Policymakers are considering steps to ease the compliance burden related to the goods and services tax (GST) on small businesses and to make product classification for taxation less complicated, said revenue secretary Hasmukh Adhia.
The simplification process may result in some readjustment of tax rates, including a possible reduction in some items that attract the highest tax slab of 28%.
Products are now classified into various subcategories—in many cases, different subcategories fall in different tax slabs—under a code called the harmonized system of nomenclature (HSN) that existed before GST was implemented on 1 July. Such a detailed classification is hard to follow for small and medium enterprises (SMEs).
Addressing concerns of SMEs and harmonization of items for better tax compliance is on the agenda, Adhia said in an interview.
News agency PTI reported on Sunday said that the government is considering easing the compliance burden on SMEs. “There is a need for harmonization of items chapter-wise and wherever we find there is a big burden on small and medium businesses and on the common man, if we bring them down, there will be better compliance,” the report cited Adhia as saying.
The government’s willingness to calibrate the GST system is significant considering that tax compliance has been below expectations in the first three months since the new indirect tax was introduced. An easier compliance regime for SMEs is unlikely to impact the exchequer adversely as the lion’s share of indirect taxes comes from large corporations.
Mint reported on Saturday that a little over 3.94 million assessees paid the GST and filed returns for the month of September, slightly more than the 3.76 million returns received for the previous month.
The finance ministry had earlier said that it had expected 6.8 million returns for August.
“Adapting the HSN code to make it simpler will help everyone in the industry, especially SMEs. It could also result in rationalization of tax rates, including a possible reduction from the highest slab,” said Pratik Jain, partner and leader of indirect taxes, PwC India.
The GST Council is working on addressing the concerns of SMEs. A ministerial panel, which has been tasked with finding ways of making a liberal quarterly tax payment scheme for SMEs, is expected to meet on 29 October before presenting its proposals to the GST Council for approval. The council is scheduled to meet on 9 November in Guwahati.
Members of the ministerial panel include Assam finance minister Himanta Biswa Sarma, Bihar deputy chief minister Sushil Kumar Modi, Jammu and Kashmir finance minister Haseeb Drabu, Punjab finance minister Manpreet Singh Badal and Chhattisgarh commercial taxes minister Amar Agrawal.
Policymakers are focusing on easing the problems faced by SMEs as the tax reform implemented within a year of last November’s demonetization has rattled this segment, a major source of employment in the country.
SMEs also play a large role in economic growth, accounting for about 95% of industrial units in the country and about 40% of value addition in the manufacturing sector. According to a government survey published in 2011, SMEs account for about 80 million jobs in the Indian economy.
We have launched Single Platform on GST Compliances In India, assisting in 4 areas – 1) Migration, 2) GST Compliance, 3) Training and 4) Transition & Implementation. Click this link for any assistance