Finance Minister Piyush Goyal and MoS Finance Shiv Partap Shukla (right ) during the 29th GST Council meeting at Vigyan Bhawan in New Delhi on 4 August 2018. Photo: PTI
Finance Minister Piyush Goyal and MoS Finance Shiv Partap Shukla (right ) during the 29th GST Council meeting at Vigyan Bhawan in New Delhi on 4 August 2018. Photo: PTI

Ministerial group formed to consider tax relief for small businesses

GST Council decides to form a ministerial panel to examine a series of tax and compliance relief proposals for the benefit of MSMEs which form the backbone of the manufacturing sector, the rural economy

New Delhi: Federal indirect tax body the Goods and Services Tax (GST) Council on Saturday decided to form a ministerial panel to examine a series of tax and compliance relief proposals for the benefit of small businesses which form the backbone of the manufacturing sector and the rural economy.

Union finance minister Piyush Goyal, who chaired the Council meeting in the capital, said the panel to be chaired by union minister of state for finance Shiv Pratap Shukla will examine all proposals received so far regarding tax relief for micro, small and medium (MSME) enterprises and make recommendations to the Council.

“All proposals will be reviewed in detail by the ministerial panel in consultation with the fitment and law committees (of officials)," said the minister. The Council decided to try a pilot project for refunding 20% of GST paid on business-to-consumer transactions using Rupay card and BHIM mobile application subject to a cap of 100. However, to implement this, the IT system has to get ready first.

Amit Mitra, West Bengal finance minister, said the group of ministers will look into all proposals relating to tax rates and procedure relaxation including the proposal to give relief to MSMEs with sales upto 1.5 crores from the central GST (CGST). This would restore the excise duty exemption available to small businesses with sales upto 1.5 crore that existed in the pre-GST era, he said.

Finance Minister Piyush Goyal, MoS Finance Shiv Partap Shukla, Finance Secretary Hasmukh Adhia and other members during the during the 29th Meeting of the GST Council at Vigyan Bhawan, in New Delhi. Photo: PTI
Finance Minister Piyush Goyal, MoS Finance Shiv Partap Shukla, Finance Secretary Hasmukh Adhia and other members during the during the 29th Meeting of the GST Council at Vigyan Bhawan, in New Delhi. Photo: PTI

Mitra said the council decided to run the pilot project for tax refund on select digital transactions after the technology is ready. “One or two states may run the pilot and depending on the experience, further rollout may be considered," said Mitra. He, however, expressed concerns about giving incentives from GST revenue proceeds, which may not be a good idea in principle.

Bihar Deputy chief minister Sushil Modi said the revenue impact of the refund for select digital transactions may be around 980 crore as Rupay and Bhim account for 20% of all digital transactions. Uttar Pradesh, Bihar, Maharashtra and Gujarat have all agreed to join this pilot project, he said. “Compliance will increase. In the longer run, it will encourage formalization of the economy," said Modi.

Experts said that more than tax cuts, small businesses want easier rules. “More than any financial incentive, MSMEs have been looking forward to easier compliance and faster refunds for exporters," said Pratik Jain, partner and leader of indirect tax at PwC.

R. Muralidharan, senior director at Deloitte India, said that if simplification of procedures are done in true spirit, it will help MSMEs focus on their core business rather than spending a disproportionately high amount of time on compliance matters and this will help in boosting productivity.

Small businesses play a crucial role in supporting the manufacturing sector and in job creation, especially in rural areas. As per a 2016 official survey, MSMEs have created over 11 crore jobs in manufacturing, trade and services, contributing about 29% of gross domestic product (GDP) and about half of total exports. Despite their key role in the economy, they face challenges including access to credit and technology.

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