BIG-BANG FRIDAY-- Key development in the 22nd GST Council meeting - A relief for SMEs and Exporters

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The Finance Minister, Mr. Arun Jaitley headed panel and pushed for big changes at the 22nd meet of GST Council held at New Delhi. The Council has cut rates for 27 items and 12 services. The Council has offered relief to small and medium enterprises (SMEs) and exporters from the rigours of complying with the technology-oriented goods and services tax (GST).The steps taken by the Council will provide urgent but temporary relief to SMEs

"Rates have been tweaked on 27 items," Mr. Jaitley says.

Some of the items whose rate has been lowered are:

Items Earlier rate New rate
Sliced dried mango 12 5
Khakra and plain chapattis 12 5
Unbranded Namkeen 12 5
Unbranded ayurvedic medicine 12 5
Manmade yarn 18 12
Stationery items such as clips 28 18
Paper waste or scrap 12 5

Quarterly returns

Those who have turnover till upto 1.5 crore, which will cover 90% of the assesses outside the composition scheme, will now file quarterly return instead of monthly returns.

For those with turnover above Rs 1.5 crore, the existing system will continue of three returns per month and so on.

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 GST Network.

Composition Scheme

"The ambit of the composition scheme has been expanded," the Finance Minister says.

The major tax collections (94-95%) coming from big players should keep rising, while the medium and small payers remain in tax net so that tax base is expanded, Mr. Jaitley says.

So, the composition scheme where firms with upto Rs. 75 lakh turnover can participate - now that has been expanded today to include firms with turnover upto Rs 1 crore.

There are 3 types of taxpayers under this scheme -

Trading firms will pay 1% tax.

Manufacturing firms will have to pay 2%

Restaurants will have to pay 5%.

On GST and Exporters

Mr. Jaitley says, "The main concern for exporters was that there were no taxes on exports as they then become uncompetitive in the global market. Committee of officers had examined their problems. the facility for processing their refunds may take some more time."

So, it was decided that both Centre and State officials will be empowered to start processing refunds and give exporters cheques. For July, from October 10 and from October 18 for August. This is an interim measure. The committee has also suggested a long-term solution.

The Council decided to continue with two pre-GST era schemes that allow duty-free sourcing of materials for export production till March 2018, a move that will improve the liquidity of exporters by preventing their working capital from getting locked up in tax procedures.

The Council 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.

e-wallet for exporters

The Finance Minister announces the setup of an e-wallet for exporters. "Since GST has no exemptions, for now, all exporters will be given an e-wallet. It will be given a notional amount as advance refund. And on the basis of this credit, firms can pay IGST and GST. And refunds will be offset against this."

"We will strive to start the e-wallet facility as soon as possible, by April 1, 2018 definitely," he said. "A professional tech firm will be appointed."

Federation of Indian Export Organizations president Ganesh Kumar Gupta said the introduction of an e-wallet will provide a permanent solution to the liquidity problem of exporters. “The early refund of GST for July and August will address liquidity concerns of exporters.

Friday’s decisions will come into force over the next one week as they get notified by the Central Government.