The 23rd meeting of the GST Council in Guwahati last week brought sweeping changes in tax rates and eased compliance burden of the businesses, particularly on the smaller players.
In the biggest GST restructuring, the GST Council reduced tax rates on over 200 items, ranging from chewing gum to chocolates to beauty products, wigs and wrist watches. This move is expected to provide major relief to both consumers and businesses.
However, many feel that the decisions taken at Guwahati meet of the GST Council are only a step towards the kind of overhaul that the new tax regime requires. Much more is expected of the Narendra Modi government on GST front.
Here are some of the steps that the Modi government may consider in future to make GST more effective to the extent of making “good and simple tax”.
SIMPLER TAX STRUCTURE
Announcing the GST Council’s decision, Union Finance Minister Arun Jaitley had said, as many as 178 items of daily use were shifted from the top tax bracket of 28 per cent to 18 per cent, while a uniform 5 per cent tax was prescribed for all restaurants, both air-conditioned and non-AC.
With the latest rejig, the number of goods and services in the 28 per cent tax bracket has come down from 228 to just 50.
Many tax observers feel that the Guwahati streamlining was the first step towards removing the 28 per cent tax slab from the revamped taxation regime. The government may consider a simpler three-tier tax structure with GST rates of 5, 12 and 18 per cent.
EXPANDING SCOPE OF GST
Due to certain political and economic compulsions, certain items like petrol, diesel and other petroleum products, electricity, real estate and liquor have been kept out of the purview of the GST.
Keeping them outside GST regime not only means that the consumers are paying more taxes on these items but it also deprives businesses operating in these segments of the benefit of input tax credit. This is a loss for these businesses.
Further, the existing system for these businesses puts them at the mercy of the state government and their variable VAT regime. Demands have come out of the industry sectors like oil and gas saying that these should be brought under the ambit of GST regime.
QUARTERLY GST RETURN FILING
GST compliance has been a major problem area for businesses ever since the new taxation regime was rolled out with a gong at the stroke of midnight on July 1. After the latest GST revamp, the Council has exempted taxpayers from filing GSTR 2 and GSTR 3 till March 2018.
However, it falls short of the principal demand of the industry to allow quarterly GST returns filing for businesses. Currently businesses having less than Rs 1.5 crore turnover are allowed quarterly return filings. The industry is demanding similar concession for businesses revenue of more than Rs 1.5 crore.
At Guwahati, the GST Council remained silent on allowing for quarterly filings for all businesses. But, the GST Council may do well to consider the demand as the industry feels that existing regulations are not conducive for businesses. The government may consider its stand as and when the invoice matching concept kicks in after March 2018.
DOING AWAY MANDATORY E-WAY BILL
Despite the fact that India has more mobile phones than toilets, doing businesses and keeping electronic records of the same are difficult as handling trade online requires a different skill set than necessary for using internet or an app on mobile phones.
The industry, especially those in the rural areas and smaller cities, seem to be practical in demanding that the government should do away with e-way bill. This is an electronically generated document for movement of goods worth Rs 50,000 or more.
The government, too, looks sympathetic towards their concern as the implementation of e-way bill has been deferred till April 2018. But, experts are of the opinion that for a consumption tax like GST, there is no need for a check on movement of goods and hence e-way bills are redundant.
However, GST Council has maintained silence on the matter. But, the GST Network is running a pilot in Karnataka for e-way bill. The GSTN looks keen on expanding the same in other states.
This may not go down well with the industry, which considers it to be another technology mess in the business. If it is redundant, as experts say, the government may favour businesses by doing away with the condition altogether.
INPUT TAX CREDIT FOR COMPOSITION SCHEME
The concept of input tax credit has done away with the old practice of levying tax on tax. But, the existing rules don’t allow businesses availing composition schemes to claim input tax credit.
Many feel that this could be a dampener for many businesses availing this scheme. As the government is likely to increase the composition threshold, allowing input tax credit for businesses availing composition scheme may it more attractive.