The GST registration is the process in which the businesses have to register under GST as a normal taxable person if their turnover exceeds Rs. 40 lakhs. Sometimes, GST registration becomes mandatory for certain businesses. If the business undertaking companies do not register under GST, they would require to pay heavy penalties as it is an offence. It has been stated that the new GST turnover limit exceeds Rs. 40 lakhs for normal category states and exceeds Rs. 20 lakhs for special category states. You can register under GST within 2 to 6 working days.
What is the GST Turnover Limit for Businesses?
As per the demand of MSME, the GST Council exceeded the turnover limits for GST registration from Rs. 20 lakhs to Rs. 40 lakhs for normal category states and from Rs.10 lakhs to Rs. 20 lakhs for special category states. It has been done to make compliance easy under GST.
However, the states can feel free to continue with the existing turnover limits or choose a higher limit. This new limit applies to the businesses that are involved in the sales of goods. The turnover limits for GST registration are unchanged for service providers which means the service-providing persons have to register under GST only if the GST turnover is more than Rs. 10 lakhs for special category states and Rs. 20 lakhs for normal category states.
It is to be noted that the two hilly states namely Assam and Jammu and Kashmir can only prefer to be under lower turnover limits as they come under the Special Category States. The other new update is that the state Kerala can now charge up to 1% ‘calamity cess’ on the supply of goods and services of all intra-state to overcome the natural calamities that occurred last year in the state.
GST Audit Turnover Limit 2021 – 2022
Every businessman has to maintain books of accounts and get them audited from one of the Chartered Accountants if turnover, total sales, or gross receipt from business exceeds Rs. 1 crore in the previous year. The Finance Act 2020, Section 44AB has claimed to exceed the audit threshold limit from Rs. 1 crore to Rs. 5 crores for business-undertaking small and medium organizations to reduce the burden of compliance. However, the Rs. 5 crore audit turnover limit is only applicable when payment and cash receipt made does not be more than 5% of total payment or receipt during the year.
Now, according to the notice of the amendment to Finance Bill 2021, the GST audit threshold has increased from Rs. 5 crores to Rs. 10 crores for non-cash transactions to further reduce the compliance burden of small to medium enterprises and promote the digital economy. This amendment is only applicable to the receipt or payment made by draft and/or cheque. However, it should be noted that this amendment is effective from 1st April 2021 and would apply for the assessment year 2021-22 and further assessment years accordingly.
How to Calculate Aggregate Turnover Limit for GST Registration?
Aggregate turnover is nothing but the aggregate value of all taxable supplies (excludes the value of inward supplies), exports of goods or services, exempt supplies, inter-state supplies of persons with the same permanent account number but does not include State tax, Central tax, Integrated tax, Union territory tax, and cess. When the aggregate turnover is calculated for the whole financial year from April to the next year till March, it is to be referred to as annual aggregate turnover.
But when it comes to aggregate turnover in the state, it differs a bit. The aggregate turnover in the state is the total value of all non-taxable and taxable supplies comprising exports of goods or services undertaken by a taxable person within state, exempt supplies, inter-state supplies of goods or services undertaken by the taxable person but it does not include taxes charged under SGST Act, IGST Act, and the CGST Act.
Several states come under the list of Special Category States for GST registration including Assam, Meghalaya, Arunachal Pradesh, Manipur, Jammu & Kashmir, Tripura, Mizoram, Sikkim, Himachal Pradesh, Nagaland, and Uttarakhand. The aggregate turnover limit for the above-mentioned states is Rs. 10 lakh.
When it comes to computing the GST aggregate turnover limit, it would be good to take one example. For example, let’s take the turnover of the farmer Mr. A staying in Karnataka is Rs. 14 lakhs from agriculture, and his taxable turnover is only Rs. 50,000 which he has from the sales of plastic bags.
He would still need to register under GST with the threshold limit of Rs. 10 lakhs as he comes under special category states. Make use of myBillBook to quickly access the GST portal and register for GST. This will help you calculate the turnover limit in one click.
What is the GST composition scheme turnover limit?
The composition scheme under GST is a simple scheme for taxpayers. Small taxpayers have the option to pay GST at a fixed turnover rate to avoid monotonous GST formalities. This scheme is suitable for the taxpayers whose turnover is below Rs. 1.5 crores. CBIC has claimed that the turnover limit has increased from Rs. 1.0 crore to Rs. 1.5 crores. The taxpayers with less than Rs. 1.5 crores turnover can choose Composition Scheme. Now, the threshold limit is Rs. 75 lakhs for the states like Himachal Pradesh and North Eastern states.
Pros and Cons of GST Composition Scheme
- Even though to pay a lower amount of GST to the government, businesses can enjoy higher liquidity.
- This scheme allows the businesses to experience lesser compliance like filing returns, maintaining records, issuance of invoices, and more so that they can concentrate on their core business tasks.
- Moreover, under this scheme, businesses have to face a much lesser tax liability, especially start-ups and smaller businesses.
- Businesses with this scheme are open to limited territory to carry out their business operations.
- In addition, businesses registered under this composition scheme are not allowed to supply exempted goods like coconuts no matter if they are shelled, peeled, fresh or dried.
- Also, businesses that opted for this scheme cannot formally claim the input tax credit (taxes paid on purchases).
FAQs related to GST Turnover Limit
1. Is GST applicable if the turnover limit is below 20 lakhs?
The new scheme is that the businesses with the GST turnover limit of up to Rs. 40 lakh are exempted from GST. Initially, the turnover limit was Rs. 20 lakh for sales of goods and services. Moreover, the businessmen with a turnover limit of up to Rs. 1.5 crore can choose the Composition Scheme and need to pay only 1% tax.
2. Is GST turnover considered as gross or net income?
Current GST turnover is nothing but the gross income of your business-undertaking organization for the previous 11 months and the present month.
3. How to compute the turnover rate?
To calculate the turnover rate, you have to take the average number of employees and divide it by the total number of separations that had taken place during the given time duration. And then you have to multiply that number by 100 to get the value as a percentage.
4. How imports of goods and services will be treated under GST?
The imports of goods and services would be considered as inter-state supplies and IGST would be applied.
5. Can a person without GST registration collect tax and claim ITC?
Not at all, a person without GST registration can neither claim ITC nor collect tax from his customers.