Three months after the rollout of the new indirect tax regime, the GST Council today made sweeping changes to give relief to small and medium businesses on filing and payment of taxes, eased rules for exporters and cut tax rates on more than two dozen items.
Businesses with annual turnover of up to Rs 1.5 crore, which constitute 90 per cent of the taxpayer base but pay only 5-6 per cent of total tax, have been allowed to file quarterly income returns and pay tax instead of the current provision of monthly filings.
Also, the turnover threshold for businesses to avail of the composition scheme that allows them to pay 1-5 per cent tax without going through tedious formalities, was raised to Rs 1 crore from current Rs 75 lakh.
“GST Council has considered the implementation experience of the last 3 months and gave relief to small traders… Compliance burden of medium and small taxpayers in GST has been reduced,” Finance Minister Arun Jaitley told reporters after the 22nd meeting of the Council.
Small and medium enterprises had complained of tedious compliance burden under the Goods and Services Tax (GST) that was intended to be a simple indirect tax regime which replaced over a dozen Central and state taxes.
Jaitley said the Council also decided to cut GST rates on 27 common use items.
GST on unbranded namkeen, unbranded ayurvedic medicine, sliced dried mango and khakra has been cut to 5 per cent from 12 per cent while the same on man-made yarn used in textile sector has been reduced from 18 per cent to 12 per cent.
Tax on stationery items, stones used for flooring (other than marble and granite), diesel engine parts and pump parts has been cut to 18 per cent from 28 per cent. GST on e-waste has been slashed to 5 per cent from 28 per cent.
Food packets given to school kids under ICDS will attract 5 per cent tax instead of 12 per cent.
Job works like zari, imitation, food items and printing items would attract 5 per cent tax instead of 12 per cent. Government contracts involving high amount of labour will be levied 5 per cent GST instead of 12 per cent in order to contain cost of those programmes, he said.
Also, salwar suit in a three-piece set has been classified as fabric and 5 per cent GST would be levied on it.
Exporters, who have been facing sluggish growth due to global slowdown, will get refunds for the tax paid by them on exports during July from October 10, while refunds for tax paid for August will be given by October 18, he said.
For the remainder of the fiscal, merchant exporters will operate under an exempted category after paying a nominal 0.1 per cent tax on purchase from manufacturers.
From April 1, the government will attempt to launch an e-wallet facility for the exporters to give them refund for GST paid which will solve their liquidity problems.
Jaitley said big taxpayers, who make 94-95 per cent of the total taxes, will continue to file monthly returns and pay taxes on a monthly basis.
GST provisions for TDS and TCS deductors will come into effect from April 1, he added. Also, the Council has finalised a concept paper defining parameters on which future rate revisions would be done, he said.
A group of ministers (GoM) has been asked to go into the issue of extending the composition scheme on inter-state sales as well as rationalising taxes on restaurants.
The GoM will also look into whether manufacturers availing composition scheme can claim input credit on 2 per cent GST paid by them.
The switchover to quarterly tax filing for small and medium businesses would happen from October 1 and they will have to file monthly returns for the first three months (July-September) of GST, he said.
With small businesses and traders complaining about the compliance burden the new GST regime has put on them, the Council has decided to give option to taxpayers to avail of the Composition Scheme if their turnover is less than Rs 1 crore as against the previous limit of Rs 75 lakh.
So far, over 15 lakh out of the 90 lakh registered businesses have opted for the composition scheme.
The tax rate for traders of goods in the composition scheme is 1 per cent, while it is 2 per cent for manufacturers and 5 per cent for suppliers of food or drinks for human consumption (without alcohol).
Service providers cannot opt for the composition scheme.
The scheme allows small businesses, including eateries, to pay 1-5 percent tax without having to deal with the three- stage filing process.
It allows small taxpayers to pay GST at a fixed rate of turnover and not go through the tedious GST formalities.
The scheme cannot be opted by supplier of services other than restaurant related services; manufacturer of ice cream, pan masala, or tobacco; casual taxable person or a non- resident taxable person; and businesses which supply goods through an e-commerce operator.
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.
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