States governments have pitched for a single audit system for Micro, Small and Medium Enterprises (MSMEs) and for a one-time settlement scheme for legacy issues related to the pre-GST regime.

Small and medium enterprise are currently required to get their accounts audited separately for Income Tax and GST.

Presumptive taxation scheme, under Section 44AD of the Income Tax Act, is available for small and medium enterprises with a ₹2-crore turnover limit. SMEs with a higher turnover will have to maintain detailed account books and ensure proper auditing.

Similarly, under Section 80 (3) of CGST Rules, every registered person whose aggregate turnover during a financial year exceeds ₹2 crore should get his accounts audited as specified under sub-section (5) of section 35.

According to a State Finance Minister, two audits increase the compliance cost. “Though the requirements of audit for Income Tax and GST may be different, the goal is to establish whether the account is properly maintained,” the Minister said, adding that all required information can be examined in one audit.

Bimal Jain, Chairman, Indirect Tax Committee, PHD Chamber of Commerce and Industry, said: “MSMEs should be picked up for audit once in three-five years and that too once for both IT and GST….State-wise audit is not easy, but there is no choice in the dual concurrent GST model.”

Resolving legacy issues

Another suggestion given at the special meeting of GST Council on Saturday was for a one-time settlement scheme for legacy issues and litigation related to VAT and Central Excise. State Finance Ministers said that big companies have big compliance teams and can easily complete pre-GST assessment and fulfil compliance requirement under GST, but for a smaller or medium enterprises, it is not so easy. “A one-time settlement scheme will unlock disputed amounts for the government, and save resources for SMEs,” said another State Finance Minister.

CGST refund

States feel that MSMEs not required to register under the erstwhile Central Excise mechanism and under HSY should be given some kind of a refund. Manufacturing units with an annual turnover of ₹1.5 crore or more were to register under the erstwhile Central Excise mechanism, but now businesses with an annual turnover of ₹20 lakh or more (₹10 lakh in some States) are required to register under GST. “Units with a turnover between ₹20 lakh and ₹1.5 crore should be refunded CGST as there were not paying Central tax earlier,” a Minister said.

Suggestions on law and rules will be considered by the Law Committee, while matters related to rates will be considered by the Fitment Committee. Both committees comprise tax officials from the Center and the States. They will send suggestions to a Group of Ministers (GoM), which, in turn, will place the proposal before the GST Council for the final decision.

The GoM is headed by Minister of State in the Finance Ministry Shiv Pratap Shukla and has Suhsil Modi (Deputy Chief Minister and Finance Minister, Bihar), Himanta Biswa Sarma (Finance Minister, Asaam), Manpreet Badal (Finance Minister, Punjab), Manish Sisodia (Deputy Chief Minister, Delhi) and Thomas Isaac (Finance Minister Kerala). Some proposals of the GoM are likely to be considered by next meeting of GST Council scheduled to be held in Goa on September 28-29.

Related Topics