GST Council Meet Today: Small businesses expected to get Tax Relief

The Goods and Services Tax (GST) Council, in its 32nd meeting today is likely to consider numerous proposals aimed at providing relief to the small taxpayers, a section that has been struggling after losing exemptions enjoyed by them in the pre-GST system.

An important proposal that is expected to be approved by the Council is increasing the annual revenue threshold for GST to Rs 75 lakh from the present Rs 20 lakh. The group of ministers (GoM) also mulled over a proposal to partly refund taxes paid by these companies as relief measure but later decided that lifting exemptions was a more practical solution.

The Council, after its meeting last month, had expressed worry over the lack of smaller service providers not selecting GST registration that was accredited to relatively higher tax rate of 18 percent and unwieldy compliance. To amend this, the Council is also expected to agree on a benign composition plan, with quarterly returns and nominal tax rate - for those taxpayers with an income threshold of up to Rs 1 crore. A scheme like this already exists for manufacturers as well as traders but since the value addition in service sector can be quite huge, the same was not made available to service sector up till now.

Founder and CEO of ClearTax, Archit Gupta said, “Composition scheme for small service providers and quarterly payment of taxes will help in improving compliance and lessen the effort required by them considerably. The Council should continue to focus ITC claim procedure and simplification of GST returns as they are the keystones for GST success.”

Finance minister, Shri Arun Jaitley also mentioned lower-than-expected growth in the real-estate sector - a cause for restrained GST collections this financial year. Jaitley said the proposal before the Council is to cut GST rates of under-construction housing units to 5 per cent from 12 per cent and refuse the builders input tax credit that is not being passed to customers effectively. At present, the GST is charged at 12 per cent on payments made for under-construction property or ready-to-move-in homes where completion certificate has not been provided at the time of sale. GST is not charged on properties with a completion certificate.

Even if the higher overall GST threshold would allow permit half of nearly 1.2 crore GST registrant to go out of tax net, higher threshold is doubtful to either bring down taxpayers base or income. Even as the obligatory lower limit for a company to register for GST is Rs 20 lakh, more than half of the companies registered are those with revenue below that level. Although these sub-Rs 10 lakh companies contribute only 1.5 per cent of the GST revenue, they wish to be in the tax chain for the advantage of the input tax credit and to keep large businesses as their consumers.