India: GST Reforms And Expectations: Looking Forward Budget 2018

Last Updated: 17 January 2018
Article by Phoenix Legal

Goods and Services Tax (GST) implementation has not been a smooth ride for the Government, be it the technical glitches faced on GST Network while filing returns or export refund delays leading to massive unrest among the exporters. Nevertheless, the Modi Government should be given due credit for their unstinted resolve in seeing through the unprecedented task of bringing in a reform such as GST, which many thought would not see the light of the day.

In an attempt to make GST conducive for the stakeholders, the Government has kept its ear on the ground for all the suggestions pouring in from different quarters. With each set of problems and issues raised with respect to GST, the Government has tried to act swiftly for resolution.

Reduction of the prices of goods and services was followed by quick formation of anti-profiteering machinery. A five-member Group of Ministers was formulated to monitor GSTN and related implementation issues of GST. A committee on exports was convened by the Revenue Secretary to look into exports related issues and to recommend suitable strategy for helping the exporters with their delayed refunds and working capital deficits. Further, various fliers, GST notes- industry specific and general, have been put on the Central Board of Excise and Customs website to educate people in GST.

The earnest endeavours of the Goods and Service Tax Council (GSTC) have resulted into various statutory and procedural reformative decisions in twenty-four meetings held so far. The notable reforms have been summarised as under:

GST Reforms at a Glance

  1. The threshold exemption limit of turnover made applicable to inter-state suppliers, whereas earlier, suppliers engaged in inter-State supply were subject to registration from zero turnover.
  2. Composition threshold limit raised to Rs. 1.5 crore. However, composition scheme is not available to inter-State suppliers, service providers (except restaurant service) and specified category of manufacturers. For special category States (except J&K and Uttarakhand) enumerated in article 279A of the Constitution, threshold exemption limit has been fixed at Rs. 75 lakh.
  3. Existing tax incentive schemes of Central or State governments such as Area Based Exemption Scheme may be continued by respective government by way of reimbursement through budgetary route. These schemes, in their present form, have not been continued in GST. Further, 50% exemption of the CGST portion is provided to CSD (Defence Canteens).
  4. In order to ensure single interface, all administrative control over 90% of taxpayers having turnover below Rs. 1.5 crore would vest with State tax administration and over 10% with the Central tax administration. Further all administrative control over taxpayers having turnover above Rs. 1.5 crore shall be divided equally in the ratio of 50% each for the Central and State tax administration.
  5. Powers under the IGST Act shall also be cross-empowered on the same basis as under CGST and SGST Acts with few exceptions.
  6. Suppliers of services, having turnover upto Rs. 20 lakhs, even if, making inter State supplies or making supplies through e-commerce platforms are exempted from obtaining registration. Earlier both these category of service providers were mandatorily required to register.
  7. The reverse charge applicability of supplies made by the unregistered dealer has been suspended till March 31, 2018.
  8. There is no requirement of payment of tax on advance received for supply of goods by all taxpayers.
  9. Supplies from GTA to unregistered persons has been exempted from tax.
  10. Registration and operationalization of TDS/TCS provisions has been postponed till March 31, 2018.
  11. The e-way bill system shall be introduced nation-wide for all inter-state supplies with effect from February 01, 2018. As regards intra-state supplies, option has been given to States to choose any date on or before June 01, 2018.
  12. E-Wallet Scheme shall be introduced for exporters from April 01, 2018 and till then relief for exporters is given by allowing manually filing of refunds. Exporters will get an estimated advance amount in their e-Wallets which may be later offset with final tax refunds.
  13. All taxpayers are allowed to file simplified summary returns in FORM GSTR-3B & pay tax on monthly basis till March 2018.
  14. Taxpayers with turnover upto Rs. 1.5 Cr are required to file information in FORM GSTR-1 on quarterly basis. Other taxpayers would have to file FORM GSTR-1 on a monthly basis.
  15. Time period for filing FORM GSTR-2 and FORM GSTR-3 for the months of July, 2017 to March 2018 is being worked out by a Committee of Officers.
  16. Late fee for delayed filing of return in FORM GSTR-3B for the months of July, 2017 to September, 2017 has been waived. The amount of late fee already paid but subsequently waived off is re-credited to the Electronic Cash Ledger of registered person under "Tax" head instead of "Fee" head.
  17. Facility has been introduced for manual filing of refund application.
  18. Facility shall be introduced for manual filing of application for advance ruling.
  19. The National Anti-Profiteering Authority has been constituted having Chairman and four technical Members.
  20. GST rate on 178 household goods lowered and that on restaurant services are brought down to 5%.

Reforms in Pipeline

It is an acknowledged fact that the GST legislation requires further streamlining for the sake of a 'simpler' tax regime. Towards this effect, a Law Review Committee and an Advisory Group of Law Review Committee were constituted on 2nd November, 2017. The Advisory Group of the Law Review Committee submitted its recommendations on 5th December 2017, which have been referred to the Law Review Committee. The Law Review Committee was required to examine these recommendations and take a final view.

Few recommendations that the Law Review committee is reported to have put forth before GSTC before its 25th Meeting are as under:

  1. Automation of exports and other refund processes,
  2. Simplification and rationalisation of procedures pertaining to returns,
  3. Setting up of a National Advance Ruling Authority,
  4. Non-inclusion of other services except restaurant services, under the ambit of composition scheme in the GST regime,
  5. Threshold for composition dealer to be limited to 10 percent of the taxable turnover or INR 5 lakh, whichever is higher (composition scheme allows taxpayers to pay taxes at a concessional rate and makes compliance easy under the GST),
  6. Separate composition rate not to exceed 18 percent for services supplied by composition dealer by way of job work,
  7. Composition scheme not to be extended to businesses which are engaged in inter-state supply of goods and services.

Expectations Going Forward

It is likely that amendment in the definitions of terms such as 'supply' and 'handicrafts' as part of 'ease of doing business' effort besides replacing the three return forms i.e. GSTR-1, GSTR-2 and GSTR-3, that need to be submitted with one. One may also expect a drop in the requirement for invoice matching. The possibility of backend matching of invoicing by the Department, may be explored, basis the information submitted by the taxpayer in their returns.

Decision upon GST rate reduction on a few items before the Union Budget may be taken up, including rationalisation of about 70 items out of which at least 40 are services. The rate reduction is majorly expected in agriculture and clean energy sector. GST rate on irrigation equipment, bio-diesel vehicles and electrical vehicles may be reduced to 18 percent from their current rates.

It is expected that job works may be allowed as part of the composition scheme, which will imply a lower flat rate of tax and easier compliance for them. Further, service aggregators such as UrbanClap, Housejoy and Quickr which provide e-commerce platform to small service providers such as beauticians, carpenters, plumbers etc. are taxed at the rate of 18%, wherein the individual service providers are well below the threshold. Such service providers may also expect some relief. Also, Service providers having turnover upto INR 5,00,000 may also be allowed benefit of composition scheme under GST.

Road Ahead

In the past one used to look up to the Budget for determining the ups and downs in the rate of taxes of goods and services to ascertain their impact on households and businesses. Since, the power to ascertain the rate of GST now rests with GSTC, the budget will not have much to offer on that front. The flip side is that GSTC makes rate change of goods/services and overall amendment to the GST regime more flexible, which leaves more room for sustained effort to work towards 'simpler' regime, year-round.

The Government seems to be in line with the PM optimistic vision of taking India to first 50 countries in 'Ease of Doing Business' ranking issued by World Bank, wherein India was one of the major gainers jumping 30 places to reach 100 this year. The GST reforms can act as a catalyst in achieving such aspirations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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