Rates for 29 goods, 53 services will be amended with effect from Jan 25, 2018
Abhishek A Rastogi
A lot was yearned by the populace from the 25th GST Council meeting, as this was a significant event before the last full Budget of the current government. Cumbersome return rituals, causing major anguish for businesses, were expected to be bare-boned. Other measures such as rationalisation of input credit scheme, improvement of reverse charge provisions, subsumation of stamp duty under GST and inclusion of petroleum products were also anticipated. Amidst dwindling indirect tax collections, the government was expected to take measures for boosting revenue numbers. The GST Council followed a balanced approach between measures to avoid tax evasions and tax benefits to numerous supplies including the labour-intensive handicraft sector. Bringing cheer to different industries, rates for 29 goods and 53 services would be amended with effect from January 25, 2018. Rates have been altered, inter alia, for old or used cars, buses run on biofuels, sugar, biodiesel and pesticides, LPG supplied to domestic consumers, and diamonds and precious stones. Compensation cess has been removed on ambulance, old and used cars, and clarifications have been issued on LPG, polybutylene feed stocks, rail coach industry and coal rejects. Exemptions are proposed on legal services to government, admission to theme parks and water parks, and transportation of goods from India by air or ship (with a sunset clause till September 2018). Rates on services like works contract to the government, tailoring and transportation of petroleum are proposed to be reduced. This tweaking of rates before the Budget is a welcome move.
In terms of simplification of returns, GSTR-3B (the summary monthly return introduced as a temporary measure) is set to continue. Measures have been implemented on GSTN portal to ensure that people wishing to file nil returns can do so with just a click of a button. Taxable persons obtaining voluntary registrations or migrated taxpayers will be permitted to cancel registrations within the extended period. Hopes with respect to simplification of returns for the long term have not been completely dashed. Suppliers will be required to load invoices, and such invoices will be the basis for tax payments and credits claimed. Any mismatch in data would be required to be explained at a later stage. It is hoped that relief will be granted on this count at the next Council meeting to be held in 10 days over video-conferencing. The e-way bill mechanism for interstate movement of goods will be applicable from February 1, 2018. States have been given the freedom to choose the date for implementation of intrastate movement with an upper limit of June 1, 2018. In fact, 15 states will proactively implement the e-way bill provisions for intrastate transactions with effect from February 1, 2018. This is expected to curb tax evasion and improve GST collection, which has been a subject matter of debate over the last couple of months.
Few important policy changes have been agreed upon. Value of exempt supplies will not include the value of loans, deposits, etc, on which interest is earned. Earlier, in absence of any specific provision, the moot point was whether to reverse input tax credit in proportion to interest income earned as such income was exempt from GST. The CENVAT regime also contained provisions that excluded interest income from the scope of exempt services for the purposes of credit reversal. However, a lot more needs to be done for addressing legal issues such as taxability of inter-branch banking services when the place of supply is outside India, taxability of ocean freight, continuity of entertainment tax and area-based exemption-related benefits, and restriction on transitional credits. Each GST Council meeting gives new reasons to cheer and celebrate. It’s Christmas for businesses and citizens once again with loads of gifts on offer in the form of populist rate cuts and compliance simplification. The subsequent meetings should address the issues related to the petroleum and real estate sectors, in addition to the implementation of anti-profiteering measures to curb inflation. The journey so far has been a roller-coaster ride for more than a billion of us. With the pragmatic approach and the proactive thinking of the government and the GST Council, we may have bright sunny days before 2019.
Author is Partner, Khaitan & Co