GST council set to ease processes for SMEs on Friday

In the next meeting, the Council may consider relaxing return filing timeline for small businesses, defer reverse charge mechanism, and reopen registration for composition scheme for the third time

ByShreya Nandi

The government plans to introduce slew of measures to reduce compliance burden for small taxpayers struggling under the country's new indirect tax system, Goods and Services Tax (GST) that was rolled out from July 1.

In the next meeting on Friday, the GST Council may consider relaxing return filing timeline for small and medium enterprises (SMEs), defer reverse charge mechanism, and reopen registration for composition scheme for the third time.

GST, billed as India’s most ambitious reform move, has consolidated a patchwork of 17 local and central duties into a single levy, stitching together a common national market, and enabling way for a more robust economy. A little over three months since its implementation, the transition into new tax system has been facing teething troubles.

Among various challenges, small and medium businesses have been particularly hit due to higher compliance burden owing to complex monthly return filing and glitches in the information technology (IT) portal GST Network (GSTN).

"There could be a change in return filing cycle for small tax payers. A quarterly return filing could be implemented for small businesses," a senior government official told Moneycontrol.

However, what could be a business' annual turnover cut off for it to be called a small taxpayer, will be decided by the Council on Friday, the official said.

Currently, regular businesses have to file three monthly returns, in addition to one annual return.

A total of 68.2 lakh taxpayers were required to file returns for the month of August, out of which, 37.63 lakh assessees  filed returns, as on September 25, which was surprisingly lesser than the 38.38 lakh returns have been filed in July, the first month of the indirect tax reform. The low level of compliance has been a matter of concern for the government and keep this in mind, the Council could make key changes to provide some relief to small businesses grappling with the several changes under the new system.

The Council may reopen registration for composition scheme for the third time.The scheme is an alternate method of taxation, which allows small businesses with annual turnover up to Rs 75 lakhs, to pay tax at a concessional rate, as well as reduce the compliance cost. the enrollment into the plan is however, optional.

“If the Council approves, registration for the composition scheme will be open till March 31, 2018. The annual turnover for businesses opting for the scheme may be increased up to Rs 1 crore,” another official said.

Under the scheme, traders, manufacturers and restaurants can pay tax at 1, 2 and 5 percent, respectively. Compliance burden for taxpayer would reduce as they will have to file returns only once in a quarter as against monthly returns that needs to be filed by other normal taxpayers. However, dealers cannot avail input tax credit, unlike a normal taxpayer.

Initially, the response for the composition scheme was lukewarm, with only 10.24 lakh dealers opting for it over a span of one and half months, starting July 1. Last month, the Council decided to reopen registration for the scheme from September 17.

This time, however, more than 5 lakh dealers opted for the scheme over just 13 days, making to the total number of assessess 15.43 lakhs.

In addition, the Council may also defer the reverse charge mechanism (RCM), that has been especially bothering the small tax payers, the first official said.

Reverse charge is a mechanism where the recipient of the good or service will have to pay GST, which is otherwise paid by the supplier. The charge is applicable on a registered dealer, if he buys goods from a dealer not registered under GST. However, the receiver of the good is eligible for input tax credit, while the unregistered dealer is not.

“Businesses are getting affected by RCM. Registered taxpayers are not willing to take the burden of paying tax, while small or unregistered taxpayers are running out of business if registered dealers are not buying goods from them,” the official said.

“There could be a decision towards deferring RCM for at least some time,” the official said

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