GST Relief for Exporters, Small Businesses and Crackdown on Shell Companies – India Regulatory Brief

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GST relief for exporters, SMEs among key GST Council decisions from October 2017

A host of concerns raised by exporters and small businesses over the Goods and Services Tax (GST) refund mechanism and increased compliance burden were addressed by the GST Council meeting on Friday.

For exporters, the finance minister, Arun Jaitely, confirmed that refund of GST for July will be secured by October 10, and for August by October 18. Further, exporters will have access to a digital wallet by April next year, in which a nominal amount will be deposited for tax credit purposes. Until then, exporters will be subject to a nominal GST of 0.1 percent.

For small businesses, the option to file returns and pay taxes by quarter will ensure ease of compliance – instead of the monthly requirement. Nonetheless, the GST-3B form will have to be filed monthly till December this year.

Further, the composition scheme will be extended to businesses with a turnover of up to US$150,000 (Rs 1 crore), instead of the previous US$110,000 (Rs 70 lakh) limit.

In other decisions, the GST rates were revised for selected goods and services.

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India clears select foreign investment proposals in single-brand retail

The federal government recently approved five foreign direct investment (FDI) proposals in the tightly regulated single-brand retail sector. The companies benefiting are: Oppo Mobiles India, Louis Vuitton Malletier, Chumbak Design, Daniel Wellington AB, and Actoserba Active Wholesale Pvt. Ltd for the Zivame brand.

The clearance of investments comes soon after the FDI policy for 2017 was announced – it consolidated the relaxations introduced since late 2016 and confirmed new procedures after the dismantling of the Foreign Investment Promotion Board (FIPB).

In fact, Oppo secured its investments through the Department of Industrial Policy and Promotion’s (DIPP) foreign investment facilitation portal – the successor to the FIPB.

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Tracking post-demonetization activity, crackdown on shell companies intensifies

Banking and financial transactions since last November’s demonetization have exposed numerous companies suspected to be fronts for money laundering. Last week, the government acted on data provided by 13 banks showing post-demonetization transactions for 5,800 companies – some of which held up to 100 accounts each. This is the tip of the ‘black money iceberg’, according to federal officials, and investigations are ongoing.

Parallel to this, the government has intensified its crackdown on shell companies and introduced new rules for establishing company subsidiaries. As of September end, this year, financial authorities have struck off 217,239 firms from the Registrar of Companies, and disqualified as many as 450,000 directors for their association with shell companies.

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