Simplifying GST procedures will breathe new life into small and micro-businesses

UNDER sustained pressure, Goods and Services Tax (GST) has been overhauled and the council headed by finance minister Arun Jaitley has made life somewhat easier for exporters, small businesses and consumers alike. There’s no reason why they shouldn’t begin rejoicing right away while Diwali is still a few days away.

Given the simmering discontent within all stakeholders, GST council's decisions are far-reaching in content and resultant impact. Latest slew of measures also highlight the need for a more structured dialogue between all stakeholders to soften the glitches in the unified taxation regime that turned 29 Indian states into a unified market.

Prime minister Narendra Modi who has been more than responsive to the issues flagged by various stakeholders, took the lead in finding a lasting solution. The responses were qualitatively very different from the earlier UPA regime that was bogged down by policy paralysis, inaction and corruption. Statecraft demands that those in the government must be open to changes and respond to the polity regularly. And, that’s precisely what happened on Friday.

Exporters in pre-GST regime awaited endlessly to get their reimbursements against a multitude of taxes paid to half a dozen authorities. Post-GST, even three months delay was taken very seriously and the government responded creatively. Firstly, the exporters would begin getting their reimbursements beginning this week. By putting in place a system of e-wallet as a long-term solution to reimbursements, the government seems to have gone one step ahead to address the exporters woes permanently. Also, exempting exporters from payment of IGST or minimising it to 0.1 per cent is yet another salvo to boost exports.

Simplifying GST procedures will breathe new life into small and micro-businesses that have been grappling with the three-level compliance burden. For one, filing GST returns quarterly by all those with turnover up to Rs 1.5 crore will reduce their compliance costs. Secondly, enhancing turnover cap to Rs one crore from Rs 75 lakh for those under composition scheme will virtually make their compliance cost nil while simply paying tax at one to five per cent without any input credit will also help. But, there’s no logic in restricting their businesses to one state. GST Council appointed ministerial group will have to find a way out and allow these small players to do business in other states.

Persons not registered with GST and meagre sales turnover have also been given relief as they can now provide products and services to larger entities under the unified tax network. Postponing the system of e-way bills, TDS & TCS provisions should be seen as transitory in nature and not dilution of GST regime. Trade, industry, transporters and their personnel will have to quickly acclimatise to the new norms and fall in line before March 31, 2018.

Like all other GST Council meetings, last Friday’s session was no different given that rates on 27 items were either slashed or taken off taxation. For instance, some items like kakra, popular with Gujaratis will cost lesser. It’s but natural to attribute the lower taxation on kakra to the impending Gujarat state assembly elections. Incidentally, Modi addressed several rallies the day after in Gujarat trying to take full advantage of the decision.

Politicians, trade and industry have been gung-ho on latest decisions of the GST Council. If sustaining the unified tax regime is a stated objective, let the stakeholders not make it unwieldy. Given the number of tax slabs, exemptions, special dispensations and sunset clauses being brought in, GST must not be turned into another VAT that was pulled aside by both center and states.

If revenues were to be mobilised transparently and within a normative system, then tinkering with rates on individual items, exemptions and slabs must be bare minimum. Periodic review, feedback and redressal mechanism must be put in place of adhocism.