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Gst Panel bats for threshold limit hike, lower tax under composition scheme

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The GoM, headed by Assam Finance Minister Himanta Biswa Sarma, recommended that the threshold limit of the composition scheme, that allows small businesses to pay taxes at a lower rate without getting any input tax credits, be raised to Rs 1.5 crore from Rs 1 crore currently.

The panel today suggested that the rate for traders be reduced to 0.5 percent from 1 percent and that manufacturers and small restaurant owners pay a uniform composition rate of 1 percent. Under the scheme, traders, manufacturers and restaurant owners have to pay a GST rate of 1 percent, 2 percent and 5 percent of their turnover, respectively.

“We have taken the view that composition scheme should be more flexible for restaurant owners and manufacturers,” Sarma told reporters after the meeting of the group of ministers, adding that input tax credit should be made available for restaurants. “We have said input tax credit should be made available to restaurant business but the Council should decide what should be the slab of tax, considering the revenue loss,” he added.

In keeping with the idea of one nation, one tax, the GoM has also suggested allowing businesses who are engaged in inter-state sale to avail the composition scheme, he added. Around 15 lakh businesses opted for composition scheme, which allows them to pay taxes at a concessional rate and makes compliance easy. There are over 1 crore businesses registered under GST.

While a regular taxpayer has to pay taxes on a monthly basis, a composition supplier is required to file only one return and pay taxes on a quarterly basis. Besides, a composition taxpayer is not required to keep detailed records that a normal taxpayer is supposed to maintain.

The GoM was set up earlier this month and was tasked with revisiting the tax structure of different categories of restaurants with the aim of rationalising or reducing the rates, apart from making composition scheme more attractive for businesses.

The final call on these recommendations will be taken by GST Council when it meets on November 10 in Guwahati, Assam.

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