GST: Key changes in the last 100 days

Here is a look at the major changes we saw since GST got implemented

Govt extends letter of undertaking (LuT) facility to small exporters

Initially the option of exporting under the LuT was made available only to certain specified exporters. Accordingly, such exporters could export goods/ services without payment of tax. However, small exporters were required to obtain a bond on furnishing of bank guarantee to export goods/ services without payment of taxes, leading to blockage in working capital.

To facilitate exports, the government decided that the facility of LuT, in place of a bond, for exporting goods or services shall be allowed to exporters.

Benefits for exporters

Following complaints by exporters of credit blockage, a Committee of Secretaries recommended changes in the export procedures. Since no exemptions are extended under the GST regime, hence, e-wallets would be created for each exporter. In this wallet, a notional amount as advance refund would be granted to all the exporters. Such refund amount can be utilised as credit to pay IGST or GST on procurements. 

Temporary abolishing of reverse charge tax payment on purchases made from unregistered dealers

Registered assessees under the GST were facing issues in respect of purchases made from unregistered dealers.  Industry was of the view that such provisions led to discrimination between registered and unregistered dealers. The GST Council has decided to abolish payment of tax under reverse charge mechanism on procurements from unregistered dealers until March 31, 2018. 

Extension of benefit of composition scheme

The threshold limit for composition scheme has been increased from Rs 75 lakh of total turnover to Rs 1 crore. The same would enable more dealers to avail the benefit of composition scheme and pay tax/ file returns on quarterly basis.

Quarterly return for SMEs

Small and medium enterprises (with turnover of up to Rs 1. 5 crore) could now file returns on a quarterly basis. This would reduce their compliance burden. 

The payment of taxes for such assessees would also be quarterly. 

Deferment of e-waybills and tax collected at source (TCS)/tax deducted at source (TDS) provisions

In order to further ease the compliance burden, the waybills, TCS and TDS provisions are likely to be implemented from April 1, 2018. 

Additional option for Goods Transport Agencies (GTAs)

GTAs providing transport servcies have been given the option to charge GST @ 12% and avail credit on taxes paid on procurements. GTAs were taxable under reverse charge mechanism and were not able to claim input tax credit.

Hike in compensation cess

The GST Council decided to hike cess on mid-sized cars by 2 per cent, taking the effective GST rate to 45 per cent. Also, cess on large cars has been hiked by 5 per cent, taking the total GST incidence to 48 per cent, while that of SUVs by 7 per cent to 50 per cent.

GST rate on hotels determinable basis declared tariff or transaction value

The issue faced by the hotel industry was whether tax is to be paid on the transaction value or declared value. Clarification was issued  that tariff declared on the website is to be considered as published tariff and hence, declared tariff. 

(Compiled by PwC)

Sectors in need of a helping hand

TEXTILE

ISSUES & CONCERNS 

Reduction in drawback rates: The drawback rates for textile sector has reduced significantly under GST. Accordingly, the monetary benefit by way of a refund available to the exporters as a percentage of total export proceeds has reduced significantly 

SUGGESTED SOLUTIONS: The drawback rates should be increased so as to improve the competitiveness of Indian textile industry in the foreign markets.There should be unified GST rate of 5% on readymade garments irrespective of sale price

REAL ESTATE

ISSUES & CONCERNS 

No composition scheme: In the GST regime the real estate builders/constructors cannot opt for composition scheme. The expression ‘works contract’ is limited to contracts concerning only immovable property and a works contract is considered as a service under GST 

No credit of construction activity to the service recipient: No credit of construction activity pertaining to building, offices etc. is provided to the recipient. Hence, majority of the tax paid on such activity becomes cost 

SUGGESTED SOLUTIONS: Composition scheme should be extended to real estate sector as the same was also available under the VAT regime. Credit of taxes paid on construction of building, offices etc. should be allowed

E-COMMERCE

ISSUES & CONCERNS

Permanently abolishing TCS provisions: The requirement of deducting TCS is a huge compliance burden on e-commerce companies

Taxation burden on small businesses: Dealers dealing through e-commerce websites have to register and pay tax irrespective of their turnover

SUGGESTED SOLUTIONS: TCS requirement should be abolished permanently. Instead, the e-commerce operators could be asked to furnish details of transactions undertaken by merchants through their website on an annual basis

RETAIL 

ISSUES & CONCERNS

Credit of old stocks: According to transitional provisions inability to claim credit of tax paid on old stock will result in huge losses to the retailer

Sales returns by customers to the retailers: Retailers are unable to accept the sales returns made by customers in a state different from state wherein the goods were initially sold. This affects the ability of the customer to return the goods to any of the stores across India 

SUGGESTED SOLUTIONS: Credit for stock more than 12 months old should be allowed. Clarity should be provided  enabling the retailers to accept sales returns in stores located across India without any tax loss. 

(An analysis by PwC)