Cross­ing the GST river by feel­ing the stones

Mint Asia ST - - Mark To Market -

Tweak­ing tax rates on var­i­ous items is the norm at meet­ings held af­ter the im­ple­men­ta­tion of the goods and ser­vices tax (GST) in July. At its last meet­ing, the GST Coun­cil re­vised a slew of rules, aim­ing to ease the com­pli­ance bur­den on small and medium-sized en­ter­prises (SMES) and pacify ex­porters fac­ing a se­vere liq­uid­ity crunch due to de­layed re­funds.

To be­gin with, SMES with an an­nual turnover of less than Rs1.5 crore can file GST re­turns on a quar­terly ba­sis, a re­lax­ation from the monthly fil­ing de­cided ear­lier. Also, the an­nual turnover limit un­der the com­po­si­tion scheme, that en­ables smaller firms to pay tax at a con­ces­sional rate, has been raised from Rs75 lakh to Rs1 crore.

While both th­ese mea­sures would widen the tax­payer base, ac­cord­ing to tax ex­perts, the com­po­si­tion scheme should have been ex­tended to ser­vice providers (cur­rently, for ser­vices, just restau­rants are in­cluded). Also, akin to the global prac­tice, large firms that con­trib­ute the bulk of GST should be al­lowed to file re­turns quar­terly. This would boost ease of do­ing busi­ness and re­duce the bur­den on the GST Net­work, which has so far been a big ir­ri­tant.

“Ide­ally, quar­terly re­turns with monthly pay­ments shall be ex­tended to all tax­pay­ers with fa­cil­ity claim/set off in­put credit against monthly cal­cu­la­tion of GST li­a­bil­ity,” Sachin Menon, head-in­di­rect tax at KPMG In­dia, said.

Fur­ther, a re­verse charge mech­a­nism (RCM) un­der which large en­ti­ties were re­quired to pay taxes on pur­chase from un­reg­is­tered SMES has been de­ferred by six months. This re­duces the ad­di­tional tax bur­den on larger firms and pro­vides short-term re­lief to SMES. “RCM has be­come a catch-22 sit­u­a­tion for govern­ment. The pur­pose to in­tro­duce RCM was to widen the tax base; but for smaller firms, who are too small for GST com­pli­ance, it be­came a ques­tion of sur­vival,” Ab­hishek Jain, Part­ner, EY said.

For ex­porters, re­moval of in­ter­state GST till March 2018 and the Coun­cil’s as­sur­ance to clear re­fund claims for July by 10 Oc­to­ber and for Au­gust by 18 Oc­to­ber, should largely ad­dress their con­cern of work­ing cap­i­tal block­age. But some are scep­ti­cal of the pace at which re­funds will be cleared. “As a le­gacy, get­ting re­funds from au­thor­i­ties has been a chal­lenge in­volv­ing a lot of du­pli­ca­tion in terms of pa­per­work and ad­min­is­tra­tive in­con­ve­nience,” Krishan Arora, Part­ner, Grant Thorn­ton In­dia, said.

Clar­ity on the mech­a­nism through which the re­fund claims would be com­puted is awaited. Link­ing forms GSTR1 and GSTR 3B for this pur­pose could be one way out since th­ese doc­u­ments con­tain de­tails about the ex­ports and taxes paid on them, said some tax ex­perts.

Go­ing ahead, an e-wal­let has been pro­posed for ex­porters, in which a no­tional amount as ad­vance re­fund would be pro­vided. On the ba­sis of this credit, firms can pay IGST and GST, and re­funds will be off­set against it. This fa­cil­ity is likely to be­gin from April 2018.

As for rate re­vi­sion, tax on 27 items in­clud­ing sliced dried man­goes, khakra, plain cha­p­at­tis, un­branded nam­keen, man-made yarn, sta­tionery, diesel engine parts and ser­vices such as zari job work have been re­duced.

In­ter­est­ingly, a cut in the rates of many of th­ese items would ben­e­fit busi­nesses op­er­at­ing in Gu­jarat, where elec­tions are due shortly. Ac­cord­ing to some tax ex­perts, who did not want to be named, given that the con­tri­bu­tion of th­ese prod­ucts to the over­all tax col­lec­tion is quite low, there was no need to tax them higher in the first place.

To con­clude, the rush to im­ple­ment GST has led to much con­fu­sion from the day it was in­tro­duced; de­spite a se­ries of re­vi­sions, am­bi­gu­ity on many as­pects still per­sists. Nev­er­the­less, the changes in­di­cate that the govern­ment is learn­ing from its mis­takes and, in the words of Deng Xiaop­ing, it is cross­ing the river by feel­ing the stones. The lat­est changes are a huge re­lief for ex­porters and SMES.

The lat­est changes by the GST Coun­cil will come as a re­lief for ex­porters and SMES

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.