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29th GST Council meeting approves pilot on cashbacks on digital transactions

August 6, 2018

The 29th GST Council meeting chaired by Piyush Goyal, acting finance minister (in the absence of Arun Jaitley), cleared a pilot project to offer digital incentives in the form of cashback of 20% of GST paid on business-to-consumer transactions. Other issues being faced by Micro, Small and Medium Enterprises (MSMEs) also dominated the meeting. The Council approved a six-member ministerial panel, headed by Minister of State for Finance Shiv Pratap Shukla to look into the issues of MSMEs.

Incentives in the form cashback will be offered on the GST component of the bill for payments made digitally. Digital modes will include payments through Rupay Debit card, BHIM UPI, UPI Aadhaar, USSD (Unstructured Supplementary Service Data).

A cashback of 20% on the GST component will be credited to the consumers, which will be limited to Rs 100 only per transaction. This will be a trial basis process by the GST Council to check whether it increases the tax payment compliances or not.

It will not be a compulsory adoption by the states. The states will have to volunteer for these processes to be implemented.

The revenue department and GST Network (GSTN) will coordinate with the National Payments Corporation of India (NPCI) for the development of software to facilitate the refunds in these digital transactions. “The burden will not be put on the dealers. Software will be developed by NPCI to facilitate the cashback. First, it will be rolled out on pilot basis, and then, after seeing the results, will be considered for a nationwide rollout,” media reports quoting a senior government official said.

Uttar Pradesh, Bihar, Maharashtra, Gujarat, Tamil Nadu, and Assam have opted to join the digital incentives pilot project, officials said.

Regarding the issues faced by MSMEs, a group of ministers has been formed to study and address their issues. Headed by Minister of State for Finance Shiv Pratap Shukla, this group will work in alignment with the law and fitment committee to address the concerns of this sector on GST compliances and procedures related to GST return filings.

In its effort to boost small and medium businesses, the council has had a lot of deliberations at 28th GST Council meeting and the 29th GST Council meeting was an extension of this discussion with further substantiation to proposals made earlier.

With GST in place, SMEs have benefitted a lot with many compliance reliefs given in the form of threshold exemptions, composition schemes, the quarterly filing of the GST returns to mention a few.

Some of the issues on the agenda for MSMEs included:

  • To provide a threshold exemption of Rs 20 lakhs for Inter-state supplies.
  • To increase the exemption limit for compulsory generation of e-way bills to Rs 1 lakh or even being made exempt for movement within some states.
  • To bring down the tax rates for SME units manufacturing agro products to a maximum of 5%.
  • To hasten the sanctioning of GST refunds particularly for this sector as it faces a slowdown scare due to working capital clogs.
  • To introduce a new definition to MSME from a turnover perspective to align it with GST laws.
  • To put an end to the disputes that arose during VAT regime and still pending closure. A clear call to be taken through a one-time resolution applicable to all states for this.

Piyush Goyal indicated that the popularity of various facilities like Rupay Debit card, BHIM app needs to grow among the middle-class and lower-class segment and this meeting will be facilitated to further discuss and decide on the proposals put forth by Sushil Kumar Modi committee formed for digital payments.

The next GST Council meeting is scheduled to be held in Goa on September 28-29.

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