Diwali comes early for SMEs, exporters

Diwali comes early for SMEs, exporters

The Goods and Services Tax (GST) Council on Friday took major decisions to prevent working capital of exporters from getting locked up and reduce the compliance burden on small and medium enterprises, while reducing rates on 27 items of daily use, including khakhra,which may help the ruling party, the BJP, in pollbound Gujarat.

It deferred implementing the controversial eway Bill and the reverse charge mechanism.The Council also postponed imposing tax deducted or collected at source, which will particularly benefit ecommerce companies.It also decided to set up a committee to frame principles to reduce rates, depending on revenue patterns of the GST so that no ad hoc decision was taken, said Finance Minister Arun Jaitley, who chaired the Council meeting.

Exporters will start getting credit for the integrated GST (IGST) paid for July from October 10 and for August from October 18. Other refunds of the IGST paid on supplies to special economic zones (SEZs) and of input taxes on exports under bonds or the letter of undertaking would also be processed from October 18.

Both Central and state officials will be empowered to do so. The decision, an interim one, was based on the recommendations ofacommittee headed by Revenue Secretary Hasmukh Adhia.Besides,there would be longterm solutions for exporters—a facility of e-wallet will be set up, preferably by April 1 next year.

There will be a notional amount in the ewallet to give advance credit to exporters. This credit will be used to pay the IGST or GST for his products.Refunds that exporters get will be used to offset this advance credit.A technology firm will develop the e-wallet.This decision was taken since no sector could be exempt from the GST. Till then, merchant exporters will pay the nominal GST at the rate of 0.1 per cent for procuring goods from domestic suppliers for export.

Those possessing Advance Authorisation licences come under the Export Promotion Capital Guarantee Scheme and 100 percent export oriented units need not pay the IGST and cess on imports.Also, domestic supplies to these exporters would be treated as deemed exports and refunds of tax paid on such supplies be given to the supplier.

The Council allowed those with an annual turnover of upto Rs 1.5 crore to file returns and pay taxes quarterly from October.It also raised the eligibility limit in terms of annual turnover to Rs one crore from the current Rs 75 lakh for the composition scheme, which allows a flat rate and easy compliance.

The assessees are required to file and pay taxes only quarterly under this scheme.Under the scheme,a trader pays the GST at one per cent,a manufacturer at two per cent and a restaurant owner at 5 per cent, but they are not allowed input tax credit.And they are permitted to file quarterly returns.

The two moves are aimed at reducing the compliance burden on small and medium enterprises.Jaitley said 9495 per cent of taxes came from big taxpayers.“While taxes paid by small and medium tax payers are small, the compliance burden on them was huge,” he said.About 90 per cent taxpayers under the GST has an annual turnover of up to ~1.5 crore.

There are approximately 9.8million assessees under the GST with 7.2 million migrants from the old tax regime and 2.6 million new assessees.Archit Gupta of ClearTax says, “Unless the scope of the composition scheme is widened it may not see much favour.

The services sector is still devoid of the benefits of this scheme.” The Council deferred the reverse charge mechanism (RCM) till March 31, 2018. In the GST the one selling goods and services has to pay the tax. But under the RCM, those buying goods and services from unregistered entities have to pay the tax.

This move will help many companies but it will be particularly helpful for small enterprises since bigger companies were asking them to register.Those with an annual turnover of Rs 20 lakh are exempt from registration.The controversial proposal of the eway Bill has also been put off. It is in force in Karnataka on an experimental basis.Jaitley said the experiment had been successful.

It will be put in place in other states from January next year till March 31 of that year. But the eway Bill has been notified.The Bill is required even if goods are transferred from one vehicle to the other.

The Business standard, New Delhi, 07th October 2017

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