Union Finance Minister Piyush Goyal (second from right) with finance ministers of various states before the 29th meeting of the Goods and Services Tax Council in New Delhi. Photo:PTI
The Goods and Services Tax (GST) Council on Saturday set up a six-member committee under Minister of State for Finance Shiv Pratap Shukla to look into the problems of micro, small and medium enterprises (MSMEs).
The Council also decided to test the feasibility of its proposal to offer cashbacks for digital payments, after some states voiced concerns about such a move impacting their revenues. Once implemented, customers making payments through Rupay cards and BHIM-UPI will get a cashback of 20 per cent of the GST
amount, subject to a maximum limit of Rs 100.
“The pilot (scheme) will run in the volunteer states," Finance Minister Piyush Goyal
told reporters after the Council meeting, adding that the scheme would be implemented based on the results.
On MSMEs, Goyal said the ministerial panel is expected to finalise its report within six weeks. Apart from MoS Shukla, other members of the panel are Delhi Deputy Chief Minister Manish Sisodia, Bihar Deputy Chief Minister Sushil Modi, Assam Finance Minister Himanta Biswa Sarma, Kerala Finance Minister Thomas Isaac and Punjab Finance Minister Manpreet Singh Badal.
The law and procedure as well as rates-related issues of the sector would simultaneously be considered in detail by the law committee and the Fitment Committee comprising central and state tax officers. They would give their recommendations to the group of ministers, Goyal said. The finance minister said the Council had made efforts to help the MSME
sector in the last 13 months. Speaking on the cashback scheme, he said it would help formalise the economy. These digital payments are made by lower middle class and the poor, he added.
On Friday, a panel, headed by the Bihar deputy chief minister had decided to incentivise payments made through Rupay cards and BHIM app.
The move is expected to hit the exchequer by Rs 10 billion, which will be shared equally between the Centre and states.
The expected hit to the coffers made some states oppose the idea. West Bengal Finance Minister Amit Mitra said, “(I) don't agree with incentives for digital transactions. There was Rs 430 billion revenue loss for all states in the first quarter of the current financial year.”
Kerala Finance Minister Thomas Issac said, “No concensus was arrived at on the issue. Revenue implications need to be borne in mind."
However, Tamil Nadu, Haryana and Assam showed their willingness to run the pilot. M S Mani, partner, Deloitte India, said the Council had been taking judicious approach of late to implement its decisions in a phased manner instead of going whole hog. Harpreet Singh, partner, KPMG, said limiting incentives to Rupay cards and Bhim app
was a small bargain compared to the benefits the government could reap by achieving formalisation of the economy.
Briefing the reporters Delhi, Sisodia said the MSME
sector might not be contributing much to the exchequer compared to the big companies, but its contribution to providing employment was a lot more.
Andhra Pradesh finance minister Yanamala Rama Krishnudu said this issue needed in-depth analysis and study from the perspectives of both financial and legal aspects. In the previous meeting, the GST
Council had widened the definition of this segment to annual turnover of Rs 50 million from the previous Rs 15 million.
Abhishek Rastogi, partner, Khaitan & Co., said the Council’s move might slow down a few major decisions which were not likely to happen before the 2019 general elections. He said the sector had high aspirations from the GST
Council on many technical aspects plaguing the sector such as streamlining compliance, regulating technical disruptions, blockage and eligibility for funds.
However, Abhishek Jain, partner, EY India, said, “Further simplification of GST compliances and other issues for this sector could soon be in place."
Vishal Raheja, GST expert at Taxmann, said he was hopeful that special benefits will be granted to boost the growth of the MSME
sector and India's economy.
The next GST Council meeting is scheduled for September in Goa. The Council received over 100 recommendations for the MSME sector, some of them repetitive.