Days after Prime Minister Narendra Modi hinted at changes in GST rules to ease the pain for industry and opposition and trade bodies attacked the government on the GST rollout, the GST Council on Friday exempted exporters from payment of IGST and allowed smaller businesses to file quarterly results. It also brought relief for consumers by reducing tax rates on about 27 items including man-made yarn, stationery and snacks.
The council, at its 22nd meeting in the national capital, increased the threshold under composition scheme to Rs 1 crore from Rs 75 lakh now, another key step to reduce compliance burden for the smaller firms. No input tax credit can be claimed by those opting for composition scheme. Also, the taxpayer can only make intra-state supply (sell in the same state) and cannot undertake inter-state supply of goods.
Besides, businesses having annual turnover of up to Rs 1.5 crore could now file their returns on quarterly basis, instead of monthly returns required now. These firms will file quarterly returns in forms GSTR-1,2 and 3 and pay taxes only on a quarterly basis, starting from the third quarter of this fiscal. The registered buyers from such small taxpayers would be eligible to avail input tax credit (ITC) on a monthly basis.
The GST Council decision follows demand from industry to reduce GST woes which has been compounded by economic slowdown. With GDP hitting a three-year low, the pressure had been mounting on the Modi government to take corrective measures and reverse the trend.
“Compliance burden of medium and small taxpayers in GST is being reduced,” finance minister Arun Jaitley told reporters after the meeting of the Council. Acting on industry demand, the GST Council has also deferred the reverse charge mechanism on purchases from unregistered dealer. It promised to look into other key issues raised by the industry and referred some of them to a group of ministers (GoM) for early resolution. These include items that had raised the hackles of people, like the GST on eating out at restaurants, which is currently at 18 per cent.
Praise from PM
“Good and Simple Tax (GST) becomes even simpler. Today’s recommendations will immensely help small and medium business,” the Prime Minister said in a tweet. “GST is in line with our constant endeavour to ensure interests of our citizens are safeguarded & India’s economy grows,” he added.
Modi said the composition scheme has been made more attractive and other facilitation measures will make the GST even more people-friendly and effective.
Congress vice president Rahul Gandhi demanded that petrol and diesel be brought under the GST regime to prevent "excessive profiteering". He also said that Prime Minister Narendra Modi should not view the new tax reform to further electoral interests. “Time to correct the ‘One Nation, Seven Tax’, multiple form filing and draconian power of taxman. Make it 'Good' and 'Simple' beyond rhetoric,” Gandhi said on Twitter.
In a series of tweets, Rahul said, “Wish Modiji viewed economic slide and GST mess from prism of solving suffering of people than furthering electoral interests.” He added, “Then, 1st step would be to bring Petrol/Diesel under GST to prevent excessive profiteering from common man as GOI alone earns Rs 2,73,000 crore."
Industry and trade welcomed the government's move saying the action steps were in right direction and aimed at boosting the export as well as SME sector. “Exporters got a major relief by way of upfront exemption of GST on purchases till March 2018. Also for July and August, refunds are proposed to be given in a timely manner. Proposal of an E-wallet mechanism from April 2018 seems to be interesting but would entail significant IT changes,” said Pratik Jain, leader (indirect tax) at PwC.
The GST Council gave major relief to export sector which has been facing liquidity problems due to delay in refunds of taxes. Now, exporters will get their July refunds by October 10 and the August refunds by October 18. Further, government will provide exemption on inputs required for export production through advance authorisation, EPCG and EOU Schemes. The Government has also resolved the problem of merchant exporters by putting a duty of 0.1 per cent on any supply from manufacturing to merchant.
Federation of Indian Export Organisations (FIEO) Ganesh Kumar Gupta termed GST Council decisions as very pragmatic saying it shows the flexible approach of the government which will ameliorate the problem of export sector and will impart much needed competitiveness to exports.
The Council decision on reduction in tax rates were also welcomed by the experts who said it will contain inflation.
Revenue secretary Hasmukh Adhia said that notifications with regards to today's GST Council decision would be issued in a week.