Talking Points: * Adoption of simpler system that will make compliance easy, * Proposal for the govt to have majority stake in GST Network, * Imposition of a cess on sugar to create a fund that will help mills clear cane dues.
As it meets on May 4 via video conferencing, the Goods and Services Tax Council will have many items on the agenda, including adoption of a simplified system, which will make compliance easy, without compromising on revenue for the government. It will also consider a proposal for the government to have majority stake in GST Network, the IT backbone for the new tax, and imposition of a cess on sugar to create a fund that will help mills clear cane dues owed to farmers.
Sources said the Council is keen on approving the new IT model for tax payment, credit disbursement and compliance monitoring (via a semi-automatic invoices-matching). A durable system that addresses the concerns of both the government and taxpayers has been hanging fire since September last year, when the Council had effectively suspended the original system. While the taxpayers are currently using the interim summary return to discharge their tax liabilities, the system lacks anti-evasion features.
Under a new model approved by a group of ministers earlier, taxpayer won’t have to file returns; the IT system will produce monthly returns based on supply data uploaded and inward supplies accepted.
The system will periodically generate a list of suppliers defaulting on tax payment and the taxman could focus on them to check evasion. The model has incorporated various features from the two systems proposed earlier — one by a committee of officials and another by Infosys chairman Nandan Nilekani — and is touted to be a ‘fusion model’.
Earlier this month, finance minister Arun Jaitley had asked the revenue department to examine the possibility of converting the GSTN into a firm promoted by the government. This has been a long-standing demand from several quarters, including NDA parliamentarians who have argued that sensitive data (which GSTN is handling) should be firmly under government control for safe usage.
Sources said the Council could even consider the government owning 100% in the company. Currently, five private financial institutions — HDFC, HDFC Bank, ICICI Bank, NSE Strategic Investment and LIC Housing Finance — hold 51% stake in GSTN, which was incorporated in 2013. The remaining 49% stake is with the Centre and the states.
The proposed sugar cess is proposed to finance the gap between the cane price mills can pay to farmers in accordance with a revenue-sharing formula recommended by the Rangarajan Committee and the benchmark rate — fair and remunerative price (FRP) — fixed by the central government.
As FE reported earlier, a cess of `1-1.50 per kg of sugar would be adequate to ensure farmers get their dues on time and mills are in much better shape as well. The food ministry had also written to the ministries of law and finance for advice if indeed such a cess could be levied.
Amid mounting cane arrears in states like Uttar Pradesh and Maharashtra ahead of the crucial general elections in 2019, a panel of ministers — comprising shipping and road transport minister Nitin Gadkari, food minister Ram Vilas Paswan and petroleum minister Dharmendra Pradhan — has also zeroed in on proposals such as a production-linked subsidy on cane and a reduction in the GST rate on ethanol (a cane by-product) from the current 18%.
The GST Council’s 27th meeting is being held via video-conferencing due to concerns over Jaitley’s health.