Days before Budget 2018, GST Council set to cut rates on 70-80 items; simpler rules and procedures on anvil

SINGLE STAGE RETURN FILING

The Council may allow a single stage return filing to reduce compliance burden and ease procedures for small and medium businesses.

The three key return forms—GSTR1 (outward supply), GSTR2 (inward supply) and GSTR3 (the final netted out return)—may be consolidated into a single form, a senior government official told Moneycontrol.

“Businesses will still have to file GSTR3B (summary form) for the next six-months, till the time the new simplified and single return form becomes a reality,” the official said.

A single form for return filing would mean that companies will have to file 12 returns a year instead of 37 returns, as it was decided during the rollout of GST.

However, the concept of invoice matching will continue to remain as it was one of the core principles under the ambit of the new tax system, the official added.

Since its implementation from July 1, the new indirect tax system has faced mounting criticism owing to the teething troubles including lack of clarity on return filing, errors in invoice matching, and major technical snags on the information technology portal GST Network (GSTN), among others.

The government has also, time and again, extended return filing dates. In a bid to ease compliance and simplifying procedures, in November, the Council allowed tax assessees to file only two sets of forms—GSTR1 and GSTR 3B. In October, it was decided that small taxpayers with an annual turnover of less than Rs 1.5 crore would file quarterly returns (once in three months), while those with a higher turnover would file monthly returns.

According to a tax expert, an eventual reduction in the number of monthly returns filed is a matter of concern as the objective of GST was to expand the tax base and thereby improve collections.

“While some reduction in compliance in recent months can been attributed to the technology challenges faced by taxpayers and some amount of uncertainty due to the multiple extensions in the return filing timelines, arresting the trend of declining returns needs significant attention,” MS Mani, Senior Director, Deloitte India said.

“In order to ensure that the tax base is expanded and taxpayers are encouraged to file returns, some measures that could be considered include--ensuring that the GSTN is able to handle the load, especially during the peak periods…three stage return filing process is combined into one stage with back end invoice matching, and bring service providers under the composition scheme,” Mani said

RATE CUTS

About 70-80 goods and services are likely to get cheaper, with Finance Minister Arun Jaitley expected to push for tax rate cuts in the GST Council meeting on Thursday, another source in know of the matter said.

Items such as electric vehicles, irrigation equipment and handicrafts are likely to be brought down to a lower slab.

While rate cuts could augur well for certain sector of the industry, according to experts this may impact government’s revenue position.

“A rate cut may further put strain on the government’s ability to adjust expenditure,” Prashant Deshpande, Partner, Deloitte India said.

In November, the Council had decided to cut rates of more than 200 items, a move which is expected have a revenue implication of Rs 20,000 crore annually.

CHANGES IN LAW

The Council will also look at the recommendations of the law review committee comprising officials from the states and Centre.

Some of these changes, when approved, may need amendment in the GST related laws, another government official said.

The Council may also allow single registration for large service providers, with turnover of more than Rs 5 crore and present in ten states or more. Similarly, there could also be changes related to rules for claiming input tax credit, the official said.

Deferment of some of the key features under GST, including reverse charge mechanism (RCM), tax deducted at source (TDS) and tax collected at source (TCS) among others are some of the key recommendations submitted by a panel of officers.

“RCM may be deferred beyond April 1, 2018. Only businesses under the composition scheme (a scheme for small taxpayers) would come under RCM,” the official said.

Reverse charge is a mechanism where the recipient of the good or service will have to pay GST, which is otherwise paid by the supplier. The charge is applicable on a registered dealer, if he buys goods from a dealer not registered under GST. However, the receiver of the good is eligible for input tax credit, while the unregistered dealer is not.

While registered taxpayers were not willing to take the burden of paying tax, small or unregistered taxpayers would have run out of business if registered dealers did not buy goods from them. Keeping this in mind, GST Council in October had deferred the mechanism till April 1.