Finance Minister Arun Jaitley announced major changes to the tax regime after GST Council meeting (PTI)
Here is your 10-point cheatsheet to this story:
- The focus of today's meeting was on relief for small and medium traders and exporters, crucial to Prime Minister Narendra Modi's plans to create millions of more jobs, who have been hurt by the massive tax overhaul.
- Finance Minister Arun Jaitley said the decisions took into account the experiences over the last three months, were aimed at raising revenue and easing compliance. One such decision was to let businesses with less than 1.5 crores annual turnover - that make up for nearly 90 per cent of tax assesses but contribute very little tax - file returns and pay taxes on a quarterly, rather than monthly basis.
- The GST council also agreed to raise the threshold for the composition scheme - which allows small traders to pay a standard tax rate - from Rs. 75 lakh in turnover to Rs 1 crore. These establishments pay standard tax rates; 1 per cent for traders, 2 per cent for manufacturers and 5 per cent for restaurants.
- Mr Jaitley said the reverse charge mechanism was being suspended till March 2018. This rule shifts the liability to pay the tax on the buyer rather than the seller and kick in if a supplier is not registered under GST to check tax evasion.
- For exporters who had complained their working capital was locked up, the GST council meet told the government to start issuing refund cheques from 10 October. By 1 April next year, the council also targeted to have e-wallets for every exporter where a notional amount will be credited as an advance credit to pay their taxes.
- The GST rates for textiles including zari, unbranded ayurvedic medicines, plastic and e-waste have been slashed by the council, which is made up of state finance ministers, officials from both states and the Centre and is headed by union Finance Minister Arun Jaitley.
- Earlier this week central bank RBI cautioned that "teething problems" with GST had impacted the manufacturing sector. The RBI governor has suggested simplifying GST to boost growth.
- The changes recommended by the GST Council today appear to take into account that some more ground work was required. Accordingly, it was decided to defer registration of tax deduction and collection at source 31 March next year. Goods transporters who had threatened to go on strike were also told services provided to unregistered entities would be exempted from GST.
- As he made a strong defence of the government's economic policies on Wednesday, PM Modi also promised to fix problems in GST cited by businesses. "We have seen closely what is working and what is not... We are not orthodox and conservative. We also don't know everything. But if something needs to be done, we shall do it," he has said.
- The course correction comes against the backdrop of stinging attacks on the government for what the opposition alleges was a hurried and sloppy implementation of the mega tax reform. Congress leader Rahul Gandhi has accused the government of crushing small business with a complicated process.
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