Taxpayers may look forward to more concessions as the Goods and Service Tax (GST) Council meets at Guwahati on November 10. While more cuts in tax rates, especially for items under the highest 28% rate, are on the cards, a group of state finance ministers (GoM) set up by the Council has recommended that all taxpayers be allowed the leeway of filing the detailed returns on a quarterly — instead of monthly — basis while they continue to make the tax payments every month. Also, if the recommendations of the GoM, which met here on Sunday, are accepted by the Council, all restaurants will pay taxes at 12%; currently, air conditioned restaurants pay GST at 18% while the levy is 12% on non-air-conditioned ones. However, the uniform 12% rate will come with removal of the input tax credit (ITC) facility.
The Council will also have to take a call on the GoM’s view that hotel rooms with tariff above Rs 7,500 per night be taxed at 18%, instead of 28% now as this rate change has significant revenue implications. According to sources, the ministerial panel, headed by Assam’s finance minister Himanta Biswa Sarma, also decided to propose that the turnover threshold for taxpayers to opt for the benign composition scheme be raised further to Rs 1.5 crore from Rs 1 crore fixed in the Council’s meeting here on October 6 and a cut in the tax rates under the scheme for manufacturers and restaurants — to 1% and 0.5% of turnover from 2% and 5%, respectively at present.
Traders under the composition scheme will continue to pay the tax at 1% of turnover. Dealers having inter-state supplies could be allowed to choose the composition scheme, Sushil Kumar Modi, Bihar’s deputy chief minister and a member of the GoM told FE. He added that the GoM was working out a mechanism to enure that revenue-sharing among states won’t be distorted as a result of this relaxation (which is not exactly in line with the principle of destination-based tax). The GoM, the source said, might also suggest that maximum retail price (MRP) labels on product packs include break-up of the central GST and state GST amounts, to thwart the wrong practice among several businesses to levy GST over and above MRPs. At its meeting earlier this month, the GST Council had allowed all taxpayers above Rs 1.5 crore turnover file quarterly · instead of monthly · returns, a move that shifted 90% of the non-composition GST registrants to the easier system. The GoM is learnt to have decided that this facility must be made available to all taxpayers.
While all taxpayers adopt the practice of filing quarterly returns for inward supplies (GSTR-2), outward supplies (GSTR-1), they will have to file the summary returns (GSTR 3B) and pay taxes every month. Comprehensive returns are needed for the revenue department to do the invoices-matching, but taxpayers have been finding the current frequency of these returns cumbersome. Only 12 lakh taxpayers have filed GSTR-2 for July as compared with 45 lakh who filed GSTR-1 before the October 10 deadline– with only two more days to go for the deadline for filing the latter, the vast gap between the two would mean that a large number of taxpayers would struggle to claim input tax credits.
“There is a need to further simplify the GST returns-filing processes and composition requirements to improve the acceptability of GST amongst small businesses. Enhancing the composition limits, reducing the number of returns, reducing the rates etc could lead to significant improvements in the compliance by small businesses. It is necessary to reduce the overall compliance burden of all businesses as they were accustomed to much lower levels of compliance in the past, “said M S Mani, partner-GST, Deloitte India.
Currently, over 15.5 lakh out of over 95 lakh taxpayers registered for GST are under the composition scheme, which provides for easier compliance and lower tax rates. However, the government has said that it had expected a lot more assesses to register for the scheme. The number of composition dealers had jumped from 10 lakh to 15.5 lakh after the Council had raised the turnover threshold to Rs 1 crore from `75 lakh earlier earlier this month. The Council had also extended the last date to opt for composition scheme to March 31 next year.
After a marathon 5-hour meeting at Assam Bhawan here, the GoM also decided to ask the Council ‘s designated committee to simplify procedures involved in returns filings, HSN codes and invoice matching. “Allowing quarterly returns for all taxpayers is an excellent move as monthly filing of comprehensive returns puts enormous burden on small taxpayers. All taxpayers could be allowed to file GSTR-3B which will ensure monthly revenue to the government while quarterly comprehensive filings will ensure that invoice matching can be done,” an analyst said, on condition of anonymity.