GST Council likely to speed up tax refunds, address network woes

The full-fledged meeting of the GST Council today is likely to decide on providing some relief to exporters in terms of faster refunds as well as compliance.

The all-powerful Council, at its 22nd meeting, is also likely to assess the improvements in the GST Network's functioning, officials said.

The rollout of the GST, has brought great misery to small and medium enterprises with companies in this segment facing severe cash flow issues. This is mainly due to delayed refunds and the complexity of the compliance process in the new technology framework.

Also, inter industry demand has taken a hit and there are no fresh investments. If this trend persists, the short-term liquidity mismatch can seriously hamper future prospects of these firms, as India Ratings and Research has pointed out.

Reports said the package being considered by the GST Council is more focused on exporters and MSMEs. The remedies may include the option for quarterly filing of returns for small businesses, the suspension of the 'reverse charge' tax compliance mechanism for MSMEs till March, refund of taxes to exporters through an e-wallet and exemption from any retrospective enquiry into the previous value-added tax (VAT) regime tax matters, according to reports.

Reverse charge refers to the requirement of large businesses sourcing supplies from MSMEs to deduct taxes from them and pay to the government.

Normally, it is the supplier's obligation to collect taxes from the buyer and pay the government.

Since large companies do not want additional compliance requirements for sourcing from MSMEs, these small entities stand to lose their business. MSMEs requested the government to suspend this requirement for some time. They also sought the option for quarterly filing instead of the present monthly filing norm.

India's 36 million MSMEs account for a third of manufacturing output of the country. According to government data, MSMEs employ more than 80 million people. The government also wants to support exports, which has been lagging despite a 10.29 per cent jump reported in August to $23.8 billion.

The package for exporters is based on suggestions by the panel led by revenue secretary Hasmukh Adhia, another government official said on condition of anonymity.

On Wednesday, the finance ministry allowed small exporters with revenue less than Rs1 crore to import goods without having to pay integrated GST (IGST) by furnishing just a letter of undertaking. Earlier, they had to furnish a bond to avail of this facility.

IGST is applicable on interstate trade and on imports of raw materials that exporters use. Currently, this facility is available only to large exporters.

The Federation of Indian Export Organisations (FIEO) had sought GST refund for exporters based on GSTR-1 (the return relating to supplies) and GSTR-3B (a summary of transactions).

The Group of Ministers headed by Sushil Modi, set up to look into GSTN glitches, will also brief the Council on the portal's functioning.

While over 3.3 million businesses have so far filed the final GSTR-1 return, the GoM has tasked GSTN to send reminder text messages to the remaining 2 million businesses that are yet to submit tax forms.

The last date for filing final sales returns for July in GSTR-1 form is 10 October, while the date for uploading of purchase returns in GSTR-2 is 31 October.

The final GSTR-3, matching GSTR-1 and 2, is to be filed by 10 November.

The GoM in its meeting yesterday has asked GSTN and Infosys to brace up for handling the rush of last-minute filers.