The Goods and Services Tax (GST) Council in its 49th meeting, like in the past, deliberated on critical issues to set the course of GST policy in the country. Working on the principle of cooperative federalism through harmonised deliberation, it accepted recommendations of two major Groups of Ministers (GoMs) which were created to find possible solutions to long-drawn issues, namely – setting up of GST Appellate Tribunals and Evaluating capacity-based taxation and special composition scheme in certain sectors.
Needless to say, the decision to adopt the report of setting up the Appellate Tribunal would definitely provide much-needed relief to the industry at large which has been waiting eagerly for the regular judicial process of settling disputes to begin. Given the huge pendency of cases across the country, it is hoped that the implementing governments will cut the red tape and get these tribunals operational at the earliest.
Further, the Council, on recommendations of the GoM on capacity-based taxation on certain sectors, has approved that a mechanism for compliance and tracking would be prescribed to curb tax evasion and boost first-level stage collection of revenue for commodities like gutka and pan masala. The recommendations also include a levy of specific duties for collecting compensation cess instead of the prescribed ad valorem rates on such commodities. While the GoM has refrained from recommending capacity-based taxation, one hopes these measures are sufficient to curb the evasion by entities in these sectors.
Amnesty Scheme Approved
One long-standing demand of the industry, given the onerous compliance process under the GST regime, was the need for an amnesty scheme to regularise past transactions on a self-assessment basis. The Council recommended an amnesty scheme with certain conditions. The rationalising of late fees for defaults in filing annual returns as well as the one-time option of filing an application for revocation of cancellation of registration is a welcome step that will help taxpayers resolve past cases.
The decision of the Central government to clear pending compensation due to the states for revenue losses in the first five years of the implementation of the tax regime was a major step. With this, the entire admissible compensation as envisaged in the GST Act of 2017 will be cleared. The Centre has already released the entire compensation of six states which had completed their compliances, fulfilling its federal responsibility. The meeting also accepted the recommendations on changing the rates of some goods and ironing out procedural issues.
Need A Long-term Vision
As India enters its Amrit Kaal, it is time to take stock of what further needs to be done by the Council to ensure that GST becomes the efficient tax that it was purported to be. While the GST Council has already achieved a lot, it needs to develop a long-term vision for this tax.
Four main areas require the Council’s attention. The first is rate rationalisation for which a GoM has already been in place. The GoM must submit its recommendations on rate rationalisation to correct the inverted duty structure in various sectors quickly to allow further deliberations by the Council. The second is the constitution of a GoM on credit admissibility, which will not only require a complete re-look at Section 17(5) of the GST Act that restricts credits in some cases but also look at sectors where credits have been restricted to keep the rates low.
The third area that requires immediate attention is the multiplicity of audits, scrutiny and investigations being carried out on large corporates across the country. As part of their revenue augmentation targets, multiple organisations audit and investigate corporates, most of which have multiple registrations in various jurisdictions. The Council needs to set clear guidelines to be followed by the Centre and states and also set up assessee-friendly centralised or joint audits. The fourth area involved examining individual sectors to streamline both taxation structure and procedures. There is a need to set up small task forces within a GoM to look at these sector-specific issues and remove inefficiencies like inverted duties, interpretational inconsistencies, and procedural problems.
Further, the recommendations of GoM on online gaming, on whose decision the fate of this upcoming industry is dependent, need to be debated and evaluated quickly to set to rest the multiple ongoing investigations.
As the GST revenues continue to increase, so do the expectations from each Council meeting. While the Council does deliver on some expectations, a quicker resolution of some issues is possible. The time has come for setting up a technical secretariat that can provide solutions to problems faced by all stakeholders on an ongoing basis which will allow the Council to primarily focus on major policy issues.
(With inputs from Swati Saraf, Senior Tax Professional, EY India)
Bipin Sapra is Tax Partner, EY India. Views expressed are personal, and do not represent the stand of this publication.
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