Highlighting the numerous glitches in the GST Network — the IT backbone of the Goods and Services Tax (GST) regime — several states at the 21st GST Council meeting on Saturday conveyed nervousness about the revenue position following the switch to the new tax system. At a briefing after the meeting, Finance Minister Arun Jaitley said the glitches were “transient challenges”, and a committee had been appointed to resolve GSTN-related issues. He also announced an extension of deadlines for filing GST returns.
The Council decided to levy an additional cess of 2 per cent on mid-sized cars, 5 per cent on large cars, and 7 per cent on SUVs, along with lowering tax rates on 40 items, including idli/dosa batter, raincoats, rubberband and dhoop batti.
“Reviewed the functioning of GSTN, which on 2-3 occasions got overloaded. These are transient challenges and glitches in technology. The Council has decided to appoint a committee to interact with GSTN for smooth transition,” Jaitley told reporters.
“Since the work is huge, the period of filing of returns has been extended. The GST Council has decided to extend the time to October 10 from September 10, so that there is liberal time for assesses to file return,” he said.
West Bengal Finance Minister Amit Mitra said, “GSTN has major problems. We had much discussions and all that has to be settled, and a committee of ministers has been formed along with a committee of officers. Routinely it will go after it (glitches). Small and medium enterprises are suffering today, this has to be corrected.”
The liquidity issues being faced by states were transitional, Jaitley said. “IGST is preserved and as and when CGST/SGST liability arises, it will keep getting converted as tax payments.” The issue has been more in the first month, and will go down gradually in second and third months, he added.
A senior government official said that out of the Rs 47,469 crore collected as IGST in July, about Rs 10,000 crore have been distributed between the states (around Rs 3,000 crore) and Centre (around Rs 7,000 crore).
It is learnt that to smoothen liquidity flow to states, Jammu & Kashmir Finance Minister Haseeb Drabu suggested parking of the IGST credit with the Reserve Bank of India, so that states could earn interest on it until the time of actual disbursement.
“States such as Punjab and J&K are facing a problem with their revenue. J&K has gone for the first time into a special overdraft facility. There is a need for a transitional arrangement for liquidity management. For that, existing IGST credits need to be leveraged and the way it was suggested was to put it with RBI,” said one finance minister.
However, Jaitley, when asked about the proposal, said that since IGST credit belongs to assessees, who will use it for CGST/SGST payments, it cannot be diverted for other purposes.
Not only the opposition-ruled states, BJP-ruled states, too, admitted to a sense of nervousness regarding their revenue position and GSTN glitches at the meeting, said a finance minister who did not wish to be named.
Also, on GST returns, the Council decided to extend the deadline for GSTR-1 from September 10 to October 10. The facility of GSTR-3B, the return for recording summary of transactions, has also been extended for four more months, until December, Revenue Secretary Hasmukh Adhia said.
“For GSTR-1, 2, 3, we are giving a long rope and we are staggering the return filing date for July,” Adhia said. “Companies with turnover of over Rs 100 crore, the last date for filing GSTR-1 will be October 3. For the rest, it will be October 10,” Adhia added.
GSTR-2 for July will have to be filed by October 31, and GSTR-3 by November 10. Dates of GSTR 1, 2, 3 return filing for month of August will be informed later.
The Council, headed by Jaitley, decided not to levy any additional tax on petrol and diesel cars of up to 1200 cc engine capacity, and on hybrid cars. The date of implementation of the additional cess on cars will be notified later.
Under GST, cars attract the top tax rate of 28 per cent. A cess of 1 per cent to 15 per cent was decided to be levied on top of this for the creation of a corpus to compensate states for any loss of revenue from implementation of GST. Last week, an ordinance was promulgated to enable a hike in the maximum limit of cess on certain categories of cars to 25 per cent from 15 per cent, and the Council, therefore, in its Saturday meeting looked into the quantum of hike.
To deal with businesses that are deregistering their brands post-GST to avoid taxes, the panel decided that May 15, 2017, will be the cut-off date for consideration as a registered brand for the purpose of levy of GST, irrespective of whether the brand was subsequently deregistered. Unbranded food items are exempt from GST, whereas branded and packaged food items attract a 5 per cent rate. Some businesses were deregistering their brands, and selling under a corporate brand name, creating inequality of trade. “So we amended the rule,” Jaitley said. “If you fall in either of two categories you will pay 5 per cent tax — one, if on May 15, 2017, you had a registered trademark, you have to pay 5 per cent GST. Two, if you have a mark or a name on which you are entitled to maintain actionable claim of exclusivity, then you have to pay 5 per cent.”
Khadi fabric sold through KVIC stores would be exempt, he said, adding that inter-state sales where turnover is less than Rs 20 lakh, as well as artisans, will not need registration. A similar dispensation for certain categories of job work, excluding gold, has also been approved.
Overall GST collections have been robust, Jaitley said, with over 70 per cent of eligible taxpayers filing returns of about Rs 95,000 crore.