Offering relief to small and medium enterprises (SMEs) and exporters from the rigours of complying with the technology-oriented goods and services tax (GST), thefederal indirect tax body, GST Council, on Friday announced a series ofrule changes.
The Council also lowered tax rates on 27 products and a few services and asked a panel of state ministers to examine if the 18% GST on air-conditioned restaurants could be lowered, finance minister Arun Jaitley said after the meeting.
The Council, which is headed by Jaitley, decided to continue with two pre-GST era schemes that allow duty-free sourcing of materials for export production till March 2018, a move that will improve the liquidity of exporters by preventing their working capital from getting locked up in tax procedures.
The Council decided to clear all tax refund claims of exporters for July by 10 October and for August by 18 October. It introduced a 0.1% GST rate for merchant exporters, offering relief from the full applicable GST rates on their procurements. Merchant exporters do not manufacture products themselves but procure from others for shipping overseas.
The steps taken by the Council will provide urgent but temporary relief to SMEs, said V.K. Agarwal, former presidentof the Federation of Indian Small and Medium Enterprises.
Friday’sdecisions will come into force over the next one week as they get notified. A system of immediate refunds is being prepared. A technology company will be hired to launch an e-wallet scheme by April 2018 with notional tax credits that exporters can use to procure goods without actually incurring a tax burden.
Exports are exempted from taxes to maintain competitiveness of the domestic industry in world markets.
TheCouncil also suspended till March a requirement that puts the onus of small businesses’ tax compliance on big businesses that source products from them.More businesses—traders, restaurants and manufacturers—can now sign up for a liberal quarterly tax return filing and payment scheme called the ‘composition scheme’ by raising its eligibility threshold to Rs1 crore of annual sales from Rs75 lakh. Under the scheme, a marginal flat rate of tax is levied.
Small businesses with sales up to Rs 1.5 crore can also now file quarterly tax returns instead of monthly returns. This, together with the composition scheme, will cover most of the assessees, barring the big players. The return-filing relaxation is expected to ease the compliance burden as well as the heavy traffic on the last date for filing returns on the IT network of the GST Network, the company that processes returns.
The rule changes are in line with the assurance given by Prime Minister Narendra Modi on Wednesday that if “any sector needs temporary assistance” on account of structuralreforms like GST, the government will provide it. Modi had specificallyreferred to exporters and small and medium enterprises.
The Council also reduced the tax rate on a few services such as job works (work that is farmed out to small units by manufacturers), in certain sectors from 12% to 5%.