The lowdown on GST pitfalls:  and The unintended consequences of GST: 

The lowdown on GST pitfalls:  and The unintended consequences of GST: 

Context

• The Goods and Services Tax (GST) is experiencing a number of teething issues resulting into governments taking measures to correct it.

Problem of availing of input tax credits by exporters.

• The problem is that exporters have to wait an inordinate amount of time before the refunds are processed and paid.
• This results into a large part of their working capital, estimated at about ₹65,000 crore getting stuck rendering their businesses shaky.
• The procedure is that a company pays the tax on both inputs and output and then applies for a refund for the tax paid on the inputs.
• The refund process, according to exporters, takes many months and so results in a large part of the working capital being locked up.

Problem of GST Network portal

• Another pressing problem is the capacity of the GST Network portal for filing tax returns.
• Post rollout, the portal has fared poorly in the face of peak traffic. The government is facing issue that taxpayers are missing the deadlines to file returns and thus the government can’t accurately estimate how much revenue GST is yielding.
• The problem of the online portal crashing is in large part due to the fact that businesses are waiting till the last moment to file their returns.
• The missed deadlines are due to a variety of factors, including poor taxpaying habits, a clashing of deadlines, and the fact that the government has so far been lenient about missed deadlines.

As per 22nd GST Council meeting what were the measures taken?

Lesser burden of compliance for small businesses

• The government has recognised hardship faced by small businesses with turnover of within Rs 1.5cr, by delaying their return filing compliance to once a quarter from once a month. Taxes will be paid quarterly.
• Small businesses will also have to file monthly returns for three months – July, August, and September – and the switchover to quarterly filing will happen from the cycle starting October 1.

Relief for Service Providers

• Exemption from Registration for a service provider if the aggregate turnover is less than Rs. 20Lacs (10 Lacs in special category state except for J&K) even if they are making inter-state supplies of services.
• Services provided by a GTA to an Unregistered person shall be exempted from GST.
• TDS/TCS provisions shall be postponed till 31.03.2018.
• Small businesses will also have to file monthly returns for three months – July, August, and September – and the switchover to quarterly filing will happen from the cycle starting October 1.

Relief for Exporters

• Refund cheques for July exports will be processed by Oct 10 and refund cheques for August exports will be processed by Oct 18.
• Every exporter will now get an e-wallet. In the e-wallet, there would be a notional amount for credit. The refund they will eventually get will be offset from that amount. The e-wallet will be introduced from April next year.
• Merchant exporters will pay a nominal 0.1% GST applicable on exports to enable their suppliers to claim ITC.

Composition Scheme changes

• Person otherwise eligible for availing the composition scheme and are providing any exempt services shall now be eligible for the composition scheme.
• Eligibility of composition scheme raised to Rs 1 crore.
• Traders will pay 1%, manufacturers 2% and restaurants 5% under the composition scheme.

No GST on advance receipts for businesses with turnover under Rs 1.5cr

• Taxpayers having annual turnover upto 1.5 Crore shall not be required to pay GST at the time of receipt of advances on account of supply of goods.

Significant rate changes

• GST on unbranded Ayurvedic medicines has been reduced from 12% to 5%.
• Tax rate for man-made yarn has been reduced to 12% from 18%. The decision will have an effect on textiles.
• GST rate on many job work items reduced from 12% to 5%. GST rate on some stationery items, diesel engine parts also reduced to 18% from the earlier 28%.
• GST on khakra and unbranded namkeen has been reduced from 12% to 5%. Tax on zari work has been reduced from  12% to 5%.
• 35% abatement on old leasing contract of vehicle
• Printing Job work rate revised from 12% to 5%

Others

• E-way bill has been deferred to 1st April 2018
• Relief for jewellers as no need to furnish PAN card on jewellery purchase of more than Rs 50,000. The amount of jewellery purchase for which KYC will be required will be determined later.
• 35% abatement on old leasing contract of vehicle

What will be the consequences of accelerating the input tax credit payouts?

• It will create a havoc on the entire informal sector of the economy, which actually accounts for the livelihood of a bulk of the population.
• Anecdotal evidence suggests that a huge number of these units may either simply fold up or be forced to lay off their jobbers and tempers or else officially absorb them as workers, which will definitely make them non-competitive.