GST Amendments: Impact on Indian Economy

India Infoline News Service | Mumbai | November 13, 2017 13:36 IST

The GST Council on Friday delivered a major overhaul of the GST design and rate structure. The broad thrust of the decisions was to improve lagging compliance and reduce tax burden on smaller businesses.

The GST Council on Friday delivered a major overhaul of the GST design and rate structure. The broad thrust of the decisions was to improve lagging compliance and reduce the tax burden on smaller businesses. Some of the key decisions taken in the meeting are discussed below

Summary return filing extended until 31st March:

As a transitional provision, businesses were required to file a summary return every month in form GSTR3B and pay taxes based on self-assessment. It was expected that this form will be used until December following which the full-fledged GST process of invoice matching will be up and running. However, the filing of detailed returns and invoice matching has run into problems. Consequently, the GST Council has decided to continue with the process of filing summary returns until March. The late fee for the delayed filing of GSTR3B where there is no tax liability has been reduced by 90% to Rs 20 per day.

Composition scheme made fairly liberal, perhaps too liberal:

The turnover threshold for the composition scheme was set at Rs 7.5 mn (subsequently revised to Rs10 mn), which was more than the threshold under state VAT laws but significantly lower than the threshold of Rs 150 mn under excise duty for manufacturing firms. This has now been corrected by increasing the threshold to Rs 200 mn for this year and Rs150 mn from FY19 onwards.

The tax rate under the composition scheme at 1% for traders and 2% for manufacturing firms have now been reduced to 1% and for traders, this tax will only be applicable on their taxable turnover.

The business under the composition scheme was that the composition tax cannot be used as input credit by subsequent parties in the supply chain. The composition levy is thus cascading. This issue, however, continues but with a lower tax rate.

Extended time to file sales return:

GST council further extended the deadlines for filing the form GSTR1. Businesses with turnover up to Rs15 mn will now need to file their GSTR1 only quarterly in the current financial year. Returns for the September quarter can be filed until 31st December, for the December quarter until 15th February and for the March quarter until 30th April. Businesses with turnover of more than Rs15 mn can file their detailed sales return until the 10th of the following month – a 40/41-day window
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Tax rate reduced on most items in 28% bracket:

The GST Council has reduced tax rate for almost 80% of items in the 28% bracket mostly these are end-consumer goods. With this, only about 4% of items based on 4-digit HSN code will now be subjected to 28% or higher tax (from around 19% before). The GST Council has also reduced tax rate on some goods from 18% to 12% and from 12% to 5% in case of some other goods.
 

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