GST bonanza for firms, consumers on the anvil
Federal tax body the Goods and Services Tax (GST) Council is likely to announce big 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 made up of state finance ministers and the union minister of finance is the apex decision making authority.
Not only is this a bold attempt to remove the creases in the new indirect tax system, the GST Council, if it signs off on the proposals, will potentially serve a political bonanza for the incumbent Bharatiya Janata Party (BJP)--presently 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,” a state finance minister who did not wish to be identified said.
Permission for big businesses to file quarterly tax returns instead of monthly filings, pruning of 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.
“It makes sense to do away with the monthly return filing requirement for all as it as it eliminates avoidable paperwork,” said the Council member quoted above. The person said that reducing the number of items in the highest tax slab will be a highlight of Friday’s discussions.
Another official, who also spoke on condition of anonymity, said the 28% slab should be renamed as a special slab with
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only a handful of items in it. “We will also push for raising the eli- gibility threshold for the compo- sition scheme to ₹2 crore sales, said the official.
However, a section of the GST Council believes that while change should be initiated to correct for flaws care should be taken to not dilute the tax reform. They believe a logical approach should be adopted as far as 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 their liquidity crisis, the Council at its last meeting in Hyderabad on 6 October decided to continue with two pre-GST era schemes that allowed 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 spoke on condition of anonymity.
The Council is expected to accept the recommendations of a ministerial panel, which has mooted 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 1% for traders, manufacturers and restaurants, Himanta Biswa Sarma, the convener of the ministerial panel, told reporters after the 29 October 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, Partner, Khaitan & Co.