Businesses with annual turnover of up to Rs 40 lakh now GST exempt: Finance Ministry

The Union Ministry of Finance announced on August 24, 2020 that now businesses with an annual turnover of up to Rs 40 lakh will be GST exempt. The Ministry added that those with a turnover up to Rs 1.5 crore can opt for the Composition Scheme and pay only 1 percent tax.

Earlier, only businesses with an annual turnover of Rs 20 lakh were exempted from GST tax. The Finance Ministry made the announcement through a series of tweets on the occasion of the first death anniversary of former Finance Minister Arun Jaitley. 

Now, Businesses with an annual turnover of up to Rs 40 lakh are GST exempt. Initially, this limit was Rs 20 lakh. Additionally, those with a turnover up to Rs 1.5 crore can opt for the Composition Scheme and pay only 1% tax. (1/5) pic.twitter.com/Jy589R1qNV

— Ministry of Finance (@FinMinIndia) August 24, 2020

The Finance Ministry paid respects to the late leader and remembered his lasting contribution to nation-building and the legacy he left behind as Union Finance Minister during 2014-19. The Ministry acknowledged through its tweets the key role Arun Jaitley had played in the implementation of GST, which will go down in history as one of the most fundamental landmark reforms in Indian taxation.

The Ministry noted that before GST, a combination of VAT, Excise, Central Sales Tax and the cascading effect of tax on tax resulted in the standard rate of tax being as high as 31 percent in many cases. The Ministry also stated that multiple markets across India, with each state charging a different rate of tax, led to huge inefficiencies and costs of compliance.

Before GST, the combination of VAT, Excise, Central Sales Tax and the cascading effect of tax on tax resulted in the standard rate of tax being as high as 31% in many cases. (3/6)

— Ministry of Finance (@FinMinIndia) August 24, 2020

GST Benefits: Key Highlights 

The Finance Ministry noted that under GST, compliance has been improving steadily and the taxpayer base has almost doubled to 1.24 crore.

The Ministry's tweets further read that GST has reduced the rate at which people have to pay tax. The Ministry revealed that the revenue-neutral rate as per the RNR Committee was 15.3 percent and in comparison to this, the weighted GST rate at present as per RBI is only 11.6 percent. 

The Ministry stated that GST is now widely acknowledged as both consumer and taxpayer-friendly. While the high tax rates of the pre-GST era acted as a disincentive to paying tax, the lower GST rates have helped increase tax compliance.

It is now widely acknowledged that GST is both consumer and taxpayer-friendly. While the high tax rates of the pre-GST era acted as a disincentive to paying tax, the lower rates under GST helped to increase tax compliance. (6/6)

— Ministry of Finance (@FinMinIndia) August 24, 2020

Tax Rates brought down: 28% tax only on luxury items

The Ministry noted that after the implementation of GST, the tax rate on a large number of items was brought down. The Ministry informed that at present, the 28% GST tax slab includes mostly sin and luxury items. Out of the total 230 items included in the 28% tax slab earlier, around 200 items have been shifted to lower slabs.

The Ministry further tweeted saying that significant relief was extended to the construction sector, especially the housing sector. The housing sector has now been placed at the 5% tax rate. Besides this, GST on affordable housing has been brought down to 1 percent.

Significant relief has been extended to the construction sector, particularly the housing sector. It has now been placed at the 5% rate. GST on affordable housing has been reduced to 1%. (3/5)

— Ministry of Finance (@FinMinIndia) August 24, 2020

Taxpayer Base Doubles

The Ministry's tweets also revealed that the taxpayer base has almost doubled since the rollout of the Goods and Services Tax. 

The GST covered a total of 65 lakh assessee at the time of its inception. The number of the assessee has now exceeded 1.24 crore.

Fully Automated Process

The Ministry of Finance also informed in its series of tweeted that all process under GST has now become fully automated. Till now, over 50 crore returns have been filed online and around 131 crore e-way bills have been generated. 

All process in GST have been fully automated. Till now 50 crore returns have been filed online and 131 cr e-way bill generated. (5/5)

— Ministry of Finance (@FinMinIndia) August 24, 2020

Background

The Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services. The comprehensive tax subsumed almost all indirect taxes except some state taxes. The GST was brought into effect on July 1, 2017, replacing all existing multiple taxes levied by the central and state governments.