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.
