The Goods and Services Tax (GST) Council on Saturday approved the rules related to e-way bills, which are meant to track movement of goods, and resolved to implement the mechanism soon. The Council also got ready to invoke the anti-profiteering clause in the GST laws, as several states thought that businesses largely remained reluctant to pass on the benefit of lower tax liability to consumers. Acceding to demands from the industry, the Council decided to reduce the GST rate on all job works related to the textile and apparel sector to 5% from 18%. In case of some sectors like yarns and fabrics, the tax on job works was earlier slashed to 5%, but with Saturday’s decision, the benefit of lower tax will be available to all job works in the sector. In a move that would cut the cost of project execution in the government sector, the GST on work contracts in the state-sector has been reduced 18% to 12% with full input tax credit. Briefing the media after the Council’s 20th meeting here, finance minister Arun Jaitley said although the Council has decided to implement e-way bills from a date to be notified soon, the government would prefer the transportation of goods to be technology-driven with minimal intervention by tax inspectors.
While the states’ commercial tax check posts have been dismantled post-GST, the e-way Bill mechanism for consignments with value above Rs 50,000 could practically lead to harassment of taxpayers and result in randomised checks by “flying squads” and even proliferation of check posts, tax experts said. “E-way Bill is a retrograde step and doesn’t fit into the GST’s one-nation-one-tax principle. Why should there be this document additional to invoices?” asked MS Mani, senior director, Deloitte Haskins & Sells LLP.
Screening committees under anti-profiteering clause would be set up at state and central levels in 15 days. Jaitley reiterated that though the state-level screening committees will refer cases of profiteering by the industry to the central standing committee and the anti-profiteering mechanism will start working, the idea will be to use it only as a deterrent. However, analysts were still sceptical of the taxman dictating how the industry should pass on input tax credit and/or lower GST rate to consumers.
“It must be left to the companies how they will pass on the GST benefits to consumers,” Pratik Jain, partner and leader-indirect tax, PwC India said. He noted that businesses should have the option to transfer ITC benefits to consumers only after realising them. “Same is the case for the tractor industry, where rate on parts have been reduced from 28% to 18%,” he said. Officials said the controversial taxation structure of cab leasing services is likely to remain in its current form.