GST rates on 27 items reduced, relief to small and medium enterprises
New Delhi: The federal indirect tax body, GST Council, on Friday announced a series of rule changes offering relief to small and medium enterprises (SMEs).
The Council lowered tax rates on 27 products and a few services.
A panel of state ministers has been asked to examine if the 18% GST on air-conditioned restaurants could be lowered, finance minister Arun Jaitley said after the meeting.
The Council headed by Jaitley decided to continue with two pre-GST era schemes that allow duty-free sourcing of materials for export production till March 2018.
It will improve the liquidity of exporters by preventing their working capital from getting locked up in tax procedures.
The Council decided to clear all tax refund claims of exporters for July by 10 October and for August by 18 October.
It introduced a 0.1% GST rate for merchant exporters, offering relief from the full applicable GST rates on their procurements.
Merchant exporters do not manufacture products themselves but procure from others for shipping overseas.
The Council also suspended till March a requirement that puts the onus of small businesses’ tax compliance on big businesses that source products from them.
“Big players pay the largest chunk of GST, while small taxpayers who pay nominal or nil tax face high compliance impact. We are relaxing their compliance burden,” said Jaitley.
More businesses—traders, restaurants and manufacturers—can now sign up for a liberal quarterly tax return filing and payment scheme called the ‘composition scheme’ by raising its eligibility threshold to Rs1 crore of annual sales from Rs75 lakh. Under the scheme, a marginal flat rate of tax is levied.
Small businesses with sales up to Rs 1.5 crore can also now file quarterly tax returns instead of monthly returns. This, together with the composition scheme, will cover most of the assessees, barring the big players. The return-filing relaxation is expected to ease the compliance burden as well as the heavy traffic on the last date for filing returns on the IT network of the GST Network, the company that processes returns.
The rule changes are in line with the assurance given by Prime Minister Narendra Modi on Wednesday that if “any sector needs temporary assistance” on account of structural reforms like GST, the government will provide it. Modi had specifically referred to exporters and small and medium enterprises.
The Council also reduced the tax rate on a few services such as job works (work that is farmed out to small units by manufacturers), in certain sectors from 12% to 5%.