A slew of important changes in the goods and services tax (GST) compliance rules, particularly concerning small-scale traders and exporters, will offer significant relief to these segments. The changes announced by Union Finance Minister Arun Jaitley, after a day-long meeting of the GST Council on Friday, means that smaller businesses with a turnover of upto Rs 1.5 crore will now have to pay tax and file returns only quarterly, not monthly.
This is a major relief to small units since filing of returns every month had made compliance a nightmare for them. Similarly, the GST Council has also raised the threshold for composition scheme to Rs 1 crore from Rs 75 lakh. This will ease the tedious process of tax compliance for small traders. They, however, cannot claim input tax credit.
The scheme allows traders, manufacturers and restaurants to pay tax at a flat rate of 1 percent, 2 percent and 5 percent respectively, in accordance with their annual turnover.
For exporters, too, there is good news with Jaitley promising tax refunds for July exports by 10 October, exemption from paying any tax if they are under various promotion schemes and deferment of the implementation of the provision covering tax deduction at source and collection at source to 1 April. He has also assured an e-wallet facility by 1 April.
The real good news is, however, for small traders since numerically this segment forms a major chunk though about 95 percent of the tax collection (in terms of quantum) comes from large companies. It is only logical to cut the compliance burden for these units. Millions of tiny entrepreneurs, commonly known as micro, small and medium enterprises (MSMEs), are key to addressing the problem of employment. They give jobs to around 8 crore people and contribute close to 40 percent to the gross domestic product (GDP). However, they lack the financial muscle and clout enjoyed by large corporations. The GST Council has done well by acknowledging their problems and acting in time.
The GST meet was not so much about tax revisions. Still, rates on about 27 items, including certain processed food items and medicines, have been reduced. Some of them are khakhra, man-made yarn, stationary items, e-waste, plastic waste, rubber waste and job-work services. The Council has also decided to look deeper into the process of fitment of various products going ahead by preparing a concept paper.
These steps will help allay the fear among small entrepreneurs about GST compliance and tax burden. Offering relaxation to these segments will not cause pain to the exchequer since in terms of quantum, contribution of small traders is far lesser than large corporations. As mentioned in an earlier Firstpostpiece, GST is a great reform and the time for its implementation in India is now.
Once the initial hiccups are over, an integrated economy with a uniform tax structure could help lift the economy to the next level of growth. But it is of utmost importance to handhold small and medium enterprises while progressing with its implementation. Else, it could result in chaos. The GST Council deserves credit for taking action to avert this. It wouldn’t be an exaggeration to say that the Modi government has just saved the country's biggest tax reform by acknowledging the concerns and acting early on.
Published Date: Oct 07, 2017 12:08 pm | Updated Date: Oct 07, 2017 01:29 pm