GST Council meets today: From support for MSMEs to tax rate cuts; how govt plans to ease the pain
Some measures to ease the difficulties being faced by traders owing to Goods and Service Tax (GST) are likely to be announced after the GST Council's meeting on Friday. On Thursday, Prime Minister Narendra Modi met Finance Minister Arun Jaitley and BJP President Amit Shah and discussed the state of the economy and steps to revive growth.
While Amit Shah cut short his tour of Kerala, Jaitley returned from Dhaka for the meeting with Modi, who on Wednesday night put up a strong defence of the government's handling of the economy and hit back at critics saying they were spreading pessimism all round.
Though Jaitley himself refused to disclose anything about the discussions at the Prime Minister's meeting with him and the party president, media reports have been speculating on many likely measures.
In his speech at the Institute of Company Secretaries in the capital on Thursday, the Prime Minister had promised the traders that the government would not dig into the past through any retrospective investigation of traders joining the formal economy.
Given below are the key points:
It is understood that the GST council can decide to make easier refund of input credit for exporters, deferring of reverse charge mechanism for unregistered traders and promise of no enquiry into the tax matters of the previous VAT regime of indirect taxes.
Steps for exporters: PTI reported that the committee headed by Revenue Secretary Hasmukh Adhia on issues faced by exporters is likely to submit its preliminary report to the GST Council on Friday. Based on that, the council is likely to recommend some relaxation for exporters so that their working capital which is locked up in refunds is released, officials told the news agency.
Also, the Central Board for Excise and Customs (CBEC) will inform the Council that it is ready to release Integrated Goods and Service Tax (IGST) refunds to exporters from 10 October. In a meeting with the Revenue Secretary Hasmukh Adhia last month, exporters had said that an estimated Rs 65,000 crore is locked up in GST refunds. Also, steps like easy compliance for exporters such as quarterly filing of returns instead of monthly filing, is likely to be discussed by the Council.
However, it is not clear whether the Council take a final decision on this. The government has already allowed exporters to furnish Letter of Undertaking (LUT) instead of bonds at the time of exports, which will ease the compliance burden and stop locking up of capital.
GSTN glitches: The PTI report also said the Council will review the glitches that have affected the GST Network. Officials in the ministry said that the Group of Ministers, under Sushil Modi, set up to look into GSTN glitches will brief the GST Council on the portal's functioning.
Support for MSMEs: This is one of the key area of concern. Transitioning to the new tax regime has been painful for small units. According to a report by India Ratings, companies with weak credit profiles, especially small units, are likely to be hit due to lingering short-term liquidity mismatch arising from the delayed input credit refunds.
"The short-term liquidity crisis arising from delayed input credit refunds is due to the difficulties in mapping the inventory held on the transition date with respective invoices, various GST Network-related technical issues and admissibility of these refund claims," the report has said.
Ahead of the GST rollout, media reports had warned that small and medium scale companies are likely to be severely impacted as they are not prepared fully for the new system.
A report in The Economic Times has said that the Council is likely to consider raising the threshold for composition scheme from Rs 75 lakh to Rs 1-1.5 crore. The likely tweak in the returns filing rules will also help the small scale units.
Tax rate cuts: The biggest surprise is likely to be the tax rate cuts. According to a report by Moneycontrol, the Modi-Jaitley-Shah meeting is learnt to have taken a decision to cut GST rates on as many as 60 goods and services.
The Centre is going to propose GST rate cuts on many items that fall in the highest tax bracket of 28 percent, the report said, citing an unnamed official. Such a move, if it materialises, will prove to be a major boost for the sagging economy.
(With inputs from agencies)