GST panel pro­poses more re­lief for small busi­nesses

The panel rec­om­mends flat 1% rate un­der com­po­si­tion scheme, higher Rs1.5 crore rev­enue ceil­ing for el­i­gi­bil­ity


Amin­is­te­rial panel has rec­om­mended low­er­ing the goods and ser­vices tax (GST) rates for small busi­nesses and ex­tend­ing the ben­e­fit to more such units in an at­tempt to re­duce their tax bur­den and im­prove com­pli­ance.

If ac­cepted by the GST Coun­cil at its 9-10 Novem­ber meet­ing, the changes in the so-called com­po­si­tion scheme could ben­e­fit mil­lions of small en­ter­prises, eater­ies and traders.

The changes could also re­duce some of the angst over GST, the po­lit­i­cal bal­last of which is be­ing felt by the rul­ing Bharatiya Janata Party. The GST Coun­cil has been work­ing on en­cour­ag­ing the in­for­mal seg­ment of the econ­omy, which is de­pen­dent on cash trans­ac­tions, to come un­der the tax net with­out bur­den­ing them.

In a meet­ing on Sun­day, the min­is­te­rial panel rec­om­mended a new tax rate un­der the com­po­si­tion scheme would be 1% for traders, man­u­fac­tur­ers and restau­rants, Hi­manta Biswa Sarma, the con­vener of the min­is­te­rial panel, told re­porters after the meet­ing. It was pre­vi­ously 1%, 2% and 5%, re­spec­tively.

The panel also rec­om­mended in­creas­ing the ceil­ing for el­i­gi­bil­ity to en­ter­prises with an­nual rev­enue of less than Rs1.5 crore from Rs1 crore currently. The GST Coun­cil had on 6 Oc­to­ber de­cided to raise the ceil­ing to the cur­rent level from Rs75 lakh and also ex­tended the dead­line for sign­ing up for the scheme to 31 March 2018.

The mem­bers of the panel are As­sam fi­nance min­is­ter Hi­manta Biswa Sarma, Bi­har deputy chief min­is­ter Sushil Modi, Jammu and Kash­mir fi­nance min­is­ter Haseeb Drabu, Pun­jab fi­nance min­is­ter Man­preet Singh Badal and Ch­hat­tis­garh min­is­ter of com­mer­cial taxes Amar Agrawal.

The panel at its first meet­ing ear­lier this Pro­posed month con­sid­ered a pro­posal to do away with the dis­tinc­tion be­tween non-air-con­di­tioned restau­rants taxed at 12% and air-con­di­tioned restau­rants taxed at 18%. “The group of min­is­ters de­cided that in­put tax credit should be avail­able to air-con­di­tioned restau­rants and that th­ese could be taxed at 12% (against 18% now). How­ever, con­sid­er­ing the rev­enue im­pli­ca­tions, the GST Coun- cil could take a call on the tax slab,” said Sarma. He added that for small traders who sell both tax­able and tax-ex­empt items (such as rice, flour, etc.), the com­po­si­tion scheme should be made more flex­i­ble.

A GST coun­cil of­fi­cial said that the min­is­te­rial panel has rec­om­mended the GST Coun­cil let small traders pay ei­ther 1% on their rev­enue of tax­able items (loose rice, pulses, etc., are ex­empt from GST) or 0.5% tax on to­tal turnover.

“In the lat­ter case, cen­tral and state gov­ern­ments will get a quar­ter of a per­cent of tax each. The idea is to make the sys­tem sim­ple,” said Pun­jab fi­nance min­is­ter Badal.

Sarma said that on one is­sue—al­low­ing en­ter­prises in the com­po­si­tion scheme to avail of in­put tax cred­its on busi­ness-to-busi­ness trans­ac­tions—the panel could not reach a con­sen­sus and that this mat­ter will be re­ferred back to the GST Coun­cil.

The panel also favoured al­low­ing those cov­ered un­der the com­po­si­tion scheme to sup­ply goods across state borders.

The com­po­si­tion scheme was en­vis­aged for small busi­nesses and held the prom­ise of a flat rate and easy com­pli­ance. Around 1.5 mil­lion small busi­nesses have signed up for it so far, a frac­tion of the 8.9 mil­lion reg­is­tered GST tax as­sesses.

It was clear that the scheme needed to be made more at­trac­tive and that just the flat rate and the easy com­pli­ance (sum­mary re­turns ev­ery quar­ter) were not draw­ing enough as­sessees.

Over the past few sit­tings, the GST Coun­cil has sought to ad­dress teething trou­bles and im­ple­men­ta­tion is­sues sur­round­ing the new uni­fied in­di­rect tax regime that In­dia adopted on 1 July.

In early Oc­to­ber, for in­stance, it slashed rates on 27 items, al­lowed busi­nesses with rev­enue of up to Rs1.5 crore to file re­turns ev­ery quar­ter (in­stead of ev­ery month), rec­om­mended the cre­ation of a min­is­te­rial group to re­view the tax on AC restau­rants and an­nounced sops for ex­porters.

More changes could be in the off­ing, es­pe­cially in terms of spe­cific tax rates. Rev­enue sec­re­tary Has­mukh Ad­hia said in a 22 Oc­to­ber in­ter­view to PTI that the gov­ern­ment was con­sid­er­ing eas­ing the com­pli­ance bur­den on small and medium en­ter­prises: “There is a need for har­mo­niza­tion of items chap­ter­wise and wher­ever we find there is a big bur­den on small and medium busi­nesses and on the com­mon man, if we bring it down, there will be bet­ter com­pli­ance.”

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