Vendors wait for customers at wholesale stalls selling fruit inside Crawford Market in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Law Amendments, Rate Revisions To Top GST Council Meet Agenda

In its last meeting ahead of the Union Budget 2018-19, the Goods and Services Tax Council will meet to discuss a slew of changes in the GST Law along with some tweaks in the tax rates.

The apex decision making body of the new indirect tax regime may also take up changes to simplify the composition scheme further and finalise filing of a single return under the new indirect tax regime from next financial year, two government officials told BloombergQuint.

Widening The Composition Scheme

The Council, in its previous meeting had decided to to include certain taxpayers who provide some services along with the sale of goods under the composition scheme which allows small businesses to pay taxes at a lower rate without getting any input tax credits. As per the changes decided by the Council, businesses which sell goods and provide allied services such maintenance of equipments, and whose turnover from the services business is either 10 percent of the turnover from sale of goods or Rs 5 lakh, whichever is lower, can now avail the scheme. This would require amendments in the GST Law which the Council will discuss in tomorrow’s meeting.

Job-works, currently treated as services, may be allowed to be a part of composition scheme, one of the official cited above said. But the Council is unlikely to make the scheme available for all service providers since that may result in significant loss of tax revenue for the government, he added.

Currently, the composition scheme can be availed by taxpayers with a turnover of Rs 1.5 crore. Manufacturers and traders availing the scheme pay 1 percent of their turnover as GST, while restaurant owners pay 5 percent of their turnover as tax.

Centralised Registration

The Council will also take up the Law Review Committee’s suggestion of centralised registration for banks, financial institutions and airlines which have a turnover of Rs 500 crore and are present in ten or more states, the second official quoted above said. Currently, such businesses have to register in every state where they are present.

Centralised registration and return filing for service companies will bring a lot of relief in terms of ease of compliance for the services sector, Abhishek Jain, an indirect tax partner at EY India told BloombergQuint.

“However, it will be important to see whether the states agree since it was not accepted by them at the time of GST rollout on the apprehension that they would lose control over these taxpayers," said Jain.

And even if states agree, “service companies may still have to maintain state wise records,” Sumit Lunker, an indirect tax partner at PwC India said.

Simplication Of GST Returns Filing

The Council is considering several options to simplify the GST returns filing process, include merging GSTR 1 and GSTR-3B by including additional tables in GSTR-1, the first official quoted above said.

If this happens, taxpayers will have to file just one return, he added. This will not require much changes in the system, and can will be implemented from the next financial year, the official said.

Matching of invoices to check evasion would be done by the system, and taxpayers will be questioned if their purchase and sale details do not match, he said.

Other option, according to the second official, is to consolidate GSTR-2 and GSTR-3. But he assured that if this proposal goes through, enough time would be given to taxpayers as they will have to change their systems.

Rate Revisions, Discussions On Real Estate Likely

Here are the other issues that the GST Council may consider:

  • Lowering tax rates on buses run on biodiesel, agricultural equipments, and inclusion of natural gas under GST
  • Rate on packaged drinking water would be brought done from 18 percent.
  • The GST rates on tools and implements applicable to drip irrigation would be brought down to popularise and propagate the drip irrigation in the country, Minister of State for Parliamentary Affairs, Water Resources, River Development and Ganga Rejuvenation, Arjun Ram Meghwal was quoted as saying in release by industry body PHD Chamber. GST rates on equipment and tools pertaining to drip irrigation currently attract 18 percent GST.
  • A presentation will be made on the contours of including real estate under the new indirect tax regime. This was the unfinished agenda in the last GST Council's meeting in Guwahati.

The Council will meet for the last time before the nationwide implementation of E-way bill mechanism. It is, therefore, expected to take stock of the preparedness before the e-way bill system is implemented. E-way bill mechanism would be rolled out countrywide for inter-state transfer of goods from Feb. 1, 2018.