- Refunds for exporters will be expedited, says Mr Jaitley
- E-wallets will be set up by April 2018 for refunds to exporters
- GST Council hikes threshold limit of composition scheme to Rs 1 crore
Exporters have complained that delayed GST tax refunds have resulted in fund shortage, hurting normal operations. Fearing that a staggering Rs 65,000 crore could get stuck in GST refunds, exporters had urged the government to fast-track the refund process and avoid further deterioration in their "liquidity situation."
Exports are a crucial segment of the Indian economy, accounting for nearly 20 per cent of the GDP or gross domestic product.
Under the pre-GST system, exporters did not pay taxes for import of inputs for export purposes. But after GST came into effect, they had to pay Integrated Goods and Services Tax or IGST, which locked up their working capital, in absence of a quick refund mechanism.
The GST Council on Friday hiked the threshold limit of the composition scheme to Rs 1 crore, from Rs 75 lakh, The move will ease the compliance norms for small businesses. Businesses with annual turnover up to Rs.1 crore can now opt for the composition scheme, which enables them to pay tax at a flat rate without input credits. The objective of the optional composition scheme is to bring simplicity and to reduce the compliance cost for the small businesses. By opting to pay for tax under this scheme, small businesses can pay tax at a prescribed percentage of the turnover every quarter, instead of paying tax at normal rate.
The tax rates under composition scheme is 1 per cent for traders, 2 per cent for manufacturers and 5 per cent for restaurants. In the services sector, composition scheme is available only for one sector - restaurants. The businesses which opt for composition scheme have to file only one quarterly return with details of total turnover.
Mr Jaitley also said small businesses (turnover of up to Rs 1.5 crore) would be allowed to file tax returns once a quarter instead of monthly returns.
Tax experts have welcomed the move. "The focus was on small businesses and exporters who were facing lot of issues in terms of compliances, refunds etc," said Pratik Jain of PwC. "This was perhaps the most important GST Council meeting after implementation of GST. Some far reaching decisions have been taken. Providing an option of quarterly return for all businesses up to Rs 1.5 crore turnover is also a welcome step," he added.