Tax Experts react to 22nd GST Council meeting announcements of October 6

GST & Government demonstrates their responsiveness in addressing GST issue on a day of significant decisions. Big relief for exporters with exemption till March, refunds of July/ Aug by Oct 18 and solution of e-wallet by April. Big relief to MSME by increase in threshold to 1 crore, quarterly returns/ payments for taxpayers under 1.5 crores with presumptive credits available in such cases for others. Some rate reductions though not very significant on expected lines. Car lease gets partial relief. Welcome moves to provide some immediate relief to affected sectors. Still, clarity awaited on Area Based Exemptions and Advance Ruling Authority hopefully by Nov 8, 9 Council meeting if not earlier.

The run up to the GST Council meeting had raised expectations which seem to have been only partially fulfilled.

Marginal increase in composition scheme limit seems to have been constrained more by the legislative limit of Rs one Crore than by economic justification of a threshold. The issue of extending input tax credit to purchasers from composition scheme dealers has been skirted which dissuades the taxpayers to do business with such dealers on account of lack of input tax credit. Continuing with composition benefit only to suppliers of goods but not to service providers other than restaurants is discriminatory to services sector. The disincentive to purchase from unregistered dealers has been temporarily removed by suspending the reverse charge mechanism up to March 2018. The committee of experts who will look into this issue will be well advised to curtail it by making it applicable only to certain select goods and services.

Reason to cheer for many and hope for others whose challenges are still to be addressed!

The message from highest levels of Governments is clear – we hear you: businesses, small and large, exporters, informal sector entrepreneurs and stakeholders in general; the rigors of GST law and it’s strict and technology driven implementation has impacted economic activities, cost and ease of doing business has taken a hit and we are addressing them. 

Decisions taken at the 22nd GST Council held on 6 October, 2017, demonstrates earnest desire to address these challenges, albeit, temporarily, in some cases and consolation for resolution in few days in some cases.  This visible pragmatism will go a long way in reducing pain of GST implementation when our design of GST is unique to meet our diversity, systems are robust and there is huge support from vast majority.

Each of the decisions address most pressing demands whether it is exemptions for exporters, quick fix for held up refunds, postponement of implementation of domestic reverse charge for unregistered business purchases, continuing threshold benefit even if there are inter-state supplies and so on.

We have come some way but, there is a long way to go.  There are many more challenges that need to be addressed whether they relate to LUT for exporters, rate differentials, HSN, interest and penalty for incorrect payments, adjustments for errors, double taxation and so on.  We do hope these too will be addressed and there will not be unintentional slips between the cup and the lip.

The GST council has taken some bold decisions mainly to ease the burden on small taxpayers. The key decisions, however, are the announcement to suspend the tax on reverse charge, deferment of TDS/TCS provisions and E-way bill rules till 31 March 2018. This would give the taxpayers sufficient time to get used to the broad operationalisation of the GST law before introducing additional complexities.

The E-way bill rules in particular, in its present form, runs counter to the objective of ease of doing business and its deferment is a welcome move. Even the reverse charge on supply from unregistered persons was a pain point for the taxpayers to track and comply with yielding no additional revenue to the Government.

The small taxpayers deserve every bit of relief offered by the government with the major one being facility of filing quarterly returns instead of monthly returns earlier. Rationalisation of rates is proving to be a continuous process. The reduction in rate of duty credit scrips to zero is certainly welcome as they had become already unpopular as they could not be used to discharge GST.

Overall the Government seems to continue with its fire-fighting approach having introduced a complex GST in a haste.

The Government has discussed lot of issues related to exporters, compliances including reverse charge, enhancement of limits for composition scheme from 75 lacs to 1 crore and the tax rates.  This is a welcome move as the government is trying to address lot of issues erupting in the first hundred days of the GST implementation. Today, in the preponed GST council meeting, the government has yet again taken certain key decisions with respect to the rates on various goods and services. The Guidance to the fitment Committee is very interesting. The benefits to the exporters in the form of e-wallet, interim benefits by manual filing and payment of 0.1% are very welcome. The quarterly filing of returns gets extended to the extent of 1.5 crores of turnover. It needs to be seen that how the other issues which have reached different courts in the country are addressed in the days to come. Certainly, the need of the hour is to provide impetus to the business growth and it appears that the government is openly looking into the concerns of the businesses.

The GST Council meet today brings consolation to most businesses with reliefs like quarterly filing and payment of tax for businesses with turnover less than 1.5 crores; increase in composition threshold to 1 crore; several relief measures to address working capital issues of exporters, deferment of liability to discharge GST for purchases made from unregistered dealers, deferment to e-way bill provisions and TDS and TCS provisions to April 1, 2018. The GST Council's swift relief measures are commendable and address the three biggest areas of concern i.e. of exporters, MSME segment and other compliance irritants.

GST council met yesterday amid high expectations of reviving ease of doing business in context of GST regime. The meeting was primarily for addressing problems faced by the industry and corrective actions that can be taken. The Council recommended some significant steps on various issues. 

Exporters were facing working capital constraints due to delay in getting tax refunds. The decision for sanction of refunds on immediate basis (for July and August 2017 by October 10 and October 18, 2017 respectively), levy of nominal 0.1% GST on merchant exporters and proposal to introduce e-wallet facility will bring significant relief. Another significant reform is GST exemption for imports / domestic procurements under Advance Authorization / EPCG and 100 percent EOUs. Further, the exemption of GST on duty credit scrips will make transactions in scrips more lucrative.

Small and Medium Enterprises (SMEs) were against GST from the day of its introduction. The proposed steps will certainly lift the spirit of these businesses. The recommendations include increase in periodicity of filing of returns from monthly to quarterly (for taxpayers with turnover upto ` 1.5 crore) and dispensation of requirement to pay GST on receipt of advance from customers. The increase in threshold for composition scheme to ` 1 crore (` 75 lakhs in specified states) and exemption from registration to small taxpayers (turnover less than ` 20 lakhs) making inter-state supply would also reduce the compliance burden for such business.

Deferment / suspension of various provisions like reverse charge mechanism on procurements from unregistered persons; requirement of TCS / TDS and nation-wide e-way bill system to April 1, 2018 will certainly give time to trade and industry to adopt to GST regime.

Overall, the meeting was positive as Council has addressed some of the key challenges faced by the industry since introduction of GST.