A group of state finance ministers (GoM) has suggested another round of changes to the architecture of the goods and services tax
(GST). The bulk of these recommendations, which will now be taken up by the GST
Council in its next meeting on November 9 and 10, is aimed at reducing the compliance burden on small businesses, many of which have either dithered over joining the GST
Network or have faced numerous hurdles after doing so. Among the key recommendations, the GoM on Sunday pitched for increasing the ceiling for eligibility to the so-called composition scheme from Rs 1 crore to Rs 1.5 crore. The GoM has also asked for a flat tax rate of 1 per cent in the composition scheme for traders, manufacturers and restaurants, as against the existing 1, 2 and 5 per cent, respectively. Further, it has suggested that traders be allowed the supply of goods across states. The changes could benefit millions of small enterprises, traders and eateries.
The reason why some of the most important recommendations pertain to small businesses is that both the Centre as well as the state governments are aware how the GST
has disrupted economic activity. But the list of recommendations is wider. The GoM has also asked the Council to consider allowing all GST
taxpayers to file their returns every quarter — a facility provided till now to only those eligible for the composition scheme. Similarly, it has decided to do away with the distinction between restaurants with and without air-conditioning. This means the GoM wants input tax credit to be available to air-conditioned restaurants, which should be taxed at 12 per cent instead of 18 per cent now. These are sensible moves as it is becoming clear that the composition scheme needs to be made more attractive to draw more assessees. The government’s keenness to respond to the problems is also evident from its decision on Monday to extend the deadline for filing the GSTR-2 form, which is central to the GST
returns filing process as it involves the input tax credit aspect, by a month till November 30 and for the GSTR-3 form
till December 11.
These hectic deliberations, suggestions and changes are welcome because they will help honest taxpayers and businesses to move on with their economic life with fewer disruptions. For instance, as the repeated extensions of the filing dates show, people want to pay taxes but more often than not the technical glitches of the GST
Network fail them, not to mention the numerous changes in rules. There are a few other urgent changes required to smoothen the system’s functioning. For instance, the onerous requirement of matching invoices before claiming input tax credit continues to hamper tax filings because the existing system is complicated. There have been several complaints and it would be best if the GST
Council next considers dropping invoice matching. More changes should follow in terms of specific rates. There is little doubt that the execution of the GST
has been poor, giving rise to many avoidable teething troubles. The Council would do well to bring this process of tweaking to a quick close to end the uncertainty once and for all.
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