The 27th meeting of the GST Council was held on 4th May, 2018 chaired by the Union Finance Minister Arun Jaitley at Prime Minister’s Office at New Delhi. The major items before the Council was the simplification of the returns without abandoning the invoice wise matching of input tax credit and the ownership of GSTN. Another issue was the implementation of sugar cess and how to improve compliance to the law. With the agenda of this meeting being limited to few items, the meeting was held through video conferencing. After deliberations, the Council laid down few recommendations under Goods & Services Tax which have been discussed as below.
Simplification of Returns
One of the major recommendation in this meeting was the simplification of returns under GST. Under the new process, there will be one Single return per month for the tax payers with exception to Composition and NIL taxpayers who will continue to file return on quarterly basis. Return filing dates shall be staggered based on the turnover of the registered person to manage load on the IT system and the Council has also recommended reduction of content/information to be filled in the return.
In case of B2C, the new return will contain the details of total turnover and in case of B2B invoice-wise details is required to be uploaded by the supplier along with HSN codes and taxes will be calculated automatically by the system. Monthly invoice matching of the details uploaded by the supplier would start around April 2019. For initial 6 months after implementation of new model for filing of returns under GST credit will be allowed to buyer on provisional basis. However, after 6 months of this step, the credit would be allowed to buyer only upon filing of return by the supplier and payment of tax. Such model of filing single monthly return would reduce the compliance burden significantly from the multiple filings currently required in a month but at the same time will leave the buyers on the mercy of suppliers to avail input tax credit. In order to avoid misuse of credit, in case the supplier defaulted in payment of tax the unloading of invoices shall be blocked above a threshold amount. Restricting the buyer from uploading the missing invoices or to take provisional credit may lead to losses for businesses where suppliers are not traceable and taxes has been paid to them. It might impact cash flows of the businesses on account of delayed credit in case of delay in uploading of invoices by the supplier. But there is one sigh of relief for the buyers that there will be no reversal or recoveries from the buyers on non - payment of tax by the suppliers.
The recommended system of return filing is quite similar to proposal made by Nandan Nilekani, (non-executive chairman of Infosys) to simplify the current process of complex return filing operations. As per his ideology in case the supplier does not upload sale invoice, nobody will buy from him since they won’t be getting any input credit from the purchase.
Ownership of GSTN
One more agenda item was to change the ownership structure of the GSTN. The original structure of GSTN was that 49% was held by the government i.e. 24.5% each by State & Central Government. And the balance 51% was held by some other entities. Finance Minister Arun Jaitley however proposed that this shareholding of 51% should be purchased by the government and divided equally between the States and the Centre. The council discussed the proposal at length and it was agreed that the 51% held by these private entities should be taken over by the government and eventually the Central Government should hold the 50% and the State Governments will hold 50% collectively. The collective share of the State Governments will be pro-rata divided among the states in accordance with their GST ratios. While doing so the council also recommended that the GSTN will continue to employ people contractually and have the flexibility to get the best talent on the best terms from the market considering the wide range of the activities and responsibilities of the GSTN.
Incentive for Digital Payments
The next important item of the agenda was with regard to an incentive on digitized payments. The issue before the council was whether digital payment either through banking mode or cheque mode or any form of digitized mode a 2% incentive should be given for those who pay entirely in the digitized mode. This will be subject to a cap of Rs 100 per voucher and this would not apply to the composition dealers. There was very detailed discussion held on this point, with the majority being in favour of this suggestion. There were two alternative views, one did not favour this and the second view was to accept this but to have a list of negative items on which this incentive would not be applicable. Therefore, council after a detailed discussion decided that a committee of 5 members i.e. 5 ministers of the State shall be constituted which would expeditiously consider all the view points and its recommendations would come up before the council in the next meeting for consideration.
The next item before the agenda was the imposition of a cess on sugar particularly considering that the cost of sugar has risen beyond Rs 35/Kg and the market price is between Rs 26 to 28/Kg and the sugarcane farmers are in deep distress and therefore whether the Council should some kind of a cess. Now, since this is after GST has been constituted, the first such suggestion has been come up how are such contingencies should be addressed in the GST regime, are they to be addressed by imposition of a cess or by increasing the tax amount or by some alternative method of revenue raising. These viewpoints were extensively discussed and debated in the council and it was agreed that an another separate group of 5 ministers be formed within the next 2 weeks because of the urgency of this matter would make a recommendation to the Council as to what are the avenues of raising revenue to meet contingencies of this kind where the cost of a commodity is much higher than its selling price and therefore the farmer is in distress and which are the cases in which this can be made applicable on a matter of principle itself.