Why in news?
The GST Council, in its 25th meeting held recently, recommended many relief measures and clarifications on issues relating to GST.
What are the highlights?
- Simplification of return filing - The Council made serious discussions on moving towards one return form but a final decision in this regard is pending.
- The plan seeks to do away with three forms — GSTR1, GSTR2 and GSTR3.
- It would be replaced with GSTR3B initially along with the uploading of a supply invoice.
- Accordingly, the monthly self-declaration on details of outward and inward supplies filed by a registered dealer will continue.
- The filing of a return would be annually or whatever frequency is decided upon.
- Taxes can be deposited on the basis of the invoice.
- However, if there is any mismatch between the buyer and seller invoices, an explanation can be sought.
- It will work as a deterrent against evasion that the invoices must match the return filings.
- E-way bill - With the trial run of the e-way bill system taking off recently, the government committed to the Feb 1 rollout across the country.
- With sole reliance on unilateral declarations and the resultant low GST collections, E-way bill is expected to be a significant anti-evasion measure.
- Tax rates - The Council cut rates on 83 employment-oriented goods and services.
- This was based on recommendations of the fitment committee.
- The new rate cuts are assessed to hit the exchequer by Rs 10-12 billion annually.
- Composition Scheme - The low proportion of collections under the scheme indicates poor response as well as large evasions.
- Most of the people who have registered have a declared income of less than Rs. 20 lakh a year, suspectedly under-declarations.
- To plug the loopholes, the Council is thinking of reverse-charge mechanism (RCM) under the composition scheme.
- Unlike the usual practice of sellers depositing the tax to the government, the buyer does so under the RCM.
- The reverse-charge levy on purchase from unregistered businesses could come back for composition dealers, in turn plugging possible tax leakage.
- IGST - The council took note of large amount of Integrated GST (IGST) credit lying unclaimed in the form of IGST collections.
- To ease the flow of funds for both the Centre and states, the Council decided to distribute IGST of Rs. 35,000 crore equally between the Centre and states.
- This will ease the indirect tax position of the centre and the states which is reportedly very weak.
- Handicrafts - The council approved a definition for handicrafts and the designation of 40 items as handicrafts.
- These would now be examined by the fitment committee.
- The council also rationalised the rates on 29 handicrafts items to zero percent.
- This will certainly increase the exports and competitiveness in international markets which in turn will boost the economy.
- This will have a minor impact on revenues, but is potential of boosting job growth.
- GST revenue - The figures on falling GST revenue so far are on voluntary compliance without any anti evasion measures.
- It was thus expressed that with the anti evasion measures coming into place, the revenue will pick up.
- While GST collections have been coming down, the growth in direct tax collection which is ahead of target is encouraging.
Source: Economic Times, Business Standard
Quick Fact
Fitment Committee
- The rate fitment committee comprises of tax officials of the central and state governments.
- Its task is to evolve a principle and an appropriate methodology to determine rates for various supplies under GST.
