In a major relief to distributors who are earning up to Rs.50 lakh, the government has reduced GST rate from 18% to 6% with effect from April 1, 2019.
Union Finance Minister Arun Jaitley has announced the introduction of composition schemes for services sector. So far, this scheme was applicable for manufacturers and traders.
In a press release, it said, “A composition scheme shall be made available for suppliers of services or mixed suppliers with a tax rate of 6% (3%CGST + 3%SGST) having an annual turnover in the preceding financial year up to Rs.50 lakh. The said scheme shall be applicable to both service providers as well as suppliers of goods and services, who are not eligible for the presently available composition scheme for goods.”
Since most distributors earning less than Rs.20 lakh have either cancelled their GST registration or not obtained any GST registration to avail benefits under reverse charge mechanism, the move would largely benefits distributors earnings between Rs.20 lakh and Rs.50 lakh.
However, these distributors cannot avail input credits if they opt for the composition scheme. Also, they will have to pay taxes quarterly but file returns annually.
On higher exemption threshold limit of Rs.40 lakh, tax experts said that this exemption is applicable for suppliers of goods, not services and hence, this threshold limit may not be applicable to financial intermediaries like independent financial advisors. Also, the discretion to increase this threshold limit is with states.
Cafemutual has spoken to GST experts at consulting firms, compliance officials at AMCs and three chartered accountants to confirm this report. We intend to clarify your doubts on GST. This does not tantamount to be a tax advice of any nature or a recommendation. Please take advice from a qualified tax advisor for your guidance.