Major relief to distributors; GST to be reduced from 18% to 6%

By SimpliCity News Team

Jan 12, 2019 11:32 AM

In a major relief to distributors 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 only for manufacturers and traders.

In a press release, “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 upto Rs.50 lakh"

It also added that "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".

To avail benefits under reverse charge mechanism, majority of the distributors earning less than Rs.20 lakh have either cancelled their GST registration or not obtained any GST registration. Hence, this move would largely benefit distributors earning between Rs.20 to 50 lakh bracket. 

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.

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