New Delhi: A flawed Goods and Services Tax was drastically overhauled on Friday in just three months of its implementation since July 1, to bring it in line with Prime Minister Modi’s goal of “ease of business.” This may, in turn, help the economy claw out of a 3-year long growth slump.
The biggest offer to the small businessmen is the option to pick up the composition scheme that saves them from the riddles of the complicated GST, as it envisages just a flat nominal rate 1% tax to traders, 2% to manufacturers and 5% to restaurants and that too without filing details of the invoices; rather they file just one quarterly (every three months) return with details of total turnover.
The day-long 22nd GST council meeting, chaired by Union Finance Minister Arun Jaitley with the state finance ministers as ministers, on Friday also decided to raise the threshold limit of annual turnover from Rs 75 lakhs to Rs 1 crore to allow eligibility of the composition scheme to cover almost 75% of those registered under the GST.
Jaitley also announced at a press conference that the small assesses with annual turnover up to Rs 1.5 crore will also be allowed to file quarterly returns instead of three returns every month but only from October 1. They will, however, have to file the monthly returns for July, August and September. Those with the higher turnover will have to, however, file the monthly returns all the time.
While reducing GST on at least 27 items, Jaitley left a hope for the consumers that once the government’s revenue goes up, the future rates of the tax will be “tailored.” In order not to go in an ad hoc manner into revising the rates, he said the council on Friday cleared the basis on which the revisions will be made.
Even while announcing relaxation in the compliance burden, four ticklish issues arising out of the higher eligibility limit for the composition scheme and other matters were referred to a small sub-committee of the finance ministers to report back in two weeks.
These issues are: Will traders in composition category pay 1% also on the unbranded items now attracting 0% tax; will those in composition category be allowed inter-state sales which are not permitted now; will manufacturers paying nominal composition tax of just 2% be allowed 2% credit; and will the air-conditioned restaurants pay 18% tax, or just 5%, if they switch over to the composition scheme.
The GST council also reduced the GST rates on 27 items, many from 18 and 12 per cent to 5 per cent and exempted the service providers with annual turnover of Rs 20 lakhs from the inter-state tax, so as not to burden them with registration in the state where they provide their services. The first decision the council took was to help out the exporters whose business has just stopped because of the blockade of their credit hitting their cash liquidity. Since their business data is electronically available, the council ordered immediate clearance of their refunds by cheque for the month of July between October 6 and 10 and the refund dues of August from October 18.
As an interim arrangement, the council also decided that the exports can be carried out by paying just nominal 0.1% GST up to March 31 as by that time the new mechanism of refunds will be in place as a long-term solution in terms of e-wallet in which they will get notional advance refund which will be offset from the actual credit refund.