In A First, GST Council Votes For Uniform Tax On Lotteries
The GST Council voted for the first time since its inception to impose uniform tax on lotteries.
Accordingly, state-run lotteries and state-authorised lotteries—or those operated by private players—will be taxed on a par at 28 percent, Revenue Secretary Ajay Bhushan Pandey told reporters in Delhi today. The new rates will come into effect from March 1, 2020. State-run and private lotteries were earlier taxed at 12 percent and 28 percent, repectively.
Every attempt was made to keep the set tradition of not resorting to a vote, Finance Minister Nirmala Sitharaman said at a press conference in response to a query on why the council resorted to voting. The GST Council was reminded that rules allow (voting), but the tradition (itself) isn’t part of the rules, and rules govern the running of the house, Sitharaman said. “Voting was done on the request of one GST Council member.”
21 members voted for a uniform rate, while seven voted against it and three members abstained from voting, Goutham Reddy, minister for industries, commerce and information technology of Andhra Pradesh, told reporters.
That’s also in line with the suggestion of a group of ministers, which was set up in January to iron out differences between states on having different tax rates on lotteries.
Punjab Finance Minister Manpreet Singh Badal, however, told BloombergQuint that voting was the result of ego clashes between council members, refusing to elaborate.
The GST Council has also exempted upfront amount payable for long-term leasing of industrial and financial infrastructure plots by an entity owned 20 percent or more by central or state governments from Jan. 1, 2020. Such exemption, at present, is given to entities that are 50 percent or more owned by the government.
The council also decided to impose a uniform rate of 18 percent for woven or non-woven bags and sacks of polyethylene, including flexible intermediate bulk containers—industrial containers made of flexible fabric for storing and transporting sand and fertiliser.
It’s good that GST rates have been left unchanged as frequent alterations create difficulties for businesses, said MS Mani, a partner at Deloitte India.
A presentation was made to the GST Council on revenue, GST rate structure and compensation given to states. The presentation explained measures to encourage voluntary compliance, expanding tax base, improving return filing and tax collection and rate rationalisation, the Ministry of Finance said in a statement.
The revenue position that was shown to us was worse than expected, Badal said.
The central government won’t have appropriate funds to compensate states after February, West Bengal Finance Minister Amit Mitra told reporters.
The GST revenue has started declining, resulting in increased compensation for losses to states. That has led to deferment of payments to states due to inadequate funds from the compensation cess fund.
Delay in compensation to states is as good as a debt default, Badal said.
Input Tax Credit Restricted
The GST Council has decided to restrict availing of input tax credit to 10 percent of the eligible credit for businesses if invoices aren’t uploaded by the taxpayer’s suppliers in GSTR-2A, or purchase-related tax return.
Last month, the government had amended rules by limiting input tax credit to 20 percent of the eligible amount for invoices. Earlier taxpayers could avail input tax credit for invoices that haven’t been uploaded by the suppliers in their GSTR-1 or sales returns.
This has been done to block fraudulent availing of input tax credit in certain situations, according to the statement.
It’s imperative for businesses to ensure timely credit matching, and follow-up with vendors so that they upload their sales invoices, said Abhishek Jain, a partner at EY India. Only then businesses will be able to claim their full input tax credit, he said.
“Reduction in the limit from 20 percent to 10 percent for unreconciled credit is likely to impact the working capital for many dealers,” said Harpreet Singh, partner at KPMG in India. This could pose another challenge in the already turbulent times, Singh said.
The GST Council has also extended the last date for filing of annual returns GSTR-9 and GSTR-9C for 2017-18 to Jan. 31, 2020, from Dec 31, 2019. It has also decided to waive late fees for filing GSTR1 from July 2017 to November 2019 if all returns are filed by Jan. 10, 2020.
It has also been decided to constitute grievance redressal committees at the state level that will have state and central GST officers along with representatives from trade and industry, the statement said, adding that the committee will address grievances of taxpayers at the state level.