GST authorities are reportedly working on methods to ensure better tax compliance, including timely return filing and tax payments, from micro, small and medium enterprises (MSME) of the country. In addition to levying penalty on due taxes, authorities may even ask businesses to provide details of their monthly sales transactions to match with tax deposits.
In its recent meeting, the Goods and Services Council (GST) had decided to reduce the return filing frequency to quarterly for businesses with an annual supply of Rs 5 crore or less. Now, the government is focusing on maintaining the cash flow in the form of taxes from this segment.
The council is required to find ways to address the rising concerns of states regarding any revenue drop because of the government’s initiatives to ease compliance burden on small firms.
“The law committee of the GST Council is examining how to ensure that taxpayers pay tax every month. The monthly tax payment has to approximate a third of the quarterly tax payments. If the variation is beyond a percentage, the taxpayer may be asked to pay interest on that part,” said an official.
MSMEs may even be asked to provide complete details of their monthly sales records to check their tax liability with the actual tax paid, said the official.
The MSME sector is also politically crucial for the government as they form a major base for ruling and opposing parties. This is why, the government is willing to provide small businesses and dealers, who suffered from the GST and demonetization, as much relief as possible, in terms of less tax compliance burden.
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According to the National Sample Survey 2015-16 data, there are over 63 million micro, small and medium enterprises in India that provide manufacturing and trading services and employ more than 110 million citizens. Their contribution to the country’s economy is close to 29%. This is one of the biggest employment sectors, which is why it is crucial for the government to find ways to ensure that they can do business easily while complying with the tax rules.
Apart from the recent decision to allow MSMEs to file quarterly returns, the Council is also considering to provide them additional relief from GST through the way of refund of a percentage of the tax paid by these taxpayers.
