New Delhi: Three months after the rollout of the new indirect tax regime, the GST Council on Friday (October 6) made sweeping changes for small and medium businesses on filing and payment of taxes, eased rules for exporters and cut tax rates on more than two dozen items.
Businesses with an annual turnover of upto Rs 1.5 crore, which constitute 90% of the taxpayer base but pay only 5-6% of total tax, have been allowed to file quarterly income returns, instead of the current provision of monthly filings.
Also, the turnover threshold for businesses to avail of the composition scheme that allows them to pay 1-5% tax without going through tedious formalities, was raised to Rs 1 crore from current Rs 75 lakh.
“Compliance burden of medium and small taxpayers in GST is being reduced,” finance minister Arun Jaitley told reporters after the 22nd meeting of the Council.
Small and medium enterprises had complained of tedious compliance burden under the Goods and Services Tax (GST), which was supposed to be a simple indirect tax regime that replaced over a dozen Central and state taxes.
Jaitley said the Council also decided to cut GST rate on 27 “common-use items”.
GST on unbranded namkeen, unbranded ayurvedic medicine, sliced dried mango and khakra has been cut to 5% from 12%, while the same on man-made yarn used in textile sector has been reduced to 12% from 18%.
Tax on stationery items, stones used for flooring (other than marble and granite), diesel engine parts and pump parts has been cut to 18% from 28%. GST on e-waste has been slashed to 5% from 28%.
Food packets given to school kids under Integrated Child Development Scheme will attract 5% tax instead of 12%.
Job works like zari, imitation, food items and printing items would attract 5% tax instead of 12%.
Government contracts involving a high amount of labour will be levied 5% GST instead of 12% in order to contain cost of those programmes, Jaitley said.
Exporters, who have been facing sluggish growth due to a global slowdown, will get refunds for the tax paid by them on exports during July and August by October 18, he said.
For the remainder of the fiscal year, they will operate under an exempted category paying a nominal 0.1% GST, he said, adding that from April 1 an attempt would be made to launch an e-wallet facility for the exporters to provide liquidity.
Jaitley said big taxpayers, who contribute 94-95% of the total taxes, will continue to file monthly returns and pay taxes on a monthly basis.
Also, a group of ministers has been asked to go into the issue of extending the composition scheme on inter-state sales as well as rationalising taxes on restaurants.
The switchover to quarterly tax filing for small and medium businesses would happen from October 1 and they will have to file monthly returns for the first three months of GST, which was implemented from July 1, he said.
With small businesses and traders complaining about the compliance burden the GST regime has put on them, the panel decided to give the option to taxpayers to avail of the so-called Composition Scheme if their turnover is less than Rs 1 crore as against the previous limit of Rs 75 lakh.
So far, over 15 lakh out of the 90 lakh registered businesses have opted for the composition scheme.
The tax rate for traders of goods in the composition scheme is 1%, while it is 2% for manufacturers and 5% for suppliers of food or drinks for human consumption (without alcohol).
Service providers cannot opt for the composition scheme.
The scheme allows small businesses, including eateries, to pay 1-5% tax without having to deal with the three-stage filing process.
It also allows small taxpayers to pay GST at a fixed rate of turnover and not go through the tedious GST formalities, according to the finance minister.
The scheme cannot be opted for by a supplier of services other than restaurant related services; manufacturer of ice cream, pan masala, or tobacco; casual taxable person or a non-resident taxable person; and businesses which supply goods through an e-commerce operator.
No input tax credit can be claimed by those opting for the composition scheme.
Also, the taxpayer can only make intra-state supply (sell in the same state) and cannot undertake inter-state supply of goods.