Skip to main content

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

Comments

Popular posts from this blog

RBI minutes show MPC members flagged upside risks to inflation

RBI minutes show MPC members flagged upside risks to inflation Concerns about economic growth and easing inflation prompted five of the six monetary policy committee (MPC) members to call for a cut in the repo rate, but most warned that prices could start accelerating, show the minutes of the panel’s last meeting, released on Wednesday. The comments reflected a tone of caution and flagged upside risks to inflation from farm loan waivers, rise in food prices, especially vegetables, price revisions withheld ahead of the goods and services tax, implementation of house rent allowance under the 7th pay commission and fading of favourable base effect, among others. On 2 August, the panel chose to cut the repurchase rate—the rate at which the central bank infuses liquidity in the banking system—by 25 basis points to 6%. One basis point is one-hundredth of a percentage point. Pami Dua, professor at the Delhi School of Economics, wrote that her analysis showed “a fading economic growth outlook, as …

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

Differential Tax Levy under GST: Food Firms May De-Register Trademarks

Differential Tax Levy under GST:Food Firms May De-Register Trademarks The government’s decision to charge an enhanced tax rate on trademark food brands is leading several rice, wheat and cereal manufacturers to consider de-registering their product trademarks. Irked by the June 28 central government notification fixing a 5 per cent goods and services tax (GST) rate on food items packaged in unit containers and bearing registered brand names, the industry has made several representations to the government to reconsider the differential tax levy, which these players say is creating an unlevel playing field within these highly-competitive and low-margin industries. Sources say that the move has affected the packaged rice industry the hardest and allowed the un-registered market leaders, India Gate and Daawat, to gain advantage as compared to other registered brands such as Kohinoor and Lal Qilla. Smaller players are even more worried with this enhanced rate of tax (against the otherwise …