Low GST Threshold Limit Hit Traders in Telangana

Completing the GST registration procedure has been quite a task for several small businesses. This is because the businessmen are not able to understand the complex GST laws completely, and thereby they are compelled to outsource GST-related work to accountants.

These accountants charge Rs 3,000+ every month and would help businesses only to file their GST returns. In addition to hiring accountants, businesses are incurring various other expenses around internal audits and other GST-related work which is becoming a burden for small businesses.

A businessman who sells minor power tools and hardware supplies in Chikkadpally mentioned that his turnover ranges from Rs 20 lakh to Rs 25 lakh. Out of which, his profit margins are slim, and his gross profit is mostly less than Rs 8 lakh. However, he ends up paying a considerable amount to an accountant on a monthly basis to ensure his GST returns are filed within the due date.

Another lady who owns a fashion boutique in Ameerpet refused to reveal details about her annual turnover. However, she mentioned that since she does not understand GST, she needs an accountant’s help to complete GST documentation concerning her business. She feels hiring an accountant takes a considerable chunk from the turnover she generates through her business.

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The stories of various small businesses in Telangana remains more or less the same. The problems faced by small businesses are partly due to the state government’s decision of not increasing the GST threshold limit.

As per the GST Council meeting that was held in January 2019, a decision was made to increase the GST threshold limit of Rs 20 lakh to Rs 40 lakh for goods traders in the non-special category states.

However, Kerala and Telangana states decided to retain the GST threshold limit as Rs 20 lakh itself. This indicates that a business which earns more than Rs 20 lakh as its gross turnover will need to complete the registration in the GST Network. Businesses in the non-special category states need not worry about doing any kind of paperwork as long as their gross turnover is less than Rs 40 lakh.

Earlier, most of the accountants preferred to specialise either in income tax or in direct taxes but favoured indirect taxes the least. However, currently, with the demand for indirect taxes increasing with every passing day, accountants have started to offer a new line of tax services concerning indirect taxes.

The 20-lakh threshold limit applies only to intra-state trade. However, when the goods are traded between two different states, a businessman is left with no other choice than registering his business under GST even though his/her revenue generated is just Rs 1 lakh. This proves to be an expensive affair for most of the businesses, especially those who have just set up their business or who are intending to expand their business operations.

The state government might make a decision soon around increasing the GST threshold limit. Also, with different GST limits, the purpose of having a uniform tax code gets defeated.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in