GST Council to meet after a year on Sept 12; blocked credit, simpler compliance likely on agenda

In September last year, the GST Council undertook a significant rate rationalisation process under GST 2.0, bringing two broad slabs of 5% and 18% along with a special 40% rate for luxury goods.

While the agenda for the upcoming 57th meeting is yet to be finalised, the Council is also expected to discuss a uniform and simplified registration framework by states and Centre for businesses looking to register under the GST regime. Automatic processes and cancellations in GST registration as well as simpler compliance rules for documentation are also expected to be discussed by the Council.

Incidentally, the meeting of the Council, which is headed by the Union Finance Minister and has representatives of 28 states and three union territories, is being held in Delhi on the same day as the first day of the 18th BRICS Summit in the national capital.

Experts flag transition issues after GST 2.0 overhaul

Tax experts said the transition-related issues of GST 2.0 need to be discussed threadbare by the Council, especially cases involving the levy of compensation cess that is not levied in the revamped regime anymore on goods such as automobiles.

“The focus should now shift from incremental changes to improving the quality of the GST framework itself. Priorities include providing a mechanism to regularise legacy tax positions, particularly in online gaming, addressing genuine input tax credit hardships arising from supplier defaults, streamlining GST administration for large PAN-India businesses, resolving transitional issues around compensation cess, and laying down a phased roadmap for bringing petroleum products within the GST framework.

Equally important is reducing interpretational ambiguities that continue to drive avoidable litigation and compliance costs,” Manoj Mishra, Partner and Tax Controversy Management Leader, Grant Thornton Bharat, said.

Blocked input tax credit has also become a significant issue for several sectors especially if the inputs are in the form of services (which is taxed at 18%) and the output is in a lower tax slab of 5%.

While the GST overhaul reduced the rates on several cars and also did away with the compensation cess, dealers who had requisitioned the cars from manufacturers at the older rates had paid GST and cess on it, for which auto dealers’ association, Federation of Automobile Dealers Associations (FADA), had even approached the Supreme Court to get their dues worth Rs 2,500 crore.

In September last year, the GST Council undertook a significant rate rationalisation process under GST 2.0, bringing two broad slabs of 5% and 18% along with a special 40% rate for luxury goods.

Under the next-generation reforms for GST, small cars with engine capacity not exceeding 1,200 cc (petrol) and 1,500 cc (diesel) and with length not over 4 metre were decided to be taxed at 18% against 28% plus cess levy earlier. Bigger cars were moved to the 40% slab as against 28%. It continued with the compensation cess levy only for tobacco and related products that was later replaced by higher excise duty rates and a Health Security se National Security Cess.