Course correction: (The Hindu, Editorial)(sonya) & A better GST: (Indian Express, Editorial)

Course correction: (The Hindu, Editorial)(sonya) & A better GST: (Indian Express, Editorial)

Context

• The risk-taking nature among Indian businessmen seems to weaken to the point due to the introduction of new Goods and Services Tax (GST) where new investment project announcements during July-September were the lowest for any quarter in over 13 years.

What alterations are taking place?

• The new alterations relate to coverage and compliance norms with a view to easing the burden of paperwork and stretched cash flows imposed on smaller businesses and exporters.
• The new GST Council has lowered the rates on 27 items.
• Prime Minister Narendra Modi has said that the Council’s decisions at its 22nd meeting has been taken to overcome the GST system’s apparent shortcomings and to fulfill the promise to fix the problems faced by traders in the first quarter of GST.

What are the reasons behind it?

• This has been the courtesy of the new Goods and Services Tax (GST) regime. The problems encountered is in complying with the new GST reform.
• It relates to both filing of returns and the cumbersome procedures for claiming refunds for taxes paid on input purchases.
• It is evident that the firms, especially the smaller ones, are facing a genuine compliance burden.

How is the government trying to solve the issues?

• Now the businesses with an annual turnover of less than Rs 1.5 crore have been permitted to file quarterly returns, instead of every month.
• The turnover threshold for availing of the so-called composition scheme has been raised from Rs 75 lakh to Rs 1 crore.
• The reverse charge mechanism under which receivers of goods and services are liable to pay tax on supplies by unregistered vendors has been deferred till March 31, 2018.
• Exporters have been promised that all held-up refunds of integrated GST paid on exported goods will be expeditiously cleared.
• The creation of a proposed “e-wallet” facility from April 1 in the form of an advance refund or notional credit will hopefully address the severe working capital blockage currently being experienced by exporters.

Way ahead

• Firms with an annual turnover of up to Rs. 1 crore paying a flat and low tax, and the six-month suspension of the reverse charge mechanism will require large firms to deduct tax on supplies from firms outside the GST net.
• This would help spur fresh confidence among small firms and help expand the tax base.
• The promise of faster tax refunds for exporters facing a working capital crunch too is re-assuring.