After Friday’s GST Council meet, Finance Minister Arun Jaitley announced a slew of measures to
ease the implementation of the new tax regime as well as reduce the burden on taxpayers and small businesses. The changes come after many complaints of tedious tax compliance burden under GST, a system that was intended to simplify the country’s indirect tax regime.
Announcing the tax cuts and tweaked rules, Jaitley said,
“After almost three months since GST roll out, it is time to deliberate on its effect on various trades and the transition… GST Council has considered the implementation experience of the last three months and given relief to small traders… Compliance burden of medium and small taxpayers in GST has also been reduced.”
If you have been wondering about how these changes in GST rules will affect your everyday life, here are the key takeaways from the GST Council meet along with a quick explanation.
1.) Eating Out Could Become Cheaper
Currently, food served at restaurants attracts tax at two rates — 12% and 18% — under GST, depending on whether it serves liquor or whether it is an AC restaurant. As per the new announcements, a panel is reviewing the 18% GST tax rate on AC restaurants to bring it down to 12 %. It will present its recommendations in two weeks.
2.) From Sliced Mangoes to Stationery, 27 Items Become Cheaper
The GST council slashed the rates on 27 items of common consumption, including roti, khakra, namkeen, stationery, man-made yarn, with most of them being brought under the 5% category.
Small service providers with revenue less than ₹ 20 lakh have been added to the GST exempt list i.e they are exempted from registering with the GST network even if they are making inter-state taxable supplies of services. Currently, anyone making inter-state taxable supplies is compulsorily required to register, irrespective of turnover.
With the aim of easing the transportation troubles of small unregistered businesses, the Council has also exempted Goods Transport Agencies from paying GST on services provided to an unregistered person.
Here’s a quick look at what gets cheaper. You can read the official description here.
12% to 5%
- Unbranded namkeen
- Unbranded Ayurvedic, Unani, Siddha and Homeopathy medicines
- Paper waste, plastic waste and rubber waste
- Job works
- Sliced and dry mangoes
- Food packets for children under Mid-Day Meal schemes
18% to 5%
- Plastic waste
- Zari work
18% to 12%
- Manmade yarn and sewing threads
28% to 18%
- Flooring stones (non-marble and granite)
- Poster colours
- Stationery items
- Diesel engine parts
- Water Pumps and their parts
3. Relief for Small and Medium Businesses
In a major move, the GST council allowed small businesses (with annual turnover of up to ₹ 1.5 crore)to file quarterly returns instead of the monthly submissions that is currently practised. The monthly to quarterly switch over for filing of returns for small businesses will kick off from October 1 (they will have to file monthly return for the July-September period).
This will make it easier for them to claim tax refund while expanding the scope of the Composition Scheme for paying GST. In the simplest of terms, the Composition Scheme is a ‘less paperwork’ initiative that offers an option to small businesses to opt to pay a fixed percentage of turnover as fees/levy instead of tax and get relief from complicated tax compliance procedures.
(Note: A business opting for the Composition scheme is not allowed to collect any tax from its customers and can only procure its supply from within the state.)
According to the Council’s announcements, the Composition Scheme can now be availed by taxpayers having annual aggregate turnover of up to ₹ 1 crore as compared to the current turnover threshold of ₹ 75 lakhs. The facility of availing the scheme under the new threshold shall be available to both new and migrated taxpayers till March 31, 2018.
Both these decisions are expected to significantly benefit India’s MSME sector as it will make it possible for greater number of taxpayers to avail the benefit of easier compliance .
4.) Relief for Exporters
The GST Council decided to continue with two pre-GST era schemes that allow duty-free sourcing of materials for export production till March 2018. This will prevent the working capital of exporters from getting locked up in tax procedures and help improve their liquidity.
The Council also decided to clear all tax refund claims by exporters, with the refund process for July starting by October 10 and for August by October 18. For the remaining months of the current financial year, merchant exporters ( who don’t manufacture the products themselves but procure them from others) can operate under an exempted category by paying a nominal GST of 0.1% on their procurements.
The Council also announced the government’s plans to kickstart a new digital e-wallet system for every exporter by April 2018 and a tech company will be hired for the same. The government will also deposit notional tax credits in the e-wallets that can be used to procure goods without actually incurring a tax burden. This is expected to provide a permanent solution to the liquidity problem of exporters.