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The 22nd GST Council in its meeting held at New Delhi on 6th October 2017, discussed about key changes required to ease the burden of compliance on small and medium businesses. The difficulties in filing the return, inconveniences faced on account of paying tax on RCM and advance receipts and proposals received from various trade associations to lower the rate of GST on certain products/services, were few important issues which were discussed and accordingly the recommendations are made by GST council meeting.
The following are the GST Council's decisions:
The small and medium businesses with annual aggregate turnover up to Rs. 1.5 crores, are required to file quarterly returns in FORM GSTR-1, GSTR-2 & GSTR-3 and pay taxes only on a quarterly basis. This a huge relief to SMEs, who otherwise were required to file and pay the tax on a monthly basis.
The quarterly returns are applicable from the third quarter of this financial year i.e. October-December, 2017. This implies that for July, August and September, 2017, all the businesses (including the business with turnover up to 1.5 crores) need to file GSTR-1, GSTR-2, and GSTR-3 on monthly basis. Also, the Form GSTR-3B needs to be filed until December, 2017 irrespective of the fact that small and medium business are required to file quarterly return from October onwards.
With small and medium businesses being allowed to file the quarterly return, now the question arises as to how businesses with turnover of more than Rs 1.5 crores buying from such small taxpayers avail ITC? This is because, businesses with turnover of more than Rs 1.5 crores are required to file the GST returns on a monthly basis.
No worries, these businesses would be eligible to avail ITC on a monthly basis based on their self-assessed FORM GSTR-2.
Businesses making inter-State taxable supplies were compulsorily required to register (except for job work services), irrespective of turnover. It has now been decided to exempt those service providers whose annual aggregate turnover is less than Rs. 20 lacs (Rs. 10 lacs in special category States except for J & K) from obtaining registration even if they are making inter-State taxable supplies of services.
This means, you can make an inter-state outward supply of services even without obtaining the registration, if your aggregate turnover does not exceed Rs 20 lacs. This will significantly reduce the compliance cost of small service providers and also, the benefit of threshold limit for registration, which was so far available only for businesses supplying within the State, is now extended for inter-State service providers as well.
If the inward supplies received from the unregistered dealer (URD) where the aggregate from all unregistered suppliers, was more than Rs 5,000 in a day, the recipient of such inward supplies was liable to pay tax on reverse charge. This provision is suspended till 31st March, 2018. This means, till such time, the recipient is not required to pay the tax in such supplies on reverse charge basis. This will benefit small businesses and substantially reduce compliance costs and efforts in accounting and reporting these details in return.
Please note, RCM liable to be paid on notified goods and services such as GTA, imports, sponsorship etc. will continue and the recipient is required to pay tax for such supplies.
On receipt of advances, GST has to be paid by the supplier. This was similar to the provision which existed in the earlier service tax regime. So, service providers were familiar with the concept of paying tax on the advance receipt but for manufacturer and traders, this was totally a new concept. On the other side, it impacted the cash outflow, especially for small traders and manufacturers.
In order to mitigate inconvenience and reduce the burden on the small businesses, it has been decided that the businesses having annual aggregate turnover up to Rs. 1.5 crores are not required to pay GST at the time of receipt of advances on account of supply of goods. The GST on such supplies shall be payable only when the supply of goods is made.
Please note, this change is applicable only for advance received against the supply of goods. On the receipt of advance against services, the existing provisions will continue without any changes.
The threshold limit of businesses opting for composition scheme is increased from 50 Lakhs to 75 lakhs for special category states (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Himachal Pradesh). For rest of India, it is increased from Rs 75 Lakhs to 1 crore. The increase in the turnover threshold means that greater number of taxpayers can avail the benefits of easier compliance under the composition scheme and it is expected to benefit the MSME sector.
Also, one of the conditions to opt for the composition scheme was, that the taxable person should not be engaged in supply of exempt supplies. This provision is relaxed such that even if the taxable person is engaged in supply of exempt supplies and meets all other eligibility conditions as required, he will be allowed to opt for composition scheme.
The facility of availing composition under the increased threshold (discussed above) shall be available to both migrated and new taxpayers up to 31.03.2018. The option once opted will become operational from the first day of the month immediately succeeding the month in which the option to avail the composition scheme is exercised. For example, if composition scheme is opted on 15th November, 2017, it will be operational from 1st December, 2017.
The return in FORM GSTR-4 needs to be filed only for that portion of the quarter from when the scheme becomes operational and for preceding tax period, the returns as applicable for a normal taxpayer needs to be filed.
Goods Transport Agencies (GTAs) were not willing to provide services to unregistered persons (not specified as recipients liable to pay tax on reverse charge) citing that they may have to register and charge tax on a forward charge basis.
In order to remove the hardships being faced by small unregistered businesses on this account, the services provided by a GTA to an unregistered person is exempted from GST.
The registration and operationalization of tax deducted at source (TDS) and tax collected at source (TCS) is suspended until 31st March, 2018.
The e-way bill system shall be introduced in a staggered manner with effect from 1st January, 2018 and will be rolled out nationwide with effect from 1st April, 2018. This is in order to give trade and industry more time to familiarise with the GST regime.
The last date for filing the return in FORM GSTR-4 by the composition dealer for the quarter ended July-September, 2017 is extended to 15th November, 2017. Also, the last date for filing the return in FORM GSTR-6 by an Input Service Distributor (ISD) for the months of July, August and September, 2017 is extended to 15th November, 2017.
The tax rate for about 27 items have been lowered and these include plastic waste, parings or scrap, e-Waste and so on. Click here to download the complete list of revised GST rates on goods. Apart from goods, GST rates on job work services are being revised. Click here to download the revised GST rates on services.
The outcome of the 22nd GST council’s meeting is a clear indicator that the Government has swiftly acted on the concerns raised by tax payers and trade bodies, which clearly underlines the intention of the Government to streamline GST implementation and administration quicker. The reduction of compliance burden for small and medium businesses was a key focus. We expect, that the key changes made by GST council such as quarterly returns for small businesses, relaxing the provisions on GST on advances, allowing the small businesses to make interstate supplies of Services and so on, will aid SMEs in neutralizing the cost of compliance and saving ample time towards meeting the compliance requirements.
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