News Analysis

Miles to go before GST Council can sleep

TCA Sharad Raghavan | Updated on January 27, 2018 Published on November 19, 2017

The government has sought to address key pain points but more steps are needed

The Goods and Services Tax Council and the government might be tempted to take a breather after the latest round of changes announced to the rates and filing deadlines, but there is still a lot left to do to rectify the mess created by the hurried roll-out of the indirect taxation system.

During its 23rd meeting in Guwahati on November 10, the GST Council sought to address two main pain points — the 28 per cent rate slab, and the huge compliance burden brought on by the numerous forms to file. Out of 228 items in the 28 per cent tax slab, the Council decided to bring down the tax on 178 items, most of them commonly used. Regarding the actual filing of taxes, the Council decided to stagger the return filing deadlines for both small and large companies, and has done away with two out of three of the forms they need to fill. For now, companies need to only file the GSTR-1 form, without having to file GSTR-2 and GSTR-3.

Welcome breather

Those earning less than ₹1.5 crore a year can file their GSTR-1 forms in a more or less quarterly manner. The returns for the July to September period can be filed by December 31, for October to December by February 15, 2018, and for January to March by April 30, 2018. Companies earning ₹1.5 crore or more a year can file their July to October forms by December 31. Thereafter, they will have to file monthly returns, but with a delay of 40 days from the end of the taxable period. That is, the returns for November will have to be filed by January 10, those for December by February 10, and so on.

These changes were necessary since companies are still pretty confused about the return filing process. But the flip side of this is that the government will not be able to get a clear picture of GST revenues for some time to come.

In cutting rates on so many goods, the Council took into account the representations made by a number of industries, but there are many others that still need their cases addressed. For example, the car leasing industry is one of the most employment-intensive sectors in the country. For the most part, every car needs a driver, every four cars need at least one technician, and every 10 cars need a cleaner. But these leasing companies have to pay tax at 28 per cent without input tax credit, which is killing the sector.

Similarly, the solar sector has been facing the long-standing problem of how to prove that particular inputs are being used for the production of solar energy and not any other use.

All inputs that go into solar energy production attract a tax of 5 per cent, while the same inputs, when used for anything else, can be taxed as high as 18 per cent. This is causing a lot of confusion in the sector, and is leaving the door open for a lot of tax evasion.

The Union Cabinet on Thursday approved the creation of the National Anti-Profiteering Authority, which is meant to ensure that companies pass on any benefits they receive due to lower GST rates or input tax credits to the consumers. But this, too, needs a lot more clarification as to what exactly constitutes anti-profiteering. McDonald’s, for example, raised its prices following the GST Council meeting since restaurants will no longer get the benefit of input tax credits. Since it did not reduce prices when it was getting the credits, will raising its prices now attract the attention of the Authority?

Anti-profiteering itself is a very subjective topic, leaving a lot of discretion in the hands of the authority.

Clarity on the rules is therefore essential.

The GST Council has, over the last few meetings, addressed a large number of major issues plaguing GST.

But the road to an efficient and equitable system is long, and several more steps are needed.

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