Rate cuts and clarifications for about 29 goods and 54 categories of services along with a convergence towards simplification of returns were the major takeaways from the 25th meeting of the goods and services tax (GST) Council held on Thursday. A decision on the introduction of Reverse Charge Mechanism (RCM) only for composition scheme dealers was also taken at the meeting.
Rate cuts on items such as used medium and large cars, diamonds and precious stones, biodiesel buses for use in public transport and packaged water in 20 litre bottles, alongside a rationalisation for 54 categories of services that will come into effect from January 25, will result in a revenue loss of about Rs 1,000-1,200 crore a year, a senior government official said.
Except for the rate cuts, other changes would require amendments in the GST-related laws that are likely to be taken up in the later half of the upcoming Budget session of Parliament. The Council gave its in-principle approval for about 40-50 “minor” legal changes in the GST-related laws that would be finalised and circulated among the Council members before the next meeting, which will be held via videoconferencing, officials said.
Finance minister Arun Jaitley said that the main agenda of the meeting was simplification of GST returns and the Council converged towards a presentation given by former UIDAI Chairman Nandan Nilekani, which suggests moving towards a system of filing the summary GSTR-3B returns along with uploading of suppliers invoices (as is currently done through GSTR-1 return). “The process behind these proposals was that GSTR-3B return filing should continue for now and the suppliers should upload their invoices … if there’s any discrepancy, at a later stage, they can be asked to explain and this would be a deterrent in the first instance,” Jaitley told reporters after the meeting.
He further said, “It was finally culminating in the direction that initially there will be a GSTR-3B return and there would suppliers’ invoices, which could be adequate. This would be a simple process … The Council felt that the ministers’ group, IT committee and Nandan Nilekani should discuss it further and formalise it and then it would be circulated to ministers in writing and we’ll have the 26th meeting via videoconferencing and try and approve this alternative system.”
As per the presentation given by Nilekani, two options for return filing — workflow driven and system matching through simultaneous upload of sales/purchase data — were detailed in the meeting. As per the workflow driven option (option 1), the provisional credit would be provided to the buyer based on seller’s data. The other option (option 2) of ‘system matching’ provides for simultaneous upload of sales/purchase data wherein the buyer would be able to avail input tax credit on filing of purchase details at invoice level, a system which was followed in the earlier VAT regime before the July 1 rollout of GST.
Both options involve matching of returns by taxpayers and filing of one return. As per the presentation, the workflow option proposes the autodrafted purchase data to be compared with the purchase register, while in the system matching option, taxpayer has to match only data under the mismatch category.
“Buyer is dependent on the supplier for his upload of purchase data in the workflow option. In the system matching option, buyer won’t be dependent on supplier to upload, but is dependent on supplier for correction. The mismatch percentage is estimated to be lower in the first option but there is no empirical evidence as such a model does not exist,” an official said, adding that the presentation cited that the first option would be more appealing to large taxpayers having large number of invoices, while option-2 will be more appealing to small and medium sized enterprises.
The first option was discussed with the Law Committee and representatives of four states — Karnataka, Gujarat, Andhra Pradesh and Maharashtra — on January 4, who favoured the second option as it was felt that under option 1, current GSTR-2 and -3 were joined together and GSTR-1 was replaced by invoice upload which would be like having old wine in new bottle, a state finance minister said. Both options were later discussed in the officers meeting held on January 11 and the officers’ committee was also inclined towards the second option over the first option, he said.
The Council will finalise the return filing process in the next meeting, Jaitley said. “Today it was discussed but not finally approved but it’s moving in that direction,” he said.
Tax analysts welcomed the move towards returns simplification. Abhishek Jain, tax partner, EY said, “It seems that the GST Council may in their next meeting decide requirement of filing only two returns i.e. GSTR 3B and GSTR 1 and may do away with GSTR 2 and GSTR 3. GSTR 1 will provide the Government all the invoice level details of the suppliers basis which the government can verify the credit availed by the purchasing tax payer. If the Government notices that any purchasing taxpayer has taken credit more than what is reflected in its name as per the invoices uploaded by its suppliers in their GSTR 1; the Government may undertake an audit and seek an explanation. If implemented, this may simplify the GST return filing process but at the same time keep any possible revenue evasion in check.”
Anti-profiteering: Govt to accept Rs 119 crore from HUL
New Delhi: The government will provisionally accept Rs 119 crore offered by FMCG firm Hindustan Unilever Ltd in relation to the anti-profiteering notice sent to the company for not passing on the benefits of lower GST rates to the consumers. “The matter is before the anti-profiteering authority, which will accept this amount provisionally subject to the legal process,” finance minister Arun Jaitley said on Thursday. The firm, while declaring its December quarter results on Wednesday, said that it had suo moto offered to set aside Rs 119 crore towards the consumer welfare fund as provided under the GST law since it was unable to pass on the benefits on some of the stocks in pipeline after the GST rate cuts effective from Nov 15.
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