The ministerial panel, headed by Minister of State for Finance Shiv Pratap Shukla, in a meeting held on Sunday converged on the view to hike the exemption threshold level under the indirect tax regime in a bid to provide relief to micro, small and medium enterprises (MSMEs).
In a separate meeting, the ministerial panel headed by Bihar’s Deputy Chief Minister Sushil Kumar Modi decided to recommend levy of a 1 per cent calamity cess under Goods and Services Tax (GST) by Kerala for a period of two years.
The hike in exemption threshold will be applicable to B2C (business-to-consumer) registrants, while B2B (business to business) and inter-state sales will be excluded.
The Shukla-led panel also suggested that the composition scheme be extended to service providers with annual turnover of up to Rs 50 lakh with a GST levy of 5 per cent and that comsposition scheme dealers be allowed to file annual returns, even as they would continue to pay their taxes quarterly.
Also, the other ministerial panel will suggest the GST Council to allow additional borrowing over the permitted limit by states hit by natural calamity. The final decision on the recommendations of both the panels will be taken in the upcoming meeting of the GST Council that is scheduled to be held on Thursday.
Steps to ease the compliance burden of MSMEs
In the run-up to elections this year, the focus is on providing relief to MSMEs in order to ease their compliance burden. The proposed measures such as free accounting software, hike in exemption threshold and extension of composition scheme to service providers under GST are steps in that direction. These measures are also being stressed upon as these have a minimal revenue impact compared with rate cuts.
“Kerala had asked the GST Council for levying cess to fund rehabilitation work after it faced floods. The GoM has recommended that Kerala be allowed to levy 1 per cent cess for two years.”
“Also, the Centre and states will together decide on increasing the borrowing limit under FRBM for funding natural calamity,” Modi told reporters after the meeting of the GoM.
Modi also said that for now the proposal is for Kerala and could extend to other states as and when there is a natural disaster or calamity.
“If there’s calamity in any other state and if they urge the GST Council, at that time the GST Council will decide,” the Bihar Deputy CM said, adding that the GST constitutional amendment provides for raising additional resources if any state faces natural disaster.
Kerala’s Finance Minister Thomas Isaac said that as per the recommendation of the GoM, the state will have the power to choose the goods and services on which the calamity cess be levied.
“It will be a cess up to 1 per cent on the value of goods and services but it will left to the state to determine whether it is across the board or certain commodities, that flexibility will be given,” he said.
On the proposed relief to MSMEs, Modi, who is a member of the ministerial panel, said that the GoM was unanimous that the exemption limit should be increased but there were varied suggestions from different states and the final call will be taken by the GST Council.
“The proposal was to increase it to Rs 75 lakh but there were different views on this. Delhi suggested Rs 40 lakh (exemption limit), Bihar suggested Rs 50 lakh, but the final decision will be taken by GST Council…no unanimous recommendation was there by the GoM but the majority view was that the threshold should be increased,” Modi said.
Another suggestion was that for MSMEs with turnover between Rs 50-60 lakh be levied Rs 5,000 GST, and those between Rs 60-75 lakhs be levied Rs 10,000-Rs 15,000 GST.
“Under the earlier excise duty regime, businesses with turnover of up to Rs 1.5 crore were exempt. So it was felt that there was a need to give relief to the MSMEs under GST,” Modi said.
The Shukla-led GoM has also suggested to the Council to allow businesses with turnover of up to Rs 1.5 crore to avail composition scheme, up from the current Rs 1 crore.
Currently, under composition scheme, traders, manufacturers and restaurants pay a nominal tax and file returns and pay taxes quarterly.
The Group of Ministers has also suggested that businesses with turnover of up to Rs 1.5 crore be provided with a free accounting and billing software by the goods and service tax Network.