Plugging tax evasion and consumer welfare took centre stage in the first meeting of the Goods and Services Tax (GST) Council under the chairmanship of Finance Minister Nirmala Sitharaman on Friday.
The Council, during the half-day meeting, imposed stiff penalties on companies not passing on the rate cut benefits to consumers, besides giving a two-year extension to the National Anti-Profiteering Authority (NAA), whose term would have expired in November.
However, experts said the council should come up with a methodology of calculating the profiteered amount. Without this, there is arbitrariness.
To plug tax evasion, measures like using Aadhaar for registration, voluntary electronic invoicing and mandatory electronic ticketing for movie theatres were approved.
“The decision to use Aadhaar for registration is a significant step and could lead to similar linkages with income tax,” said Pratik Jain, partner, PwC India.
As for reduction in rates on electric vehicles from 12 per cent to 5 per cent and for chargers from 18 per cent to 12 per cent, the matter was referred to the fitment committee. “The view was that protocol was not followed as the matter was not discussed by the fitment committee,” said a government official. The contentious issue of a uniform GST rate on lotteries has been referred to the attorney general (AG) of India. Kerala FM Thomas Isaac in his speech in the Council threatened to press for voting in case the matter was pushed forward. “So far all decisions in the Council have been taken by consensus. I hope this tradition is maintained. In case the agenda is pushed forward, I will be failing in my duty if I don’t demand a division,” Isaac said.
Sitharaman said the issue of lotteries had been referred to the AG in the context of the ruling by the Calcutta high court and Article 304 of the Constitution.
The high court had rejected a plea that the council cannot impose GST on lotteries.
Article 304 allows a state to impose the same tax rate on imported goods and goods produced in the state. Punjab raised the matter related to Article 304.
“The issue relates to consumption. If the consumers of both the lotteries, private and state, are the same, then how can there be two rates,” asked a government official.
Regarding the decision on anti-profiteering, at present, Rs 25,000 is imposed as penalty on the company which has profiteered the amount if the amount is not deposited.
Now, the company has to deposit 10 per cent of the profiteered amount if the money is not deposited within thirty days of passing the order. This is to ensure that rate cuts are passed on to the consumers, said Revenue Secretary Ajay Bhushan Pandey.
At the meeting on Friday, in-principle approval was given to the proposal of e-invoicing. The Council has re-proposed the system. The GST Council was working on various models for electronic invoicing.
Pandey said e-invoices could be generated on portal and that invoice could itself act like a e-way bill. Because it is on portal, collection of invoice can become return.
“That is the system which we will work on. The GST Council has given in-principle approval for electronic invoicing system,” Pandey said.
It also approved e-ticketing for multi-screen cinema halls mandatory. This will be convenient for consumers and will also ensure that the state government and Centre get proper revenues.
Even as the GST collections crossed Rs 1 trillion for a third straight month in May, revenue collections are still a challenge.
The NAA had earlier told the Council that about 354 cases are currently under its investigation.
“While the extension of term of the National Anti-Profiteering Authority (NAA) by two years was expected, one would hope that the government would come up with detailed guidelines and seek to restrict the same only in case of consumer complaints,” said Jain.
Abhishek Rastogi, partner at Khaitan & Co, said, "With this extension, it becomes all the more important to have the complete methodology to compute quantum of profiteering."
The council also approved the new timelines of simplified returns that will replace the current forms. The new forms would replace the current ones fully by January 2020.
It also extended last date of filing of annual returns by two months till August 2019.
Archit Gupta, founder and chief executive officer, ClearTax, said “businesses were struggling with GSTR-9 filing, now there is sufficient time to focus on this important return and finish compliance in time. ... It is good to see that there is continued focus on simplification of GST Returns, ITC credit will move to the new system in a phased manner. It should not be held up in transition, we are expecting ITC mechanism to be clearly laid out for the transition phase”.
It also incorporated into GST laws various decisions taken by the Council in its earlier meetings such as increasing threshold of registration.
Meanwhile, the council passed a resolution acknowledging the role played by former union finance minister Arun Jaitley and expressed its gratitude and appreciation for the contribution made by him in making the GST Council a shining example of co-operative federalism that it has become today.
The Council, during the half-day meeting, imposed stiff penalties on companies not passing on the rate cut benefits to consumers, besides giving a two-year extension to the National Anti-Profiteering Authority (NAA), whose term would have expired in November.
However, experts said the council should come up with a methodology of calculating the profiteered amount. Without this, there is arbitrariness.
To plug tax evasion, measures like using Aadhaar for registration, voluntary electronic invoicing and mandatory electronic ticketing for movie theatres were approved.
“The decision to use Aadhaar for registration is a significant step and could lead to similar linkages with income tax,” said Pratik Jain, partner, PwC India.
As for reduction in rates on electric vehicles from 12 per cent to 5 per cent and for chargers from 18 per cent to 12 per cent, the matter was referred to the fitment committee. “The view was that protocol was not followed as the matter was not discussed by the fitment committee,” said a government official. The contentious issue of a uniform GST rate on lotteries has been referred to the attorney general (AG) of India. Kerala FM Thomas Isaac in his speech in the Council threatened to press for voting in case the matter was pushed forward. “So far all decisions in the Council have been taken by consensus. I hope this tradition is maintained. In case the agenda is pushed forward, I will be failing in my duty if I don’t demand a division,” Isaac said.
Sitharaman said the issue of lotteries had been referred to the AG in the context of the ruling by the Calcutta high court and Article 304 of the Constitution.
The high court had rejected a plea that the council cannot impose GST on lotteries.
Article 304 allows a state to impose the same tax rate on imported goods and goods produced in the state. Punjab raised the matter related to Article 304.
“The issue relates to consumption. If the consumers of both the lotteries, private and state, are the same, then how can there be two rates,” asked a government official.
Regarding the decision on anti-profiteering, at present, Rs 25,000 is imposed as penalty on the company which has profiteered the amount if the amount is not deposited.
Now, the company has to deposit 10 per cent of the profiteered amount if the money is not deposited within thirty days of passing the order. This is to ensure that rate cuts are passed on to the consumers, said Revenue Secretary Ajay Bhushan Pandey.
At the meeting on Friday, in-principle approval was given to the proposal of e-invoicing. The Council has re-proposed the system. The GST Council was working on various models for electronic invoicing.
Pandey said e-invoices could be generated on portal and that invoice could itself act like a e-way bill. Because it is on portal, collection of invoice can become return.
“That is the system which we will work on. The GST Council has given in-principle approval for electronic invoicing system,” Pandey said.
It also approved e-ticketing for multi-screen cinema halls mandatory. This will be convenient for consumers and will also ensure that the state government and Centre get proper revenues.
Even as the GST collections crossed Rs 1 trillion for a third straight month in May, revenue collections are still a challenge.
The NAA had earlier told the Council that about 354 cases are currently under its investigation.
“While the extension of term of the National Anti-Profiteering Authority (NAA) by two years was expected, one would hope that the government would come up with detailed guidelines and seek to restrict the same only in case of consumer complaints,” said Jain.
Abhishek Rastogi, partner at Khaitan & Co, said, "With this extension, it becomes all the more important to have the complete methodology to compute quantum of profiteering."
The council also approved the new timelines of simplified returns that will replace the current forms. The new forms would replace the current ones fully by January 2020.
It also extended last date of filing of annual returns by two months till August 2019.
Archit Gupta, founder and chief executive officer, ClearTax, said “businesses were struggling with GSTR-9 filing, now there is sufficient time to focus on this important return and finish compliance in time. ... It is good to see that there is continued focus on simplification of GST Returns, ITC credit will move to the new system in a phased manner. It should not be held up in transition, we are expecting ITC mechanism to be clearly laid out for the transition phase”.
It also incorporated into GST laws various decisions taken by the Council in its earlier meetings such as increasing threshold of registration.
Meanwhile, the council passed a resolution acknowledging the role played by former union finance minister Arun Jaitley and expressed its gratitude and appreciation for the contribution made by him in making the GST Council a shining example of co-operative federalism that it has become today.
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