Panel set up by government for GST tweaks set to recommend changes for smoother implementation
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Updated: Dec 02, 2017, 10.32 AM IST
NEW DELHI: A panel of industry representatives is set to recommend a fresh set of changes in the goods and services tax (GST) to make life easier for businesses.
The six-member committee was set up by the government to provide inputs to the GST law review committee, comprising officers, to overhaul the legislation and remove irritants in the new regime that kicked in from July. The government has already undertaken massive changes, including pruning the list of items in the highest bracket of 28% to 50 from over 200 products earlier.
Sources told TOI that the group has completed its work and identified at least a dozen areas where changes are required for smoother implementation.
While several changes have been brought as temporary relief measures, such as quarterly filing of returns, the panel wants them to be made permanent. This is in addition to suggesting simplification of forms, an issue that is also being dealt with by a committee headed by GST Network chairman A B Pandey.
At the same time, the committee wants an overhaul of the architecture, beginning with an extension of the composition scheme to services, a benefit that is currently available to small traders, manufacturers and restaurants. The scheme provides for a lower tax liability and a lower compliance burden but does not allow input tax credit on taxes paid earlier in the manufacturing chain. The government had earlier rejected the scheme for services, arguing that thesector ishighly prone to leakage.
Similarly, it wants a removal of the reverse charge mechanism that puts the liability on the buyer instead of the supplier. The tool was meant to allow large companies to take the burden of unregistered small vendors through selfinvoicing. But SMEs are unhappy with the move and have forced the government to defer it. On its part, the government believes that the mechanism is key to making the GST regime foolproof.
Further, the committee also wants the proposed rollout of E-way bills deferred till GSTN stabilises, arguing that the new toll will create more confusion. The nationwide use of the electronic tool to track goods shipments through trucks is proposed to kick in from April although the tool was used by some states during the VAT regime too.
The panel is also veering around to the view that those providing job work, such as artisans, should be exempted from GST as they do not have the ability to deal with the required paperwork.
Proposals for massive changes in the export architecture are also being finalised which will result in a return to the pre-GST regime. For instance, committee members are in favour of going backtotheearlier system where inputs used for exports were exempted from payment of duty. Under the current regime, an integrated GST has to be paid, with the government promising to refund it later.
It's a different matter that glitches have held up refunds, with many exporters even unable to file the forms to claim refunds. The panel is also keen on a new drawback mechanism for small exporters from sectors such as leather where the rates under the duty refund scheme include customs as well as GST.
The sources said that the panel is expected to submit its report next week and wants that input tax credit is available across the board instead of restricting it for some items.
The six-member committee was set up by the government to provide inputs to the GST law review committee, comprising officers, to overhaul the legislation and remove irritants in the new regime that kicked in from July. The government has already undertaken massive changes, including pruning the list of items in the highest bracket of 28% to 50 from over 200 products earlier.
Sources told TOI that the group has completed its work and identified at least a dozen areas where changes are required for smoother implementation.
While several changes have been brought as temporary relief measures, such as quarterly filing of returns, the panel wants them to be made permanent. This is in addition to suggesting simplification of forms, an issue that is also being dealt with by a committee headed by GST Network chairman A B Pandey.
At the same time, the committee wants an overhaul of the architecture, beginning with an extension of the composition scheme to services, a benefit that is currently available to small traders, manufacturers and restaurants. The scheme provides for a lower tax liability and a lower compliance burden but does not allow input tax credit on taxes paid earlier in the manufacturing chain. The government had earlier rejected the scheme for services, arguing that thesector ishighly prone to leakage.
Similarly, it wants a removal of the reverse charge mechanism that puts the liability on the buyer instead of the supplier. The tool was meant to allow large companies to take the burden of unregistered small vendors through selfinvoicing. But SMEs are unhappy with the move and have forced the government to defer it. On its part, the government believes that the mechanism is key to making the GST regime foolproof.
Further, the committee also wants the proposed rollout of E-way bills deferred till GSTN stabilises, arguing that the new toll will create more confusion. The nationwide use of the electronic tool to track goods shipments through trucks is proposed to kick in from April although the tool was used by some states during the VAT regime too.
The panel is also veering around to the view that those providing job work, such as artisans, should be exempted from GST as they do not have the ability to deal with the required paperwork.
Proposals for massive changes in the export architecture are also being finalised which will result in a return to the pre-GST regime. For instance, committee members are in favour of going backtotheearlier system where inputs used for exports were exempted from payment of duty. Under the current regime, an integrated GST has to be paid, with the government promising to refund it later.
It's a different matter that glitches have held up refunds, with many exporters even unable to file the forms to claim refunds. The panel is also keen on a new drawback mechanism for small exporters from sectors such as leather where the rates under the duty refund scheme include customs as well as GST.
The sources said that the panel is expected to submit its report next week and wants that input tax credit is available across the board instead of restricting it for some items.
(This article was originally published in The Times of India)
