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Small and medium enterprises had complained of tedious compliance burden under the Goods and Services Tax
Illustration: Uttam Ghosh/Rediff.com
Three months after the rollout of the new indirect tax regime, the GST Council on Friday made sweeping changes to give relief to 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 annual turnover of up to Rs 1.5 crore, which constitute 90 per cent of the taxpayer base but pay only 5-6 per cent of total tax, have been allowed to file quarterly income returns and pay tax 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 per cent 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) that was supposed to be a simple indirect tax regime which 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 per cent from 12 per cent, while the same on man-made yarn used in textile sector has been reduced to 12 per cent from 18 per cent.
Tax on stationery items, stones used for flooring (other than marble and granite), diesel engine parts and pump parts has been cut to 18 per cent from 28 per cent. GST on e-waste has been slashed to 5 per cent from 28 per cent.
Food packets given to school kids under Integrated Child Development Scheme (ICDS) will attract 5 per cent tax instead of 12 per cent.
Job works like zari, imitation, food items and printing items would attract 5 per cent tax instead of 12 per cent.
Government contracts involving high amount of labour will be levied 5 per cent GST instead of 12 per cent in order to contain cost of those programmes, he said.
Exporters, who have been facing sluggish growth due to 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, they will operate under an exempted category paying a nominal 0.1 per cent GST, he said, adding from April 1 attempt would be made to launch an e-wallet facility for the exporters to provide liquidity.
Jaitley said big taxpayers, who contribute 94-95 per cent 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 new Goods and Services Tax (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 per cent, while it is 2 per cent for manufacturers and 5 per cent 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 percent tax without having to deal with the three-stage filing process.
It allows small taxpayers to pay GST at a fixed rate of turnover and not go through the tedious GST formalities.
The scheme cannot be opted by 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 composition scheme.
Also, the taxpayer can only make intra-state supply (sell in the same state) and cannot undertake inter-state supply of goods.
| S.No. | Tariff item | Description | Present GST Rate | Proposed by Council |
|---|---|---|---|---|
| 1. | 0804 | Mangoes sliced dried | 12% | 5% |
| 2. | 1905 or 2106 | Khakra and plain chapati / roti | 12% | 5% |
| 3. | 19 or 21 | Food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programme dulyapproved by the Central Government or any State Government, subject to specified conditions [Foot note 1] | 18% | 5 % |
| 4. | 21 | Namkeens other than those put up in unit container and, -(a) bearing a registered brand name; or(b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or enforceable right in respect of such brand name has been foregone voluntarily[Foot note 2] | 12% | 5% |
| 5. | 2710 | Imposing GST only on the net quantity of superior kerosene oil [SKO] retained for the manufacture of Linear Alkyl Benzene [LAB] | 18% | 18%[Clarification to be issued] |
| 6. | 30 | Ayurvedic, Unani, Siddha, Homeopathy medicines, other than those bearing a brand name[Foot note 3] | 12% | 5% |
| 7. | 3213 | Poster Colour | 28% | 18% |
| 8. | 3407 | Modelling paste for children amusement | 28% | 18% |
| 9. | 3915 | Plastic waste, parings or scrap | 18% | 5% |
| 10. | 4004 00 00 | Rubber waste, parings or scrap | 18% | 5% |
| 11. | 4017 00 20 | Hard Rubber waste or scrap | 28% | 5% |
| 12. | 4707 | Paper waste or scrap | 12% | 5% |
| 13. | 4907 | Duty credit scrips | 5% | Nil |
| 14. | 5401 | Sewing thread of manmade filaments, whether or not put up for retail sale | 18% | 12% |
| 15. | 5402, 5404, 5406 | All synthetic filament yarn, such as nylon, polyester, acrylic, etc. | 18% | 12% |
| 16. | 5403, 5405, 5406 | All artificial filament yarn, such as viscose rayon, Cuprammonium, | 18% | 12% |
| 17. | 5508 | Sewing thread of manmade staple fibres | 18% | 12% |
| 18. | 5509, 5510, 5511 | Yarn of manmade staple fibres | 18% | 12% |
| 19. | 5605 | Real Zari | 12% | 5% |
| 20. | 6802 | All goods falling under heading 6802 [other than those of marble and granite or those which attract 12% GST] | 28% | 18% |
| 21. | 7001 | Cullet or other waste or scrap of Glass | 18% | 5% |
| 22. | 8305 | Fittings for loose-leaf binders or files, letter clips, letter corners, paper clips, indexing tags and similar office articles, of base metal; staples in strips (for example, for offices, upholstery, packaging), of base metal | 28% | 18% |
| 23. | 8483 | Plain Shaft Bearing 8483 | 28% | 18% |
| 24. | 84 | Parts suitable for use solely or principally with fixed Speed Diesel Engines of power not exceeding 15HP | 28% | 18% |
| 25. | 84 or 85 | Parts suitable for use solely or principally with power driven pumps primarily designed for handling water, namely, centrifugal pumps (horizontal and vertical), deep tube-well turbine pumps, submersible pumps, axial flow and mixed flow vertical pumps | 28% | 18% |
| 26. | 84 or 85 | E-Waste | 28%/18% | 5% |
| 27. | Any Chapter | Biomass briquettes | 18% | 5% |
