As India is preparing to enter into a new era of indirect taxation, various entities that perform commercial activities have expressed their concerns regarding whether GST would ensure them any strategic benefit.  It has been claimed several times by many experts that GST would enhance growth rate of the country by stimulating a coercive environment, but there are numerous small scale businesses which are a bit unclear about how will the new ACT benefit them.  So, herein, we would discuss a crucial benefit that GST has for small businesses, i.e., GST exemption threshold.

What is GST exemption threshold?

All the businesses in the country whose annual turnover is below Rs. 20 lakhs would be kept out of the tax ambit, or in other words, they are exempted from the law.  This limit of Rs. 20 lakhs is called as GST exemption threshold. It must be noted that the exemption threshold for businesses in special category states (such as hill-area states or north-east states) is Rs. 10 lakhs.  It means that if the annual turnover of any particular business entity is below the exemption threshold limit, then that business firm would fall outside the GST ambit.

The concept of GST exemption for small business was envisioned because there are various small business firms in India.  The annual turnover of these businesses is very low.  If taxation authorities would compel these businesses to perform all the functions related to GST compliance, then it would become somewhat impossible for these small businesses to handle, manage, and monitor the functions associated with return filing, payment, and so on through the common portal.  These businesses certainly lack the technical expertise to ensure that all the automated GST compliance functions are performed immaculately.  On the other hand, these businesses just cannot afford to hire additional skilled resources that can monitor the automated tax compliance functions competently.  Therefore, the government of India decided to introduce as GST exemption threshold limit.  This means that small businesses would fall out of the category of taxable entities under GST era.  Apart from all these, it was also considered that small businesses generate employment in rural and remote locations.  If these businesses would be brought under the new indirect taxation regime, then it might hurt the employment ration in rural or remote locations.

In short, the concept of GST exemption for small business will help all the small and medium sized companies across India perform various commercial activities with utmost ease.  Additionally, it will also help them compete with all the taxable entities across India, or target consumer markets, in the most competent manner.  Thus, it has been claimed that the concept of GST exemption will not only benefit the small businesses, but would also ensure several advantages for consumers across India.