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%.