Introduction

The Goods & Services Tax Council (hereinafter ‘GSTC’) is putting in efforts to convert one of the most complicated GST Laws into just ‘Good & Simpler Tax’. The first step was taken on 21st July 2018, 28th GST Meeting, held in Vigyan Bhavan, New Delhi. The decisions may be put into three broad categories – Recommendations to simplify GST Laws, Simplified GST compliance regime and Rationalization of GST Rates. The current article deals with the Council’s latest call.

Recommendations made to simplify GST Laws – In Brief

The GSTC has made some amendments to the Central GST Act, 2017, Integrated GST Act, 2017, Union Territory GST Act, 2017 and the GST (Compensation to States) Act, 2017. Some recommendations are as follows:

• Composition Scheme – To increase the turnover limit for opting for composition scheme to Rs. 1.5 crore from Rs. 1 crore. Another one is allowing the composition dealers to supply services (other than restaurant services), up to a value not exceeding 10% of turnover in the preceding financial year or Rs. 5 lakhs, whichever is higher.
• Reverse Charge Mechanism & its applicability – To bring in certain specified goods and classes of registered persons.
• Multiple Registrations – Taxpayers may be allowed to opt for multiple registrations within a State or Union Territory.
• Ease of burden on E-Commerce Players – To get registration mandatorily only in case of those e-commerce players who are required to collect tax at source or TCS.
• Definition of Supply – To treat the following transactions as no supply or exempt from tax:
  • Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory.
  • Supply of warehoused goods before clearance for home consumption
  • High-Sea sales
• Input Tax Credit – To widen the input tax credit regime, such as:
  • More activities or transactions specified in the Schedule;
  • Motor vehicles having a seating capacity of more than thirteen (including the driver), vessels and aircraft;
  • Motor vehicles for transportation of money for or by a banking company or financial institution;
  • Services such as general insurance, repair, and maintenance of motor vehicles, vessels, and aircraft subject to availability of input credit;
  • Employers’ obligation to provide any goods or services to an employee;
  • Order of cross-utilization of the input tax credit is recommended to rationalize
• Withdrawal of liability of interest on default – To withdraw the liability on the recipient to pay interest on his failure of honoring the payment.
• Consolidated Credit and Debit Notes – To allow registered persons to issue consolidated credit and debit notes in respect of multiple invoices, as the case may be

Simplified GST compliance regime – In Brief

The much simpler version of GST Compliance compared has been approved It is as follows:

• The GSTC had approved of the ‘Simple GST Return Design’ and directed the Law Committee to finalize the return formats and requisite changes in the GST laws. In its latest meeting, the GSTC has approved of formats which are in line with the basic principles, such as ‘option of filing quarterly return with a monthly payment of tax by the small taxpayers’.
• Unlike current practice, the GSTC has recommended allowing taxpayers, excluding small taxpayers to file one monthly return instead of multiple returns. As reported, the simple return will have two features, one to report outward supplies and another to avail of Input Tax Credit based on invoices uploaded by the supplier.
• Compliance or NIL Returns by SMS – The GSTC has recommended providing an option of filing NIL returns by sending Short Message Service.
• Quarterly Compliance instead of monthly – The GSTC has approved of the quarterly filing of return for small taxpayers having a turnover up to Rs. 5 crores but as an optional.
• Amendments to Invoice or its details – The GSTC has recommended allowing the filing of an ‘Amended Return’ with due payment. It is reported that around 93% of the taxpayers have a turnover of Rs. 5 cr. or less, hence, said ‘Simplified GST compliance’ would benefit a substantial amount of taxpayers.

Rationalization of GST Rates – In Brief

The GSTC has recommended certain exemptions, changes in GST rates, ITC eligibility criteria, rationalization of rates on both goods and services. They are as follows:

On Goods

The GSTC in its effort to rationalize tax rates on goods has reduced tax rates on 191 goods, leaving just 35 items in the highest tax bracket, i.e., 28 percent slab. There were around 226 goods when GST was implemented in July 2017.

W.e.f. 27th July 2018, 35 goods including cement, automobile parts and equipment, tyres, motor vehicles, yachts, aircraft, aerated drinks, betting and sin items like tobacco, cigarettes and pan masala will be within the bracket of highest tax bracket. From the decision of lowering tax rates on 50 plus product categories, it would affect or benefit more than 100 products to name a few, fridge, washing machine, small TV sets, leather items will become cheaper. The GSTC has also lowered the tax rates on alternative fuels such as tax rate on lithium-ion batteries to 18 per cent from 28 percent, fuel cell vehicles to 12 percent from 28 percent, ethanol for blending with petrol to 5 percent from 18 and rates on bio-fuel pellets has been fixed at 5 per cent, allowing Input Tax Credit on man-made fabric equivalent to 7 percent which will turn or cut effective rate on man-made or synthetic fabric to 5 percent from 12 percent earlier and as a major step, sanitary napkins have been fully exempted from the GST; earlier there was a 12% levy.

On Services

• Farming or agriculture sector – Recommended to exempt:
  • services by way of artificial insemination of livestock other than horses
  • warehousing of minor forest produce
  • works of installation and commissioning undertaken by DISCOMS or electricity distribution companies for extending electricity distribution network up to the tube well of the farmer/agriculturalist for agricultural use
  • services provided by FSSAI to food business operators
• Social Sector:
  • services provided by Coal Mines Provident Fund Organisation to the PF subscribers
  • services by an old age home run by State/Central Government or by a body registered under section 12AA of Income-tax Act to its residents aged 60 years or more.
  • an administrative fee collected by National Pension System Trust.
  • services provided by an unincorporated body or a non-profit entity registered under any law for the time being in force, engaged in activities relating to the welfare of industrial or agricultural labour or farmer; or for the promotion of trade, commerce, industry, etc., against consideration in the form of membership fee up to an amount of one thousand rupees per member per year.
• Education, Banking, Hotel & Transport Sector – Recommended to reduce or exempt:
  • Rate of GST from 18% to 5% on a supply only of e-books for which print version exists.
  • Reinsurance Services provided to specified Insurance Schemes
  • GST rate slabs on accommodation service, based on transaction value instead of declared tariff.
  • GST rate of 12% with full ITC under forwarding charge for composite supply of multi-modal transportation

National Anti-profiteering Authority & its Role – Post 27th July 2018

With the latest tax rate cuts, it is expected that the NAA will turn the heat on other sectors