Goods and Services Tax – GST – By: – Bimal jain – Dated:- 1-8-2018 – Key 15 suggestions on simplifying GST for SME / MSME sector Ahead of GST Council meeting on August 4, which would exclusively focus on the issues / hardships faced by MSME, CBIC is collating grievances/issues related to GST and suggestions thereof for mitigating such issues for MSME taxpayers. Following suggestions were compiled by Mr. Bimal Jain, Chairman, Indirect Tax Committee, PHD Chamber of Commerce towards making GST Law as Good and Simple Tax for SME/ MSME sector forming heart of Indian Economy, which have been submitted to the Government for their kind consideration: I Definition of Aggregate Turnover for taking registration in GST Definition of aggregate turnover as per Section 2(6) of the CGST Act, 2017 ( CGST Act ) inter alia, means aggregate value of all taxable supplies, exempt supplies, exports and inter-state supplies of persons having the same Permanent Account Number, to be computed on all India basi
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ted in Schedule II (as supply of service or supply of goods) shall be taxed only when they constitute supply in accordance with provisions of Section 7(1)(a), (b) and (c) of the CGST Act, 2017. Suggestion(s): Removing subjectivity and inclusivity in definition of supply – The definition of term Supply starts with Supply includes is too wider a definition and with subjectivity, followed by inclusive definition. As this is taxable event in GST, it must be defined concretely so as to avoid any disputes & litigation, as we have past history for the term Manufacture for the chargeability of Central Excise Duty. Further, Section 2(30) of the CGST Act defines Composite supply as a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Suggestion(s): Clarif
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s – Like manufacturers, traders and restaurant service providers, benefit of composition scheme must be extended to other service providers also. Providing some ceiling for inter-state outward supplies of goods by a composition supplier – Presently, a person opting for composition scheme is not allowed to make any inter-state outward supply of goods. This is creating a bottle neck for small sector. It is suggested here also that certain percentage of turnover may be allowed for inter-state supply of goods for the benefit of SME/MSME sector in true sense. No hefty penalties – Penalties in respect of wrongly opted composition scheme, cancellation of registration, etc., must be limited to recovery of differential taxes only without levying hefty penalties / interest considering that the tax payer under a composition scheme would be a small player. IV Reverse Charge under Section 9(4) of the CGST Act to be removed completely GST Council has proposed to defer existing Section 9(4) of the CG
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her, as per 2(5) of the CGST Act, agent means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another . Suggestion(s): Clarification to the effect that Compulsory Registration for agents is restricted to only consignment agents – Though definition of agent under Section 2(5) as well as clause (vii) of Section 24 covers only those persons who supply taxable goods on behalf of another i.e. consignment agents, but debate is going on as to whether the commission agents or brokers who merely facilitate a transaction between two parties like procuring orders etc. are also debarred from the benefit of threshold limits of registration i.e. ₹ 20 Lac. It is suggested to issue a suitable clarification in this regard. VI Input Tax Credit ( ITC ) viz-a-viz registration In terms of Rule 10(3) of the
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f grant of registration as no ITC is made available on procurements made during such period. Further, ITC is also denied for stock held on the day immediately preceding the date of liability to register. It is recommended that alternate mechanism may be developed for genuine cases and registration may be granted with effect from the date of liability if proved bonafide. Further, credit of stock as on date of liability to register must also be allowed in bonafide cases. VII E-Way Bill Section 129 of CGST Act validates detention and seizure of goods/conveyance and consequently levying penalty as high as 100% of tax payable along with tax payable for any contravention of provisions of GST Act and Rules made thereunder irrespective of there being any intent to evade taxes or not. Wide powers conferred under this provision is causing harassment of taxpayers specially when there is some error or incomplete details in E-Way Bill. Recently Madhya Pradesh HC in the case of Gati Kintetsu Express
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asis for small taxpayers. VIII HSN wise summary – GSTR-1 Notification No. 12/2017 – Central Tax dated June 28, 2017 provides that a registered person whose annual turnover in the preceding financial year is less than ₹ 1 .5 crores is not required to mention the digits of HSN codes in a tax invoice issued by him. However, in GSTR-1, every assessee is required to give the details of stock sold HSN code wise. Further, such small tax payers are required to mention 4-digit HSN Code for generation of E-way Bill for movement of goods, having consignment value more than ₹ 50,000/-. These divergent provisions and procedures are creating obstacles towards ease of business for SME/ MSME Sectors. Suggestion(s): System of uniformity and synchronization to be adhered for brining simplicity and ease of business. It is suggested that an alternative way of reporting rate-wise supplies be established in new formats of returns to give relief to small traders who are otherwise not required to
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the maximum amount to be deposited to file appeal from the appellate authority to appellate tribunal is 20% of the disputed tax amount along with the amount deposited u/s 107(6) subject to maximum of ₹ 50 crores. Suggestion(s): Maximum ceiling should be 10 crores – Under Excise and Service tax, pre-deposit @ 7.5% of tax in dispute at first level and 2.5% at second level was applicable subject to maximum of ₹ 10 Crores. Keeping such high pre-deposit amount of 10%/20% with maximum ceiling as high as ₹ 25 crores/ 50 crores will cause undue hardship on innocent assesses having genuine case and not easing business for SME/ MSME Sectors. It is suggested that, pre-deposit amount under GST also should be 7.5% at first level of appeal and 2.5% at second level, totalling together 10% of disputed tax amount subject to maximum of ₹ 10 Crores. XI IGST credit on imports of finished goods affecting Make in India drive Prior to implementation of GST, while traders were only all
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ting the same from China as the effective duty on imports has reduced by around 16%. The Pre-GST & Post-GST duty structure is as under: Pre-GST Post-GST Basic Duty 10% 10% Countervailing Duty 12.5% Special Additional Duty 4% IGST 12% As imports of finished goods have become cheaper on par credit available to both manufacturer/ Trader, the domestic manufacturers are closing their operations and impacting adversely towards Make in India drive & there is loss of jobs in small scale units. Suggestion(s): IGST credit to be restricted only on import of raw materials – Manufacturers of India must be boosted in comparison to their position with traders of imported finished goods. IGST credit on imports should be restricted only to the manufacturer of imported raw materials. Import of Finished goods must not be allowed par benefit of credit of IGST to the trader of imported finished goods. This will make the position of manufacturers wiser and encouraging as compared to importers. This
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claim for refund of ITC arises, which is presently the end of the financial year. Suggestion(s): Facility on GSTN portal should be enabled to allow monthly and/ or quarterly refund – As of now Form RFD – 01A allows only monthly claim of refunds. Thus, proper GSTN functionality must be ensured for proper execution of proposed change. Removing anomaly of no refund on unutilized ITC on capital goods as against Rebate Mechanism of export made on payment of IGST – The CGST Rules do not allow refund of ITC on capital goods when zero-rated supplies are made against LUT without payment of IGST, but in case of supplies made on payment of IGST, refund of ITC on capital goods is allowed. It is suggested that such anomaly must be removed for creating par situations for both rebate and refund mechanisms. XIV Input Tax Credit – Value of exempt supply for reversal of ITC In GST amendments, it is proposed that no reversal of common ITC shall be required on activities or transactions specified in Sche
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Audit Section 35(5) of CGST Act provides that every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant. In this regard, Rule 80(3) of the CGST Rules states that every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under sub-section (5) of section 35 and he shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C. Suggestion(s): Two crores limit must be computed per registration wise – Anomaly of word turnover in Section 35(5) viz-a-viz word aggregate turnover in Rule 80(3) be removed. Further, clarity must be provided that two crores limit for GST audit shall be determined per State wise turnover rather than taking aggregate turnover on PAN India basis of an assessee. Considering aggregate turnover of an assessee will create a situat
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