Govt to Ease Norms for Small Traders under GST, may Defer RCM

With a view to reduce compliance burden to the small traders under the Goods and Services Tax (GST) regime, the Government may liberalize some norms for composition levy and defer implementation of reverse charge mechanism.

As part of this, the GST Council, in its next meeting, may consider relaxing return filing timeline for small and medium enterprises (SMEs), defer reverse charge mechanism, and reopen registration for composition scheme for the third time.

Among various challenges, small and medium businesses have been particularly hit due to higher compliance burden owing to complex monthly return filing and glitches in the information technology (IT) portal GST Network (GSTN).

Currently, regular businesses have to file three monthly returns, in addition to one annual return.
As the time limit for registration for opting Composition Levy has expired on 30th September, the Council may reopen the same for the third time. The scheme is an alternate method of taxation, which allows small businesses with annual turnover up to Rs 75 lakhs, to pay tax at a concessional rate, as well as reduce the compliance cost. The enrollment into the plan is however, optional.

Under the scheme, traders, manufacturers and restaurants can pay tax at 1, 2 and 5 percent, respectively. Compliance burden for taxpayer would reduce as they will have to file returns only once in a quarter as against monthly returns that needs to be filed by other normal taxpayers. However, dealers cannot avail input tax credit, unlike a normal taxpayer.

In addition, the Council may also defer the reverse charge mechanism (RCM), that has been especially bothering the small tax payers, the first official said.

Reverse charge is a mechanism where the recipient of the good or service will have to pay GST, which is otherwise paid by the supplier. The charge is applicable on a registered dealer, if he buys goods from a dealer not registered under GST. However, the receiver of the good is eligible for input tax credit, while the unregistered dealer is not.

Reportedly, the Council may decide to defer RCM for some time since businesses are getting affected by RCM. Registered taxpayers are not willing to take the burden of paying tax, while small or unregistered taxpayers are running out of business if registered dealers are not buying goods from them.

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