The 22nd Goods and Service Tax (GST) council meeting held on 6th October 2017 was primarily targeted towards providing liquidity respite to exporters as well as lowering of compliance burden for small and medium enterprises (SME). CRISIL Research believes that the government’s move to relax IGST for six months and faster processing of refunds for exporters, would address their liquidity issue and improve business efficiencies in the short term. Moreover, reducing compliance burden for SME would widen the tax base under GST. Further, tax rates have been reduced on air conditioned (A/C) restaurants from 18% to 12%.

Lowering compliance cost for SME to widen the tax base

Implementation of GST burdened the SME sector following increase in compliance cost on account of filing 3 monthly returns and 1 annual return (total 37 returns per annum). In the 22nd GST council meeting, the Government eased return filing process from monthly to quarterly for SME’s who have annual turnover of less than Rs 150 million. Government also raised the annual turnover limit under composition scheme from Rs 7.5 million to Rs 10 million, enabling players to pay taxes at concessional rate. CRISIL Research believes that quarterly return filings by SME and increasing the turnover limit under composition scheme would widen the tax payer’s base.