March 12, 2020 6:03:05 am
Rate rationalisation for mobiles, textiles, footwear, fertilizers to correct inverted rate structure, compensation cess shortfall to pay to states, and compliance-related measures are expected to be the key issues to be taken up for discussion during the 39th Goods and Services Tax (GST) Council meeting scheduled for Saturday.
Though revenue shortfall and delayed compensation payments to states are expected to dominate the meeting, apart from correcting the inverted structure, any major rate increase either across tax slabs or for cess is unlikely to be formalised, given the concerns about the overall economic slowdown, officials said.
Inverted duty structure for many items such as mobile phones, man-made yarns, and fibers, footwear as of now attract a lower rate on the final product and a higher rate on the inputs, creating a need for payments of input tax credit (ITC) refund. Over Rs, 5,000 crores has been claimed as ITC refund from the mobile industry since July 2017 GST rollout, with cellular phones being taxed at 12 percent GST slab, while its parts are in 18 percent and 28 percent slabs. Rs 6,000 crore have been claimed as an ITC refund on fertilizers since the GST rollout.
The committee of officers set up to suggest ways to augment revenue had earlier suggested several measures to remove anomalies such as inverted rate structure, which causes an annual revenue loss of Rs 20,000 crore.
“Some items for which inverted duty structure is creating an issue, their rate change will be taken up in the meeting. But other than that, no major rate change is anticipated. States are aware of the compensation cess shortfall situation and the delay in compensation payments, but there is very less room for tweaking the cess rates since they are already quite high and hiking cess rates further may not be feasible amid the overall economic slowdown,” a state government official said.
Central government officials maintain that the compensation payment will be met out of the cess collected in the compensation fund, a point which has already been stressed upon in the Budget 2020-21. The point was reiterated by central government officials at the third national level meeting of GST officers from states and Centre held on Friday last week.
Finance Minister Nirmala Sitharaman, while presenting the Union Budget in February, had said transfers to the compensation fund would be limited only to collection by way of GST compensation cess.
States are already facing revenue constraints in view of the delayed compensation payments under the indirect tax regime. In the previous GST Council meeting held in December, states had strongly raised their concerns about the revenue shortfall, but it was decided that changing slabs and rates will be a knee-jerk reaction and rather the Council should opt for plugging loopholes in GST structure for augmenting revenues.
GST Council in its meeting on Saturday is also expected to take up further input tax credit restrictions, especially for new companies. Some other measures which are in the proposal for the meeting include an extension of the deadline for filing the summary GSTR-3B return for January till March end as the issue of levy of interest on delayed GST payment will come up for discussion.
Moreover, due to regular technical glitches, Infosys has been asked to make a presentation in the meeting and the Council is likely to defer the new return filing system from the earlier proposed date of April 1. Also, mandatory generation of e-invoice for business-to-business (B2B) transactions for businesses with a turnover of over Rs 100 crore is likely to be deferred by three months till July 1.
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