Proposed GST changes positive for business: Experts
NEW DELHI: Tax experts see the proposed changes to the GST regime – that will now be discussed on Thursday — as positive for businesses, helping reduce the working capital requirement and eventually benefit buyers.“It is expected that businesses may be entitled for refund of accumulated GST on input services and capital goods, which is currently restricted to raw material. It is also expected that 90% of the refund claimed will be granted on a provisional basis within seven days. These proposals alone can relax the working capital stress in the range of 2-4% for manufacturers, eventually helping businesses reduce the product prices and invest funds back into business,” said Pratik Jain, partner at consulting firm Price Waterhouse & Co.
Refunds and limited use of accumulated input tax credit (ITC) have been two major concerns for businesses. For long-gestation projects, GST Council members will discuss a proposal where tax paid on services and plant and machinery can now be refunded, with refund on the latter spread over five years. The process is also being reworked for exporters. According to govt data, 38,700 taxpayers claimed refund on exports, and 13,100 have paid taxes on plant and machinery. Among businesses claiming refund on an inverted rate structure, 15,200 have paid such tax on plant and machinery and 17,300 have paid tax on input services.“ITC rationalisation is the need of the hour as credits locked up either due to restrictions in usage or due to the sellers’ defaults or due to delayed ITC refunds add significantly to the working capital costs and easing credits and related refunds would make businesses more competitive. Providing regular refunds to capital intensive projects, such as semiconductors and refineries where ITC remains locked up for several years, would effectively reduce their capex requirements and encourage more investors to come forward and invest in long-gestation period projects,” said MS Mani, partner at Deloitte India.“Allowing GST incurred on various employee related expenses, such as insurance and cafeteria, as credit to businesses is going to be a major policy shift. This could result in direct benefit to large sections of the workforce and reduce paperwork for businesses,” added Jain.Govt officials said that decriminalisation and allowing courts to decide where a person should be arrested will really liberate businesses, who are often threatened. “Businesses seek an environment free from needless policing and hence the proposed removal of the arrest provisions and the softening of the prosecution provisions would go a long way in improving business confidence,” said Mani.“Decriminalising GST is a welcome move that honours the 90% of honest, law-abiding traders driving our economy. Ease of business shouldn’t be stifled by constant fear of prosecution but bad actors must still face strict penalties,” said Bangalore-based trade activist Sajjan Raj Mehta.
