GST Council provides relief to SME sector, exporters; tax rates on 27 items cut

In a major relief to merchant exporters, the GST Council on Friday fixed a tax rate of 0.1 per cent on goods procured for export purposes.

The merchant exporters would also be allowed to obtain refund of 0.1 per cent tax paid on export of goods, a senior finance ministry official said.

An official statement said that to prevent cash blockage of exporters due to upfront payment of GST on inputs, the Council approved two proposals.

“One for immediate relief and the other for providing long term support to exporters. Immediate relief is being given by extending the advance authorization (AA)/ Export Promotion Capital Goods (EPCG)/100 per cent EOU schemes to sourcing inputs from abroad as well as domestic suppliers,” the statement said.

It said that holders of AA/ EPCG and EOUs would not have to pay IGST and cess on imports.

“Also, domestic supplies to holders of AA / EPCG and EOUs would be treated as deemed exports...and refund of tax paid on such supplies given to the supplier,” it added.

Further, specified banks and Public Sector Units are being allowed to import gold without payment of IGST.

“This can then be supplied to exporters as per a scheme similar to AA,” it added.

Exporters body Federation of Indian Export Organisations (FIEO) said this is a welcome move as merchant exporters account for over 30 per cent of country’s exports and they usually work on thin margins of 2-4 per cent.

The imposition of GST had made their costing haywire, particularly for products having higher GST rate, as they have to pay GST and seek refund after some time lag, FIEO said in a statement.

From April 1, attempt would be made to launch an e-wallet facility for exporters to provide liquidity.

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For the functioning of e-wallet facility, the Directorate General of Foreign Trade (DGFT) will prepare norms.

FIEO had earlier said that micro and small exporters are particularly hit by GST as they have to borrow money to pay taxes.

The availability of credit and more so the cost of credit is adversely impacting them and on account of this, the government should consider introduction of e-wallet for exporters, FIEO had said.

It stated that under this facility, based on preceding year’s exports and an average GST rate, e-currency is credited to exporter’s account.

On the other hand, India Inc welcomed the outcome of the GST Council meet and said the decisions will improve compliance and provide much needed relief to the taxpayers.

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 CII Director General Chandrajit Banerjee said that the SME sector compliance will greatly improve as limit for composition scheme has been increased to Rs 1 crore.

Now forSMEs with annual turnover of Rs 1.5 crore will be allowed to file quarterly returns, this will be a big relief to the small-scale players. Banerjee further commented that deferment of ReverseCharge Mechanism (RCM) is welcome as it encourages registered taxpayers to continue sourcing from small and unregistered taxpayers.

GST Council cuts tax rates on 27 items

Jaitley said the Council also decided to cut GST rates on 27 common use items.

GST on unbranded namkeen, unbranded ayurvedic medicine, sliced dried mango and khakra has been cut to 5 per cent from 12 per cent while the same on man-made yarn used in textile sector has been reduced from 18 per cent to 12 per cent.

Tax on stationery items, stones used for flooring (other than marble and granite), diesel engine parts and pump parts has been cut to 18 per cent from 28 per cent. GST on e-waste has been slashed to 5 per cent from 28 per cent.

Food packets given to school kids under ICDS will attract 5 per cent tax instead of 12 per cent.

Job works like zari, imitation, food items and printing items would attract 5 per cent tax instead of 12 per cent.  Government contracts involving high amount of labour will be levied 5 per cent GST instead of 12 per cent in order to contain cost of those programmes, he said.

Also, salwar suit in a three-piece set has been classified as fabric and 5 per cent GST would be levied on it.