Goods and Services Tax has led to the number of taxpayers go up by 3.4 mn, as per the Economic Survey of FY17-18
New Delhi: The large number of small firms registered under Goods and Services Tax (GST) has made it possible to attract the working population so far not covered by any retirement savings schemes to pensions, chairman of Pension Fund Regulatory and Development Authority (PFRDA) Hemant Contractor said.
GST, which brought businesses with annual sales of Rs20 lakh and above into the indirect tax net, has made many small, informally operating firms without tax registration or social security schemes, part of the formal economy by becoming registered tax payers.
GST has helped the number of taxpayers go up by 3.4 million, as per the Economic Survey of FY17-18. With the requirement for maintaining books of accounts and being part of the digital tax return processing system, they have now become the biggest pool of potential new customers for the National Pension System (NPS), the self-contributory pension scheme rolled out in 2004.
Contractor said GST has addressed one of the major challenges in getting small firms to join NPS—lack of proper maintenance of accounts. “With more firms getting registered under GST, small firms operating in the informal sector are becoming part of the formal sector. To that extent, their bookkeeping and maintenance of accounts will improve. It will be possible for them to join NPS and have their contribution deducted from the salaries,” he said in an interview. NPS now has 5,162 companies as contributors with over 780,000 subscribers. Every month, NPS is adding 8,000-12,000 new corporate subscribers.
PFRDA has been taking steps to enrol both the really small firms representing the workforce not covered by any retirement savings scheme, as well as those businesses with workers earning more than Rs15,000 a month. Factories with 20 or more workers have to get workers with salary of up to Rs 15,000 a month sign up for the provident fund scheme run by the Employees’ Provident Fund Organisation (EPFO) compulsorily. For those earning more, NPS is an optional retirement saving.
Contractor said the pension regulator will soon come out with an announcement about how the superannuation funds held by corporate entities under their own trusts could be part of NPS.
The government had last year clarified that such transfers will not attract any tax.