Stay the course

GST sops for MSMEs are wel­come, but con­stant changes are best avoided

The Hindu Business Line - - THINK -

The GST Coun­cil, by rais­ing the thresh­old ex­emp­tion rate for goods sup­pli­ers from ₹20 lakh to ₹40 lakh, has thrown a ma­jor line of re­lief to the MSME sec­tor. This comes on the heels of re­lax­ation of NPA norms for the sec­tor, hit by de­mon­eti­sa­tion and later by the abrupt in­tro­duc­tion of pro­vi­sions such as re­verse charge un­der GST. With elec­tions draw­ing near, the Cen­tre seems fo­cussed on mak­ing amends. Even so, the thresh­old for ser­vices re­mains the same at ₹20 lakh. With ser­vice providers be­ing pre­dom­i­nantly small-scale, the at­tempt is to ex­pand the uni­verse of reg­is­tered units. In an ef­fort to sim­plify com­pli­ance for­mal­i­ties for the MSMEs, the limit for the com­po­si­tion scheme has been raised as well. While the fo­cus on in­dus­try’s sup­ply side con­straints is to be wel­comed, it should not lead to ad hoc mea­sures that go against the ba­sis of GST.

A case in point is the pro­posed in­tro­duc­tion of a 6 per cent rate for ser­vices sup­pli­ers with a turnover of ₹50 lakh in 2017-18. This would only in­crease the num­ber of rates un­der GST to eight, go­ing against the idea of min­imis­ing the num­ber of rates. By al­low­ing the States to de­cide whether they want to raise the ex­emp­tion thresh­old for goods sup­pli­ers to ₹40 lakh or stay with ₹20 lakh, the Coun­cil has taken a big step away from cre­at­ing a uni­form set of tax rules across States. Man­u­fac­tur­ing States may opt for a higher ex­emp­tion limit. This seems like a con­ces­sion to States, oth­er­wise peeved by the in­ad­e­quate rev­enue col­lec­tions and IGST trans­fers. It is ar­guable whether al­low­ing a cess of 1 per cent on the in­tra-State sup­ply of goods from Ker­ala will re­ally help in rais­ing the sort of funds the State re­ally needs.

The Coun­cil should avoid con­stant chop­ping and chang­ing of rates and rules. Hun­dreds of no­ti­fi­ca­tions have been is­sued in the 18 months since GST came into ef­fect. A com­mit­tee has been set up to look into whether res­i­den­tial real es­tate should be al­lowed a com­po­si­tion scheme, pos­si­bly as a re­sponse to re­ports of in­dif­fer­ent com­pli­ance in the sec­tor. How­ever, a low­er­ing of rates from 12 per cent at present to pos­si­bly 5 per cent sans tax credit should not lead to un­scrupu­lous builders claim­ing higher in­put costs and arm-twist­ing buy­ers to pay up, whether in black or white. At an­other level, it is not clear how the anti-prof­i­teer­ing pro­vi­sions are to be im­ple­mented. These should not be used to ha­rass pro­duc­ers. The GST Coun­cil should ar­rive at a trans­par­ent set of guide­lines on rates, while con­sult­ing all stake­hold­ers con­cerned as it seeks to make a change. It must pro­gres­sively sim­plify pro­ce­dures, rates and op­er­a­tions.

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