That calls for going beyond sops for SMEs and simplifying GST’s architecture
The GST Council’s decision on October 6 to modify rates of 27 categories of goods and offer a clutch of concessions to small enterprises marks a welcome effort at course correction, three months after GST was kicked off. Small enterprises and exporters were struggling to cope with the onerous task of filing three GST returns every month and securing input credits. Those below an annual turnover limit of ₹20 lakh were struggling to sell to registered businesses. Since the latter, according to the principle of ‘reverse charge’, would pay the GST, they would rather transact with a registered entity. By keeping ‘reverse charge’ in abeyance, the Council, egged on by a Centre under growing pressure to revive the economy and create jobs, has provided relief to tiny enterprises. Likewise, the increase in threshold limit of the ‘composition scheme’ will reduce compliance headaches, if only for a slightly larger section of small entrepreneurs. Allowing units below a turnover of ₹1.5 crore to file quarterly rather than monthly returns comes as a breather for small units. Likewise, service providers, whether inter-State or exporters, have been provided relief by making the ₹20-lakh threshold applicable to them. In a digital age, it is absurd to assume that only large players transact across borders. The reduction in GST rates on food products, as well as the lower duties on synthetic yarn and manmade fibres, are an attempt to placate irate small units before the onset of polls in many States.
But in all this tinkering, the Council and the Centre have missed the wood for the trees. They have allowed the state to loom large over the economy, which runs against the grain of economic reforms. Rather than patronisingly suggest that businesses are complaining, they should have acknowledged that the GSTN portal is playing truant, not allowing entities to correct even typographical errors. The uploading of three returns every month is a nuisance, all the more because invoice details have to be uploaded. With a section of assessees filing quarterly returns, there is no reason why the rest should continue with this chore. Invoice details can be provided on a half-yearly or annual basis, and summary returns on a monthly basis. According to the Chief Economic Advisor’s 2015 report on GST, enterprises with a turnover of less than ₹10 crore account for 18 per cent of the total sales turnover and 98 per cent of enterprise assessees, whereas conversely, those above ₹10 crore (and above ₹100 crore) account for 82 per cent of the sales turnover and 2 per cent of taxpayers. It, therefore, makes no sense to impose stifling norms on a large section of assessees.
The Council should align GST with the Centre’s 2014 promise to ease the conduct of business. Cumbersome rules point to the tendency of the bureaucracy to obfuscate matters and perpetuate control. This is not what GST, and reforms, are meant to be.