Customers browse items at a wholesale store selling sunglasses near Mangaldas Market in Mumbai, India. A Goods and Services Tax (GST) for India will in effect create one of the world’s biggest free trade areas. (Photographer: Dhiraj Singh/Bloomberg)

GST Council Meeting: Rate Revisions, Law Amendments, Simplification Of Returns On Agenda 

Revision of goods and services tax rates on a few items, about 46 amendments in the GST law, and simplification of returns will be considered in the GST Council’s meeting on Saturday.

The panel of finance ministers will discuss reducing rates on lithium-ion batteries and refrigeration equipment from 28 percent to 18 percent, lowering tax on ethanol from 18 percent to 12 percent and exempting sanitary napkins from GST, according to a senior government official.

Krishan Arora, indirect tax partner at Grant Thornton India, said reduction in GST rates should be done on a case-to-case basis considering the revenue impact to the state and central governments. “While exempting certain essential items from GST, the council should also consider the resultant costs arising due to credit blockages and inverted duty structure situation, if any.”

If a final product is exempted from GST, the manufacturer cannot claim credit for inputs used for making it, which in turn becomes a cost.

Inclusion of natural gas and aviation turbine fuel under the new indirect tax regime may not be taken up for discussion in the meeting, the official quoted above said. Although inclusion of these two items under GST finds no mention in the meeting’s agenda, it could be discussed by the permission of the chairman of the GST Council, the official said. However, no decision is likely to be taken due to opposition from states, he said.

Amendments

The council will also give its approval to a series of amendments made in GST rules. These include increasing the threshold of availing the composition scheme to Rs 1.5 crore from Rs 1 crore, modifying the reverse charge mechanism—that asks the buyer to pay tax if goods are procured from an unregistered dealer—and allow issuing one credit or debit note for multiple invoices compared to issuing one for every invoice. A debit note is issued by a vendor to inform the buyer of debt obligations, while a credit note is issued to state a certain amount is credited to the buyer’s account.

This will be a major relaxation for fast-moving consumer goods and pharmaceutical industries where multiple levels of credit notes or discounts are issued, tax consultancy PwC India wrote in a note.

New Returns Framework

The council will also give approval to the new return filing framework that requires taxpayers to file only one GST return in a month.

The council is also going to discuss recommendations of sub-committees constituted to suggest a way forward for applicability of a sugar cess, incentivising digital payments and reverse charge mechanism. The body will also consider recommendations given by a committee set up to:

  • Suggest measures for creating a seamless road transport connectivity post implementation of GST.
  • Taxation on lottery.
  • Distribution of unutilised Integrated GST between the central and state governments.

The 28th meeting of the GST Council would be the first that will not be chaired by Arun Jaitley. Since he underwent a kidney transplant surgery, Piyush Goyal has given the additional charge of the Ministry of Finance, making him the chair of the council. Jaitley, however, may attend the meeting through video conferencing as a special invitee.