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Improvements under GST Regime

Improvements under GST Regime


  • GS 3||Economy|| Public Finance ||  Taxation

Why in News?

  • The 32nd Goods and Services Tax Council meeting recently held and announced some tax changes.

Key Changes

  • Exemption thresholdDoubling of the exemption threshold under GST regime to Rs 40 lakh. Those manufacturers, who have turnover of 40lakh (most of them are from MSME), need not to register with GST.
  • States, however, will have the option to choose between the two exemptions thresholds of Rs 20 lakh and Rs 40 lakh.
  • For the North-eastern and hilly states like Himalayan, the exemption limit has been increased from Rs 10 lakh to Rs 20 lakh.
  • Composition scheme – The annual turnover limit under composition scheme will be increased to Rs. 1.5 crores from current Rs 1 crore.
  • The special category states comprising of north-eastern states, J&K, HP and Uttarakhand are given one week time to decide upon the composition limit.
  • Introduction of a composition scheme for the services sector as well. Of the nearly 1.17 crore businesses registered under the GST, over 18 lakh have applied for composition scheme.
  • Under this, traders and manufacturers can pay taxes at a concessional rate of 1%, while for the restaurants it is pay 5%.
  • While a regular taxpayer has to pay taxes on a monthly basis, a tax payer under this scheme will have to pay taxes on a quarterly basis.
  • They are also not required to keep detailed records compared with a normal taxpayer under GST.
  • SoftwareFree of cost accounting and billing software shall be made available to small taxpayers by GST Network (GSTN).
  • For the Real Estate 7 members group of ministers will be formed in this scenario in order to give boost to it.
  • Kerala Cess as Disaster Cess – Kerala can levy a 1% disaster cess on intra-state sale of goods and services. This will be for a period of up to 2 years to mobilize revenues to meet the cost of rehabilitation after the recent floods.
  • Lotteries – A group of ministers shall be constituted to examine the GST rate structure on lotteries.

Significance of All the Decisions

  • Most benefit for the MSMEs sector which is suffering from demonetization and GST.
  • Appears to be finally balancing the need for providing relief and the concern about slipping revenue collections.
  • All the changes will be commenced from April 1,the next financial year.
  • So the impact on revenue collections for this fiscal year has been rightfully avoided.
  • The Council did no changes to the tax rates of items and allowed things to settle down.

Future Pictures

  • Confusions: Repeated interventions in the form of exemptions and other reliefs can create confusion.
  • Frauds: Escalation of frauds is a concern and tax evasions in the GST.
  • Real Reforms: A better idea will be to go in for real reforms by bringing petroleum, the electricity duty and real estate under the GST.
  • This will cut out the cascade of taxes, raise transparency and widen the tax base.
  • The GST Council should now focus more on these issues so that the process works smoothly, leading to greater revenue mobilization.