The Council is also likely to approve a clarificatory circular, saying that salary payment to staff employed at the head office of a firm would attract GST if they are involved in providing administrative, accounting and IT services to branch offices located in other states.
The 37th GST Council meeting to be held at Goa on Friday is unlikely to approve any tax cuts that could have substantial revenue implications. The Council would consider the analysis conducted by the fitment committee on implications of rate cuts on automobiles, biscuits and cement, among other items.
According to the fitment committee analysis, GST rate cut on automobile would lead to Rs 30,000-crore revenue loss annually along with an additional impact on cess collection by about Rs 24,000 crore. Similarly, cement and biscuits have large revenue implication and the committee’s report is likely to submit that rate reduction alone might not spur sales.
However, sources said the Council might consider cutting rates on outdoor catering which currently attracts 18% tax. Similarly, a proposal to streamline GST on lottery is also likely to find favour as currently, there is a dual rate on state lottery sold with the state (12%) and those sold outside (28%).
The Council is also likely to approve a clarificatory circular, saying that salary payment to staff employed at the head office of a firm would attract GST if they are involved in providing administrative, accounting and IT services to branch offices located in other states. This would confirm the ruling passed by the Karnataka AAR last year.
However, experts said such a circular could annoy the industry as firms haven’t factored in the taxability of employees’ salary. This could result in a spate of tax notices demanding that GST be paid on past transactions, an official said.
Further, it has also been proposed to exempt taxpayers with less than Rs 2-crore turnover from filing annual returns. The Council has had to extend the due date at least thrice to November 30 after very few taxpayers managed to file the returns by the earlier deadline of August 31. These returns are crucial to detect evasion in the self-declared monthly GSTR-3B forms.
The Council would also review the timelines for implementing the new return filing system that is expected to be made mandatory for taxpayers with above Rs 5-crore turnover from October and from January next year for taxpayers that are required to only file quarterly returns.
Additionally, the Council would consider and likely approve the recommendations of a panel of officials that has laid out risk parameters for identifying sources of fake invoices. As FE reported earlier, the government stands to plug leakage by as much as Rs 50,000 crore annually if these checks are put in place.
Sources said ‘risky entities’ could be identified by “following the footprints” of the companies and persons involved, but refused to elaborate for obvious reasons. Further, a database could be created of frauds in the erstwhile indirect tax regime to identify potential wrongdoers, the sources said. The new sophisticated risk profiling would also help the taxman identify entities that have evaded detection thus far.
Sources said the Council would take up another recommendation for incorporating e-way bill with FASTag field in addition to the vehicle registration number. The committee has recommended integration of e-way bill system with FASTag — a radio frequency identification technology (RFID) of NHAI, which allows vehicle to move seamlessly through toll plazas while making payments electronically through a tag affixed on the windscreen.
The recommendations said this would eliminate the cumbersome process of tax officials inspecting vehicles on the highway, and improve supply chain management, and eliminate the need for affixing a separate tag.