The Group of Ministers has come up with three different models for simplification of GST return filing, which were placed for consideration and approval before GST Council today. 27th GST Council meeting was led by Finance Minister, Arun Jaitley today at New Delhi, which comprised following in the agenda list:
- Simplification of GST Return
- Imposition of Sugar Cess and reduction in GST rate on ethanol
- GST rate for digital transactions
- To convert GSTN into Government Holding
Simplification of GST Return:
The council today approves the principles of New Return design based on the recommendations of the Group of Ministers. The key elements of the new design are enumerated below:
One monthly Return:
The most vital element here is to the monthly return filing by all taxpayers excluding specified taxpayers. Composition Dealers fall under the exception. Further it is approved that Composition dealers and dealers having nil transaction shall have facility to file Quarterly Return.
Criteria of turnover of the taxpayer will be base for the date of filing GST returns under new system. The different dates will help to segregate the traffic and load on the portal and system.
Simple Return design and easy IT interface:
The tax liability will be calculated automatically by the system on filling the invoice-wise details of the outward supply made by the B2B dealers. As far as Input Tax Credit is concerned, it will be calculated by the system automatically by invoices uploaded by his sellers. User friendly IT interface and offline IT tool will be availed to taxpayers for uploading the invoices.
Unidirectional Flow of invoices:
The seller shall upload the invoices on anytime basis during the month. Further, the purchase invoices will also not required to be uploaded. The buyer will also be able to view the uploaded invoices by the owner during the month. The invoice uploaded would be the valid document to avail input tax credit by the buyer. Invoices for B2B transaction shall need to use HSN at four digit level or more to achieve uniformity in the reporting system.
No automatic reversal of credit:
In case of non-payment of tax by the seller, the reversal of ITC from buyer shall not be automatic reversal. In exceptional situations like closure of supplier’s business, the reversal of credit from buyer shall also be an option available with the revenue authorities.
Due process for recovery and reversal:
Recovery of tax or reversal of ITC will follow a due online and automated process of issuing notice and order that would reduce the human interface.
Supplier side control:
In order to prevent loss of revenue by the default in payment of tax above a threshold amount, the ITC passed by uploading invoices by seller will be blocked as measure to control misuse of input tax credit facility. Similar safeguards would be built with regard to newly registered dealers also. Analytical tools would be used to identify such transactions at the earliest and prevent loss of revenue.
Transition to new System:
The system under new framework will be placed in six months followed by three stages of transition into new filing system. For the time being, the current system of filing GSTR – 3B and GST – 1 will continue.
Stage 1 shall be the present system of filing of return GSTR 3B and GSTR 1, whereas GSTR 2 and GSTR 3 shall continue to remain suspended. This will continue for a period not exceeding 6 months by which time new return software would be ready.
Stage 2 will have facility for invoice-wise data upload for the new return. The facility for claiming input tax credit will be available on self-declaration basis, which is there in case of GSTR 3B now. During this stage 2, the information about gap between credit available to them as per invoices uploaded by their sellers and the provisional credit being claimed by them will be provided constantly to the dealer.
After 6 months of this phase 2, the facility of provisional credit will get withdrawn and input tax credit will only be limited to the invoices uploaded by the sellers from whom the dealer has purchased goods.
Other discussions by the Council:
Incentive to promote Digital Transactions:
The less cash economy is emphasised in recent time by the Government, therefor aim to promote Digital Transaction are also under consideration by the council. Today, discussion was made over proposal of a concession of 2% in GST rate [where the GST rate is 3% or more, 1% each from applicable CGST and SGST rates]on B2C supplies for payments made through cheque or digital mode, subject to a ceiling of Rs. 100 per transaction, so as to incentivise promotion of digital payment.
The council has recommended for setting up of a Group of Ministers from State Governments to look into the proposal and make recommendations, before the next Council meeting, keeping in mind the views expressed in GST Council.
Imposition of Sugar Cess:
The proposal to impose the Sugar Cess has come from the food ministry, where the council has approved to impose Sugar Cess over the GST rate. The same was under the discussion by the council and yet to decide the introduction of cess on sugar. The Sugar Cess would be at a rate not exceeding Rs 3 per kg over and above 5 per cent GST. The reduction in GST rate on ethanol is also discussed in the meeting. The reduction is proposed to 12% from 18% as applicable at present.
A Group of Minister from state Governments is recommended to be formed to review and discuss the proposal. The recommendations on same are expected within two week from the GoM. The report of recommendation will be presented before the GST Council in the next meeting.
Converting the GSTN to Government Holding:
The Goods and Service Tax Network (GSTN), which is a special purpose vehicle was registered as non-profit organisation that serves the taxpayers and other Stakeholder with the IT infrastructure and services.
At present the Central and State Government hold 49% ownership in form of equity shares, whereas remaining 51% are held by non-Governmental institutions. The rest 51% is held by five non-government financial institutions, HDFC, ICICI Bank and LIC Housing Finance Ltd.
Where the functions of the GSTN are in nature of ‘State’ functions that includes registration under GST, return filing, payment and refund of taxes for lakhs of business entities. Therefore, the Council has discussed and proposed to convert the GST Network into a fully owned Government holding.
It is decided to acquire the stake of 51% from the private institutions in to Rs. 5.1 Crore, equally by the Centre and the States governments and allow GSTN Board to initiate process for acquisition of equity held by the private Companies.