GTRI Advocates GST Slab Reduction, Raised Exemption For Small Businesses

As the GST marks its 7th anniversary since its launch on July 1, 2017, it has evolved into the world's largest platform for indirect taxation, boasting over 1.46 crore registrations, according to GTRI

The proposed increase would streamline the GST system by reducing the taxpayer base from 1.4 crore to fewer than 23 lakh entities

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The Global Trade Research Initiative (GTRI) on Friday suggested a series of recommendations to enhance the Goods and Services Tax (GST) framework in India. These include proposals to raise the GST exemption threshold for businesses with turnover up to Rs 1.5 crore, streamline the number of tax slabs, and eliminate state-specific registration requirements. 

These reforms are intended to streamline GST operations, foster a more business-friendly environment, and bolster economic growth.

As the GST marks its 7th anniversary since its launch on July 1, 2017, it has evolved into the world's largest platform for indirect taxation, boasting over 1.46 crore registrations, according to GTRI. 

In the fiscal year 2023-24, GST collections amounted to Rs 20.18 lakh crore ($243.13 billion), with 29.85 per cent derived from imports, 26.92 per cent from inter-state supplies, and 43.23 per cent from intra-state supplies.

The global trade research organisation emphasised that the significant share of intra-state supplies underscores the imperative to simplify GST regulations to stimulate inter-state trade.

The GTRI proposed a significant revision by recommending an increase in the GST exemption threshold for businesses with an annual turnover of up to Rs 1.5 crore, surpassing the current limit of Rs 40 lakh. According to GTRI, this adjustment is poised to be transformative for the MSME sector, fostering job creation and economic expansion.

Highlighting that businesses with turnovers below Rs 1.5 crore constitute more than 80 per cent of GST registrations but contribute less than 7 per cent to the overall tax collection, GTRI underscored the potential impact of the revised threshold. It noted that an annual turnover of Rs 1.5 crore translates to approximately Rs 12-13 lakh in monthly turnover, resulting in just Rs 1.2 lakh in profits at a 10 per cent profit margin. 

The proposed increase would streamline the GST system by reducing the taxpayer base from 1.4 crore to fewer than 23 lakh entities. This would facilitate the introduction of invoice-matching for comprehensive compliance, thereby combating fraudulent invoices and tax evasion.

While acknowledging that the increased tax collection could offset the anticipated 7 per cent revenue loss, GTRI also recommended reducing GST rates on essential items such as basic food products, healthcare services, and educational materials. 

According to GTRI, this adjustment would enhance the affordability and consumption of these necessities despite their current negligible tax contributions.