WHY THERE SHOULD BE THRESHOLD IN GST

मित्रो!

       यदि जीएसटी देने के लिए वार्षिक टर्नओवर की न्यूनतम सीमा, भारत के पडोसी देशों, नेपाल में लगभग 31 लाख रूपया, बांग्लादेश में लगभग 28 लाख रूपया, श्री लंका में लगभग 50 लाख रूपया, पाकिस्तान में निर्माताओं के लिए लगभग 61 लाख रूपया तथा अन्य के लिए लगभग 30 लाख 44 हजार रूपया और मलेशिया के लिए लगभग 79 लाख रूपया हो सकती है तब भारत में 10 लाख रूपया विशिष्ट श्रेणी राज्यों के लिए और 20 लाख रूपया अन्य राज्यों के लिए कहाँ तक उचित मानी जा सकती है?

       GST refers to a tax that is levied on the activity of supply of goods or services. Supply includes sale, transfer, barter, rental, exchange, etc. Word "tax" applies to compulsory exaction of money by the public authorities (Government) for public purposes and levy of tax is enforced by law. It is an indirect tax collected from public through the people who carry on business of supply of goods or of services or both. Normally, a businessman, in the capacity of supplier, collects tax from recipient of goods or services. Tax collected is paid to the Government by depositing it into Government's Treasury or in the relevant tax account of the Government held by a Bank. Tax may be levied on the value, quantity or measure of goods or services supplied. It is useful to collect tax on the value of goods because with increase in prices, amount of tax automatically increases whereas amount of tax collected on quantity or measure of goods or services remains static unless rate is increased by amending the law. 

Turnover: For a given period of time, the word "turnover" is the aggregate of values of all goods and services supplied by a businessman during such period. Where turnover of a businessman is computed for one calendar year or a financial year or for any other period of twelve consecutive calendar months, the turnover is called annual turnover. Quantum of annual turnover is considered the status of business and the status of a businessman. Big or small businesses may be distinguished by their annual turnovers. A big business has big annual turnover and small or petty business has small annual turnover.

Threshold limit of turnover: For various reasons, responsibilities, of collection of tax from recipients of goods and services and payment of amount of tax so collected to the Government, cannot be given to businessmen running petty businesses. Therefore, it becomes a requirement to identify those businessmen on whom such responsibility is not to be cast. Such businessmen can be identified on the basis of their annual turnovers. In the expression "threshold limit of turnover", word "threshold" has specific meaning. In cases of tax levy based on turnover, threshold limit of turnover is such amount of turnover that in cases of persons having annual turnover less than such turnover tax law will not apply and law will apply to only those persons whose annual turnover is either equal to such turnover or greater than such turnover. Threshold is the entry point for applicability of tax law. Suppose that if under the GST Law, annual turnover of 30 lakh rupees is fixed as threshold limit of turnover then GST Law will not apply to all those businessmen whose annual turnovers will be below 30 lakh ruppes and GST Law will apply to all those businessmen whose annual turnovers are either equal to 30 lakh rupees or greater than 30 lakh rupees.

        Clause 4(d) of Article 279A provides that GST Council shall make its recommendation to the Union and the States on "threshold limit of turnover below which goods and services may be exempted from goods and services tax". A reading of sections 22, 23 and 24 of the Central Goods and Services Tax Act, 2017 reveals that no such threshold limit of turnover has been provided. 

Persons liable for payment of tax under GST are required to -
(1) maintain accounts of business transactions on day-to day basis and to issue tax invoices for each transaction;

(2) submit transaction-wise details of all supplies received by them and all supplies made by them. 

(3) compute amount of input tax and admissible amount of input tax credit;
(4) compute amount of output tax for all taxable supplies made;
(5) submit online details of input tax credit taken, amount of tax payable for each tax period.
(6) submit online return of GST for each tax period and pay tax periodically.
(7) have update knowledge of goods and services codes, rates of taxes applicable.

        For all this, a businessman is required to have accountant on regular basis. Petty businessmen will need at least an accountant on part time basis. They will also be required to seek services of some tax adviser or practitioner. For all this they will have to pay remuneration to the accountant and the tax adviser from their own profits. For big businesses, amount paid by them to accountants and legal adviser may be a small amount of their income but for petty businessmen, having small earnings, such amount becomes significant amount. 

      In many cases, petty business is run by a single person. Such persons, when they have to go for some outdoor work, have to keep their business places closed. Such persons will have to give extra time and days required for submission of details and returns of business every month. This will bring adverse effect on their businesses. This will result in loss of business and loss in their earnings. Even if quarterly returns are required, a businessman will lose business of approximately 15 days in a year which will be spent by him in submission of periodical returns and annual return through a chartered accountant or a tax return preparer. 

     In absence of help of any tax adviser, it will be difficult for pretty businessmen to have track of changes made by the Government through notifications from time to time. This all will cast financial burden on big businesses as well as on small businesses. Such burden will be felt by big businesses as small burden but the same burden will be felt by small businesses as huge burden.

Another thing is that in the business world, status of a business is judged by its turnover and not by the methods or means which are used to carry on business. If a person makes counter sales of goods and achieves turnover of (say) 50 lakh rupees and another person makes sales of goods by using market places provided by e-commerce portals and achieves the same turnover of 50 lakh rupees, they cannot be distinguished as big or small businessmen. 

Stakes: Petty businessmen mostly receive supplies of goods and services from big businessmen and pay GST to suppliers of goods and services. Where the Government exempts petty businessmen from tax, it loses tax only on value addition. Looking into the expenditure involved in compliance of GST provisions, it is a requirement that petty businesses be exempt from compliance of GST. If the Government provides exemption to petty businesses, it is not going to lose much. 

Level: Whether exemption should be provided at State level or national level. I mean that whether only those petty businesses should be exempt from GST whose turnover consists of only intra-State supplies or those petty businesses should also be exempted who also make inter-State supplies. I am of the view that problems of both types of petty businessmen are the same. Also there is no barrier in the Constitution in providing exemption at national level. The Central Government has, by issuing notifications, already provided relief to businesses who make taxable inter-State supplies of services and handicraft goods if their annual turnover is twenty lakh rupees or less. 

What should be the threshold limit of turnover: Looking into the thresholds fixed in neighboring countries and other countries, minimum threshold limit of turnover may be kept annual turnover of thirty lakh rupees or more. Even small countries like Nepal and Sri Lanka have thresholds of 50, 00,000 NPR (31, 15,000 INR) and 1, 20, 00,000 LKR (50, 24,000 INR). Bangladesh, for payment of turnover tax, has enlistment limit of turnover of 36,00,000 BDT (27,85,000 INR) and threshold for registration 1,50,00,000 BDT (1,16,00,000 INR). 

      It is noteworthy the Government does not collect Income Tax from persons whose annual income is upto three lakh rupees. In cases of persons who run small businesses and who cannot maintain proper accounts, the Government accepts their income tax returns where they show net income from business of an amount which is 8 percent of their annual turnover or higher than 8 percent of their such turnover. On this basis we can infer that the Government does not levy income tax on small business owners if their annual turnover is 37, 50,000 rupees or less. 

Some other countries have thresholds for GST or VAT as under:
(INR stands for Indian National Rupee)

1.Bangladesh Turnover Tax Enlistment 36,00,000 BDT 27,85,000 INR For Registration
1,50,00,000 BDT 1,16,00,000 INR
2. Sri Lanka                          1,20,00,000 LKR    50,24,000 INR
3.Pakistan Manufacturers    1,00,00,000 PKR    60,88,000 INR
   Others                                  50,00,000 PKR    30,44,000 INR
4.India Special Category States 10,00,000 INR Other States 20,00,000 INR
5.Nepal                                    50,00,000 NPR    31,15,000 INR
6.Malaysia                                 5,00,000 MYR    79,19,000 INR
7.Thailand                                18,00,000 THB    35,56,000 INR
8.Japan                                 1,00,00,000 JPY     57,38,000 INR
9.Australia                                     75,000 AUD    36,61,000 INR
10.South Africa                        10,00,000 ZAR     47,22,000 INR
11. U.K                                          85,000 Pound  71,00,000 INR
12. France Goods 82,000 EURO Services 33,200 EURO Goods 62,25,000 INR Services 25,20,000 INR
13.Ireland                                     75,000 EURO   56,94,000 INR

       Above quoted turnover figures have been obtained from various websites. Every care has been taken to ensure the accuracy. But before using these figures readers are advised to confirm the figures.

       In view of the above I think that the Government should reconsider the matter and should provide "threshold limit of turnover" as given in the Constitution.