The goods and services tax (GST), introduced in India on 1 July 2017, replaced a host of indirect taxes being levied by the central and state governments, which has changed the taxation landscape. The underlying theme was to have a ‘one nation one tax’ which would improve ease of doing business for taxpayers, bring in transparency, ensure timely compliance and ultimately reduce the tax burden for the common man. The journey since its implementation has been nothing short of a roller coaster ride for the taxpayers. As we approach the completion of second year of GST in India, it is a good time to take stock of the significant developments, milestones achieved and the way forward.
The GST Council and Central Board of Indirect Taxes and Customs (CBIC) have played an important role in handholding taxpayers/businesses for smooth transition to this new regime and in addressing their grievances.
The GST Council has till date held 34 meetings wherein important decisions have been taken and recommendations provided to the government on issues like reducing compliance burden for taxpayers, providing sector specific relief measures, etc. Some of the key recommendations given by the GST Council include:
•Rationalization of tax rates: Some commodities which were kept in the high tax bracket (18-28%) were reviewed and the tax rate was reduced considering such items as necessities and not luxuries. At present, only few items remain in the highest tax rate of 28%.
•Compliances have been simplified for a section of taxpayers by extending the due dates, for filling annual returns and reconciliation statements, introduction of simplified return filing system, introduction of nationwide e-way bill, etc.
•Relief measures for micro, small and medium enterprises (MSME Sector) by way of increase in registration threshold limit, introducing composition schemes, extending composition scheme to service providers have been welcomed by taxpayers.
•Providing a boost to real estate sector by recommending a reduced rate of GST for under-construction properties @1% (for affordable housing) and 5% (for non-affordable segment).
The GST Council has also recommended the formation of Group of Ministers (GoM) to study the revenue trend, analyze the reasons for structural patterns affecting the revenue collection in some of the states, to examine the tax rate and issues in specific sectors such real estate, lottery, and other issues related to GST.
The CBIC, on the other hand, has played an active role in giving effect to GST Council’s recommendations, providing various suo-moto reliefs to the taxpayers in terms of extending the due dates for various return filings, providing waivers from interest and penalty, etc. Further, CBIC has issued various clarifications and FAQs to address the business concerns and sector-specific issues. Some of the key clarifications issued by the CBIC during the past year include:
•Non-inclusion of tax collected at source (TCS) for the purpose of determination of value of supply under GST as it is an interim levy not having the character of tax;
•Clarification on tax implications/treatment and input tax credit in respect of various sales promotion activities offered by companies such as distribution of gifts or free samples, buy one get one free offers, treatment for primary and secondary discounts, etc.;
•Tax implications under reverse charge basis in case of import of the outsourced services;
•Doing away with the requirement of physical submission of documents in case of export refunds.
The clarifications issued by CBIC during the initial years of implementation of GST will play an important role in guiding taxpayers on interpretation of tax provisions and also mitigate potential litigation.
In addition to the above measures, the CBIC has also introduced the facility for ‘IT grievance redressal mechanism’ along with a helpdesk facility to resolve the difficulties faced by the taxpayers owing to technical glitches on the GST portal.
Besides the GST Council and CBIC, the Authority for Advance ruling (AAR) established in various states have over the last year pronounced important rulings providing clarity on issues such as classification of good/services for determining the GST rate, determining the time and value of supply of goods/services, registration requirements, etc. An advance ruling brings certainty in determining the tax liability, as the AAR’s ruling is binding on the applicant as well as tax authorities. Further, it helps in avoiding long drawn and expensive litigation at a later date. The AAR’s ruling can be appealed before an Appellate AAR. Such rulings even though applicable only to the applicant, have a persuasive value for other taxpayers undertaking similar transactions. Keeping in view the conflicting rulings of AAR on some of the critical issues and representations made by the tax payers, the government has recently notified creation of a National Bench for Goods and Services Tax Appellate Tribunal which will further help in bringing in certainty and clarity on various GST matters and thus reduce the litigation.
The GST regime also provides for a National Anti-Profiteering Authority (NAA) which ensures that the benefit of reduction in the rate of tax on goods or services or the benefit of the input tax credit is passed on to the customer by way of a commensurate reduction in prices. Over the last year, the NAA has dealt with few cases where penalties have been imposed on a cross section of taxpayers for not passing on the tax benefit to the consumers. In cases where the ultimate customer is not identifiable, the taxpayers have been directed to deposit the amount in the Consumer Welfare Fund. However, application of the anti-profiteering provisions has been fraught with litigation as the current GST provisions do not prescribe any methodology/mechanism for taxpayers to determine the quantum of the benefits to be passed on to the consumers. Appropriate guidance from the government is awaited on this area to reduce unnecessary disputes and litigation.
Stabilization of GST collections over the past one-and-a-half year is evidence of the GST regime overcoming initial teething issues, gaining stability and gradually entering a growth phase. The total GST revenue collections during the financial year 2018-19 was `11.77 crore with a monthly gross average of `98,114 crore. It is expected that the trend of reforms will continue with focus on further simplifying compliances, providing relief measures for the certain industrial sectors which have been adversely impacted after the implementation of GST, ensuring fast-track clearance for pending export refunds, etc. among others.
The government, the administrative machinery, industry associations and businesses deserve kudos for making GST a reality today. There are not many examples in the recent history of a policy change of this scale being implemented successfully in such a short span of time. Hopefully, as the tax rates are further reduced, slab rates are further rationalised and compliances become easier, it will lead to GST to becoming ‘one Nation, one tax’ in a true sense.
1. What are the rates of GST applicable to goods and services?
The GST law provides a four-tier structure of GST rates for various categories of goods and services under the slabs of 5%, 12%, 18% and 28%. Essential services and food items are placed in the lower tax brackets while luxury services and products fall under the higher brackets. Besides, there are some goods and services which are exempt from GST, for example, fresh fruits and vegetables, milk, butter milk, curd, fresh meat, newspaper, hotels and lodges with tariff below `1,000, etc.
2. Who can file complaint before NAA?
Any consumer or organization experiencing the non-reduction in the price of the goods or service despite reduction in the rate of GST can file the complaint with proper evidences. Any supplier, trader, wholesaler or retailer, who could not get benefit of input tax credit on account of reduction in the rate of GST, can file the complaint along with evidences to substantiate the non-compliance.
3. What is the consumer welfare fund?
A separate fund has been created by the government under the GST laws which would be utilised for the welfare of the consumers in the country. When the eligible person/ customer does not claim the amount due or the recipient is not identifiable, in such conditions, the amount recovered from the taxpayer is deposited in the consumer welfare fund.
Dipti Nayak and Rajashree Sarna contributed to this story.
Vikas Vasal is national leader tax–Grant Thornton India LLP. You can send your queries to firstname.lastname@example.org