7.10.17

GST tweaked


India announced a significant revamp of the GST regime three months after it was rolled out, addressing key complaints, especially those of small-scale industry and exporters.

The GST Council raised the composition scheme threshold to Rs.1 crore from Rs.75 lakh, allowed smaller businesses with a turnover of up to Rs.1.5 crore to pay tax and file returns quarterly instead of monthly, exempted exporters from payment of tax under various promotion schemes, deferred implementation of the tax deduction at source and collection at source provision to April 1 next year and suspended the reverse charge mechanism until the fiscal year-end.

The council also slashed tax rates on 27 items including sliced dried mango, khakhra, manmade yarn, stationary items, e-waste, plastic waste, rubber waste and job-work services while deciding to adopt a concept paper on the tax rates that would form the backbone of all changes in future.

Jaitley said a number of representations had been received and the council had decided to give relief to small and medium enterprises and exporters. “Large part of the tax collection about 94-95% comes from large taxpayers... Smaller ones have low tax burden, but it was felt their compliance burden is high,“ the minister said, explaining the rationale behind the move to relax compliance for the sector, which was known to have been hit hard by the switch over to the new tax regime from July 1.

“Small ones should remain in the tax net for the expansion of the base, but we have significantly reduced their compliance burden,“ he said. Composition scheme allows traders, manufacturers and restaurants to pay tax at a flat rate of 1%, 2% and 5%, respectively, on their turnover. This facility will be available from October onwards and past returns will have to filed in time.

The council has also set up a group of ministers to examine on an urgent basis issues concerning the small scale sector such as whether the total turnover calculation for the composition scheme should include exempted goods, if inter-state sales should be allowed for those availing of the scheme and whether input tax credit needs to be given to them. This group will give its report in two weeks. It will also look at the taxation structure for restaurants, Jaitley said.

“The group will see if tax system needs to be revisited, tax rate needs to be reduced without input tax credit... It will see what should be the alternate tax mechanism,“ he said. Currently the rates for air-conditioned and non-AC restaurants are 18% and 12%, respectively.

The reverse-charge mechanism has been deferred until March 31, 2018, to streamline its working.

The council allowed merchant exporters to pay 0.1% GST on the goods they source, which they can claim as input credit, to address the issue of blockage of funds. Besides, both state and central tax authorities have been directed to issue refund cheques for July by October 10 and for August by October 18.

An e-wallet facility will be created that will be provided with notional credit as an advance refund for exporters that could be used to pay GST from April 2018. Exporters availing export promotion schemes such as advance authorisation, Export Promotion Credit Guarantee scheme and Export Oriented Unit scheme would not have to pay GST on their inputs.

Pre-GST vehicle leases would be able to avail abatement of 35%, implying that the present GST rate will be applicable only on 65% of the total lease value. This facility would be available even when the vehicle is sold.

Services providers providing interstate services up to Rs.20 lakh will be exempted from GST. Those providing exempted service on which interest is received would be eligible for exemption of up to Rs 1.5 crore. Eway bill will be fully implemented from April next year. The council has approved a concept paper that would guide the fitment committee on tax rates.


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