Concerned over a trend of falling revenue, the Goods and Services Tax (GST) Council on Thursday resolved to bring in a clutch of anti-evasion measures but refrained from resuming the suspended system of three comprehensive returns, in order not to add to the compliance burden the taxpayers are vexed about. It also reduced the tax rates on as many as 29 goods, including old and used cars, SUVs and other vehicles, drinking water in 20-litre bottles, LPG supplied to households by private distributors, bio-diesel, bio-fuel buses, a clutch of pesticides and diamonds & precious stones. Also, the taxes have been cut/waived or the input tax credit system tweaked for 53 services, as a result of which legal services to government and work contracts to the public sector could become cheaper, along with viability gap funding of airports built under regional connectivity scheme, certain reinsurance services etc. The new rates will take effect from January 25. With anti-evasion steps on top of the Council’s mind, compliance with the e-way bill system, meant to track transport of goods worth over Rs 50,000, will be a must for inter-state commerce starting February 1 (15 states will have the system running by then for transport within their states as well).
While a proposal to merge the three detailed forms (GSTR 1, 2 and 3) has been put in abeyance, the Council veered closer to a proposal under which businesses could continue to file summary return of GSTR 3B and pay tax/claim credits on the basis of self-assessment even after the current end date of March 31. Although a final decision will be taken by the Council as it holds a video conference shortly, finance minister Arun Jaitley said an alternative return filing system — where supplier invoices co-exist with GST-3B — suggested by Infosys chairman Nandan Nilekani was the favoured one. The Council’s group of ministers on IT and GST Network would discuss and finalise the mechanism, the minister added.
Among the anti-evasion measures being mulled by the council is introduction of the reverse charge levy on purchase from unregistered businesses for composition dealers. The proposal, which requires an amendment to the law, is being considered in the wake of the fact that a measly `307 crore has been collected from 7 lakh composition dealers in the July-September quarter. Under-reporting of revenue by these dealers — which is evident from the fact that most of tem claim turnover below the GST threshold of Rs 20 lakh — are a matter of concern, Jaitley said. Also, to improve the revenue flows — December GST collections are believed to be Rs 3,000 crore less than the November revenue which was the lowest — the Council decided to allocate on a provisional basis integrated GST credits of Rs 35,000 crore among the Centre and states. While the floating IGST credits are a whopping Rs 1.35 lakh crore, the immediate disbursal of Rs 35,000 crore is expected to help the Centre which is fearing a shortfall in indirect tax receipts ahead of the Union Budget and many states which are experiencing revenue squeeze.
Pratik Jain, leader-indirect tax at PwC, said: “While simplification and merging multiple monthly returns into a single return would be good in concept, it needs to be ensured that invoice level details are made available to the buyers on a real time basis so that remedial action can be taken without waiting for assessment or audit.” He added that rate rationalisation might continue over the next few months, this process, particularly “with respect to 28% category, which should only be for select luxury and demerit products.” In many cases like works contract services or used motor vehicles the reduction of rate might have been due to restriction of input credit, Jain noted, calling for further liberalisation of input credit regime.
“Reduction of GST rate on E&P activities, metro and railway projects, benefit of lower GST rate to sub-contractors where main-contractor is entitled to lower GST rate is likely to ease the pressure on many infrastructure projects,” opined Priyajit Ghosh, partner-indirect tax, KPMG in India.