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GST Council Meeting in Guwahati Could Dole Out Sops For Trading Community and SMEs

Having realised the potential damage that the newly introduced Goods and Services Tax (GST) regime could cause to the party prospects in the next month’s polls in Gujarat, the Narendra Modi Government is in the course correction mode and is likely to dole out sops to SMEs and trading community at large.

The November 10 meeting of the GST Council scheduled to be held in Guwahati is likely to make drastic changes in the GST regime and remove a large list of goods and commodities accessed by the middle class and the upper middle class form the ambit of the high rate of 28 per cent. The thinking with in the government, sources said, was that only top end luxury items and commodities including high end automobiles should be placed in the 28 per cent category and majority of the items should be moved down to the 18 or 12 per cent category.

Sources said the government was concerned about the possible fallout of the new GST regime and the resentment prevailing among the trading and business community, a major vote bank of BJP, and would look to address their concerns in order to assuage their feelings. ``One of the most impacted by the GST regime has been the SMEs which are badly reeling under the adverse impact of the new indirect taxation system. They are badly hit as a large number of the business conducted by them falls in the 28 per cent structure which had led to slowdown in business and subsequent layoffs. This is the core constituency that the GST Council would seek to address during the Guwahati meeting,’’ a senior official remarked. Interestingly, India is home to around 56 million SMEs who have been badly hit by the demonetisation last year and then introduction of GST in July this year.

The Tax Rate Fitment Committee, a panel of central and state officials assisting the GST Council, has been engaged in the task of scrutinising the list of items in the highest slab to identify items which need to be taken out from the 28 per cent and 18 per cent tax structure. The sentiment in the official circles is that in order to encourage SMEs to become part of the new GST regime and increase their tax contribution indirect tax regime from 5 per cent to 10 to 15 per cent, rationalising of the rates was very important.

In fact, as stated by Finance Minister, Arun Jaitely recently, the idea is to retain only so-called sin goods such as cigarettes, the consumption of which the state wants to discourage, in the highest tax slab.

The GST Council will also consider further changing the liberal quarterly tax filing scheme called composition scheme meant for SMEs.

In its last meeting on October 6, the Council shifted items such as stones used in flooring other than marble and granite, stationery items such as paper clips, poster colours, some diesel engine parts and parts of pumps from 28% to lower slabs. The tax regime has 5%, 12%, 18% and 28% slabs and cess on some items falling in the highest slab.

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