Concessional GST rate for small service providers

A. Exemption from registration for the person engaged in the exclusive supply of goods [Notification No. 10/2019-Central Tax dated 7 March 2019]

a. Any person who is exclusively engaged in the supply of goods having an aggregate turnover of INR 40 lakhs is exempted from obtaining registration GST.

b. The exemption has been provided in exercise of powers conferred under section 23(2) of the Central Goods and Services Tax (CGST) Act (Powers to exempt category of person from obtaining registration).  

c. The above exemption is not available to the following persons:

• Person required to take compulsory registration;
• Person engaged in supply of ice-cream and other edible ice (whether or not containing cocoa), pan masala and tobacco and manufactured tobacco substitutes;
• Person engaged in intrastate supply in states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand;
• Person who has voluntarily obtained registration; and  
• Registered persons intending to continue their existing registration.

d. The above exemption is effective from 1 April 2019.

The below data summarizes state-wise threshold limits for obtaining registration for different category of suppliers making supply in such states:

Supply engaged in exclusive Supply of goods with aggregate turnover as follows:

INR 10 lakhs - Manipur, Mizoram, Nagaland and Tripura
INR 20 lakhs - Arunachal Pradesh, Meghalaya, Puducherry, Sikkim, Telengana and Uttarakhand
INR 40 lakhs -  all other states/union territories

Supply engaged in supply of goods and services with aggregate turnover of as follows:

INR 10 lakhs - Manipur, Mizoram, Nagaland and Tripura
INR 20 lakhs - all other states/union territories and Uttarakhand

B. Increase in limit of aggregate turnover for person opting for composition scheme Notification No. 14/2019-Central Tax dated 7 March 2019

• In case of a person opting for composition scheme under section 10 of the CGST Act, the Government has increased the limit of aggregate turnover to INR 1.5 crores
• However, for eligible registered persons in the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand, aggregate turnover limit shall be INR 75 lakhs.
• Person shall not be eligible to opt for composition scheme if he is a manufacturer of ice cream and other edible ice (whether or not containing cocoa), pan masala and tobacco and manufactured tobacco substitutes.
• The increase in limit shall be effective from 1 April 2019.

C. GST rate for registered person having aggregate turnover up to INR 50 lakhs Notification No. 2/2019-Central Tax (Rate) dated 7 March 2019

a. Registered person is eligible to pay tax at the rate of 6% [3% CGST and 3 % State Goods and Services Tax (SGST)] up to an aggregate turnover of INR 50 lakhs for first supply of goods or services or both made on or after 1 April 2019 in a financial year.

b. For the purpose of determining eligibility to pay tax at specified rate, the term 'first supply of goods or services or both' shall include supplies from the first day of April of a financial year to the date from which he becomes liable for registration under the said Act.

c. For the purpose of determination of tax payable, the supplies from the first day of April of a financial year to the date from which he becomes liable for registration under the Act shall not be included.

d. Further, for determining eligibility, value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account.

e. The above benefit is available subject to following conditions:

• aggregate turnover in the preceding financial year was INR 50 lakhs or below;
• person is not eligible to pay tax under section 10(1) of the CGST Act;
• person is not engaged in making any supply which is not leviable to tax;
• person is not engaged in making any inter-State outward supply;
• person is neither a casual taxable person nor a non-resident taxable person;
• person is not engaged in making any supply through an electronic commerce operator who is required to collect tax at source; and
• person is not engaged in making supply of ice-cream and other edible ice (whether or not containing cocoa), pan masala and tobacco and manufactured tobacco substitutes.

f. Where more than one registered person is having same permanent account number then tax at the rate of 6% is payable by all such registered person.

g. The registered person is not eligible to collect any tax from recipient nor he is entitled to claim any input tax credit (ITC).

h. Such registered person shall issue bill of supply with the description 'taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies'.

i. The registered person shall pay tax on all outward supplies at the rate of 6% notwithstanding any other notification issued under section 9(1) [Levy and Collection] or under section 11 (Power to grant exemption from tax) of the CGST Act.

j. Such registered person will be liable to pay tax on supplies covered under reverse charge mechanism at the applicable rates.

k. The above notification shall be effective from 1 April 2019.