Needed tweaks

It is reassuring that Finance Minister Arun Jaitley has reacted positively to the outcry of small businesses, exporters and consumers over the implementation of the Goods and Services Tax (GST) by tweaking rules to make life simpler for them. There is indeed a conscious attempt to reduce their compliance burdens and to cut rates on a range of products to mollify critics and consumers alike.

The 27 items on which the rates have been pruned include man-made yarn to cater to the textiles sector which was particularly sore over the original GST. Reacting to the critics of the GST regime, Jaitley said the Centre and states had agreed to put in place a new mechanism that will allow those with a turnover of up to Rs 1.5 crore which make up for over 90 per cent of the base but less than 5 per cent of the tax collections to file returns every quarter rather than every month which the original GST proposal had provided for. The monthly return had been deeply resented by the small and medium enterprises with many complaining that it was impractical and too burdensome to implement.

The large businesses would still need to file monthly returns but Jaitley promised that they would not be denied credit for the taxes paid by their small vendors. Clearly, these are welcome changes and had the government not acted in haste to get the GST Bill through in the first place, it could have been saved the embarrassment of scathing comments.

The Council has decided to reduce the rates on several items, including sliced dried mangoes, khakhra and plain chappatis, unbranded namkeen, unbranded ayurvedic medicines, plastic, rubber and paper waste, yarn, diesel engine parts, pump parts, e-waste, and several services.

These items have minor revenue implications but they constitute some relief to the small scale sector and to consumers of these items. The committee of secretaries set up to look into the problems faced by the exporters found that the credit blockage felt by exporters was causing a liquidity problem for them.

Consequently, the GST Council has taken three decisions. According to Jaitley, by 10 October, the refunds for July will be processed and paid, and by 18 October, the same for refunds for August.

The Council has also decided that each exporter will get an e-wallet in which a nominal sum will be deposited for tax credit purposes, which will be offset against the credit refund when it happens.

The third decision regarding exporters taken by the Council is to impose a nominal 0.1 per cent GST rate for them till 31 March 2018. The e-wallet system is expected to rollout from April 2018. All in all, the new package looks promising. But the proof of the pudding would lie in its eating. The key indeed would be in the implementation.

         

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