A New Year Gift to Traders and Service Providers – GST

Last Updated at: Jan 13, 2021
A New Year Gift to Traders & Service providers -GST

The recent changes made in the GST amendments would be good news to start-up companies and small business owners. The updates made under the composition scheme by the Central Government are listed below. The information offered would be useful to the small and medium-sized business enterprise.

The 32nd GST Council Meeting chaired by Shri Arun Jaitley has brought significant relief to small traders and service providers from taxability and procedural compliances. While some may dub as a populist measure to appease the business community, it cannot be denied that there are certain upsides that are bound to bring in the much-needed relief to small businesses and service providers. These reforms are also very much needed, given the economic volatility brought in by internationally rising prices, frequent fluctuations in rupee and the need to capitalize on India’s upward trend in annual growth. Here are some of the key takeaways and their impact :

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A) GST registration limit increased from 20 Lakhs to 40 Lakhs

Any trader or service provider whose turnover or sales made in one financial year crossed Rs 20 lakhs was liable to compulsorily register under this GST registration act. This limit has now been doubled to Rs 40 Lakhs.

 IMPACT – The aggregate loss of Central & State Government’s revenue is estimated to be Rs 5200 Crore due to raising this limit. However, this comes as a “massive relief” or a pre-election New Year Gift for many small businesses which are likely to leave in extra cash for meeting existing obligations as well as adding to annual savings of small enterprises.

B) Composition scheme’s turnover limit increased by Rs 50 Lakhs

The Composition Scheme allowed traders and small businesses to pay GST at the rate of only 1% on all transactions if their business turnover did not exceed Rs 1 Crore. This limit is now revised to Rs 1.5 Crore, thereby allowing further spread for MSME’s to remain in the Composition Scheme.

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C) Service Providers are now included in the composition scheme

Prior to the amendments brought by this meeting, only restaurant services were a part of the composition scheme. However, now, all service providers including those supplying both goods and services with a turnover not exceeding Rs 50 Lakhs have now been brought under this scheme. The applicable GST rate is 6 % compounded. The Restaurant Services under the scheme will continue to pay GST at 5 % as before.

Discover the GST rate, HSN code, or SAC code for all goods and services by using our GST rate finder service. This finder service is also known as the HSN code finder. For products and services, GST is calculated on the basis of an item’s HSN or SAC code.


IMPACT – While the annual revenue impact of this decision is approximated at Rs 3000 Crore, of the 1.17 Crore businesses registered under GST, currently 18 Lakh have opted for composition scheme and with new inclusions, this number is going to grow multifold.

D) Composition scheme entities exempted from detailed records

The assesses registered under the scheme are generally small and medium enterprises which are vulnerable to price rise and addition to costs. Hence, the committee meeting has tabled a favourable decision to exempt the businesses to maintain a detailed record of their transactions and have to file just one tax return annually (unlike monthly for other assesses) and conveniently pay taxes each quarter.

Also, to ease the procedural compliances, a free billing and accounting software is going to be introduced by the Ministry by April for all entities under this scheme.

IMPACT – The complex tax procedures had burdened small businesses with accounting, bookkeeping and compliance costs that have now been done away by the government.

E) A Calamity Cess of allowed up to 1 percent to Kerala

In order to source revenue to meet the recent rehabilitation costs in Kerala, the committee has allowed for a provision of a Calamity Cess that may be imposed on intra-sales to Kerala up to 1% for a maximum period of 2 years.

The list of changes in the composition scheme and its impact mentioned above would be useful for small and medium-sized business owners. It is true that the Government has offered a perfect new year’s gift for entrepreneurs and start-up company owners by making the right changes in the GST amendments.