside the fact that the exemption grew to 15 lakhs and later to 30 lakhs and in the year 1998 to 50 lakhs and continued as mentioned in the tabulation given by you. All through out the emphasis was to give impetus to the SSI units which are the major source of employment in a populated country like ours. Having said that it appears that the ideology behind this SSI exemption remained only lip service and without taking into account the increase in cost of raw materials and the cost
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lt of a few should the entire industry suffer. For the ineptness of the authorities in catching hold of these unscrupulous elements, others should not be held to ransom. Every law comes along with a loophole and only those who are intelligent enough, exploit it. Same would be bound to be replicated in the present scenario too. I sincerely feel that if the government really wants to extend an exemption, it should be without any strings attached. Because if any of the 14 clauses (which the learned author has cited) is violated, the exemption would be denied and the assessee would be required to pay a heavy price. Else remove all exemptions and let all of them vie for business on a similar platform. Thanks, once again, Sethiji for highlighting the hollowness of this exemption. As they say, the attitude seems to be – Heads I win, Tails you lose! Thanks and regards Abhishek Panicker – Reply By CS SANJAY MALHOTRA – The Reply = Dear Sh Kasturi ji,very well defined. Keep it up. – Reply By Abha
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have highlighted the revenue loss to the exchequer. The topic you choose to write is carrying weightage. Thanks Sir once again. – Reply By KASTURI SETHI – The Reply = Sh. Ganeshan Kalyani Ji,. Thanks for devoting your precious time to read and expressing your valuable views. – Reply By Rakesh Garg – The Reply = Well stated, Sethi Ji. A nice and informative article. ThanksWhile making the law, the Government has ignored the Indian conditions and economic scenario. Just take one illustration: If a mechanic or dehari majdoor or piece rate worker (other than employee) comes on paddle-cycle or motor-cycle from Haryana (where he is residing) to Delhi to perform his services (may be at the construction site or to repair the televisions or AC or washing machine or any other activity), he would be making either the inter-State supply from Haryana or would be considered as casual taxable person in Delhi: and in both the cases, in the absence of the threshold limit for registration: would that p
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