Re­lief for SMES, ex­porters as GST Coun­cil tweaks rules

Coun­cil low­ers tax on 27 prod­ucts and a few ser­vices, asks states’ panel to ex­am­ine if 18% GST on AC restau­rants could be low­ered


Of­fer­ing re­lief to small and medium en­ter­prises (SMES) and ex­porters from the rigours of com­ply­ing with the tech­nol­ogy-ori­ented goods and ser­vices tax (GST), the fed­eral in­di­rect tax body, GST Coun­cil, on Fri­day, 6 Oc­to­ber, an­nounced a se­ries of rule changes.

The Coun­cil also low­ered tax rates on 27 prod­ucts and a few ser­vices and asked a panel of state min­is­ters to ex­am­ine if the 18% GST on air-con­di­tioned restau­rants could be low­ered, fi­nance min­is­ter Arun Jait­ley said af­ter the meet­ing.

The Coun­cil de­cided to con­tinue with two pre-gst era schemes that al­low duty-free sourc­ing of ma­te­ri­als for ex­port pro­duc­tion till March 2018, a move that will im­prove the liq­uid­ity of ex­porters by pre­vent­ing their work­ing cap­i­tal from get­ting locked up in tax pro­ce­dures.

The Coun­cil de­cided to clear all tax re­fund claims of ex­porters for July by 10 Oc­to­ber and for Au­gust by 18 Oc­to­ber. It in­tro­duced a 0.1% GST rate for mer­chant ex­porters, of­fer­ing re­lief from the full ap­pli­ca­ble GST rates on their pro­cure­ments. Mer­chant ex­porters do not man­u­fac­ture prod­ucts them­selves but pro­cure from oth­ers for ship­ping over­seas.

Late on Fri­day, Prime Min­is­ter Naren­dra Modi said the rec­om­men­da­tions will im­mensely help small and medium busi­ness.

The steps taken by the Coun­cil will pro­vide ur­gent but tem­po­rary re­lief to SMES, said V.K. Agar­wal, for­mer pres­i­dent of the Fed­er­a­tion of In­dian Small and Medium En­ter­prises.

Fri­day’s de­ci­sions was ex­pected to come into force over the course of a week as they get no­ti­fied. A sys­tem of im­me­di­ate re­funds is be­ing pre­pared. A tech­nol­ogy com­pany will be hired to launch an e-wal­let scheme by April 2018 with no­tional tax cred­its that ex­porters can use to pro­cure goods with­out ac­tu­ally in­cur­ring a tax bur­den.

Fed­er­a­tion of In­dian Ex­port Or­ga­ni­za­tions pres­i­dent Ganesh Ku­mar Gupta said the in­tro­duc­tion of an e-wal­let will pro­vide a per­ma­nent so­lu­tion to the liq­uid­ity prob­lem of ex­porters. “The early re­fund of GST for July and Au­gust will ad­dress liq­uid­ity con­cerns of ex­porters,” he added.

The Coun­cil also sus­pended till March a re­quire­ment that puts the onus of small busi­nesses’ tax com­pli­ance on big busi­nesses that source prod­ucts from them. “Big play­ers pay the largest chunk of GST, while small tax­pay­ers who pay nom­i­nal or nil tax face high com­pli­ance im­pact. We are re­lax­ing their com­pli­ance bur­den,” said Jait­ley.

More busi­nesses—traders, restau­rants and man­u­fac­tur­ers—can now sign up for a lib­eral quar­terly tax re­turn fil­ing and pay­ment scheme called the ‘com­po­si­tion scheme’ by rais­ing the thresh­old to Rs1 crore of an­nual sales from Rs75 lakh. Un­der the scheme, a mar­ginal flat rate of tax is levied.

Small busi­nesses with sales up to Rs1.5 crore can also now file quar­terly tax re­turns in­stead of monthly re­turns, although tax pay­ment has to be made on a monthly ba­sis. This, to­gether with the com­po­si­tion scheme, will cover most as­sessees. The re­turn-fil­ing re­lax­ation is ex­pected to ease the com­pli­ance bur­den as well as the heavy traf­fic on the last date for fil­ing re­turns on GST Net­work.

The rule changes are in line with the as­sur­ance given by Modi on Wed­nes­day, 4 Oc­to­ber, that if “any sec­tor needs tem­po­rary as­sis­tance” on ac­count of struc­tural re­forms like GST, the govern­ment will pro­vide it. The Coun­cil also re­duced the tax rate on a few ser­vices such as job works (work farmed out to small units by man­u­fac­tur­ers) in cer­tain sec­tors from 12% to 5%.

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