Consumers and firms set to get big relief on GST

ON THE CARDS Cutting items in top slab, concessions for small biz

GUWAHATI: Federal indirect tax body the Goods and Services Tax (GST) Council is likely to announce relief for consumers and big and small businesses at its meeting in Guwahati on Friday.

Small businesses and eateries will also get major relief as the flat tax rate they can pay under a special window called the composition scheme is likely to be cut.

The GST Council, comprising the Union finance minister and state finance ministers, is the apex decision-making authority on the new indirect tax.

Not only is this a bold attempt to remove the creases in the new system, the GST Council, if it signs off on the proposals, will potentially serve a political bonanza for the ruling Bharatiya Janata Party (Bjp)—which is locked in electoral combat with the Congress in the assembly elections in Gujarat.

This is because it will partly alleviate the distress faced by small businesses and traders in Gujarat, some of whom have threatened to vote against the BJP.

“This GST Council meeting will be big on optics,” said a state finance minister who declined to be identified.

Permission for big businesses to file tax returns quarterly instead of monthly, pruning the list of items in the highest tax slab of 28% and raising the sales ceiling for small businesses from ₹1 crore to ₹1.5 crore to avail of the composition scheme are among the proposals before the council.

The scheme allows taxes to be paid at a concessional rate and makes compliance easy.

“It makes sense to do away with the monthly return filing requirement for all as it eliminates avoidable paperwork,” said the council member cited earlier. This person said that reducing the number of items in the highest tax slab will be a highlight of Friday’s talks.

Another official, who also spoke on condition of anonymity, said the 28% slab should be re-categorised as a special slab, covering only a handful of items. “We will also push for raising the eligibility threshold for the composition scheme to ₹2 crore sales,” said this official.

However, some on the GST Council believe that while change should be initiated to correct flaws, care should be taken not to dilute the tax reform. This section believes a logical approach should be adopted towards relaxations to be given to businesses.

In the original GST design, there was no place for tax exemptions — everyone pays tax and wherever legitimate tax incentives are needed, it is given as a refund. But to help exporters tide over a liquidity crisis, the council at its last meeting on October 6 decided to continue two pre-gst

schemes that allow duty-free sourcing of materials for export production till March 2018.

“Instead of granting relief one by one to businesses, it may be desirable to focus only on the 10-15% assessees who contribute about 80% of revenue for compliance and liberalise the rules for everyone else,” said a third official, who also declined to be named.

The council is expected to accept the recommendations of a ministerial panel which has proposed reducing the tax rate on air-conditioned restaurants to 12% from 18% now and to reduce tax rates under the composition scheme to 1%.

The panel recommended a 1% tax for traders, manufacturers and restaurants, Himanta Biswa Sarma, the convener of the panel, told reporters after the October 29 meeting. It was previously 1%, 2% and 5%, respectively.

“Certain essential supplies are covered under the 28% tax gamut and the GST council will take certain populist measures to reduce the tax on such supplies. Industry is waiting for the Council’s decisions eagerly’” said Abhishek A Rastogi, a partner at law firm Khaitan and Co.