GSTC was constituted on 16.09.2016 after notification of 101st Constitution amendment act to decide on the various matters related to roll out of GST. Newly constituted GST Council held its first meeting on 22 – 23 September, 2016. They deliberated on very issues for past 2 days and were on loggerheads at various issues. Long deliberations were held and some issues decided thereon while some kept for next meeting. There are few things to take from the said meeting. There were discussions held on plethora of topics out of which few were decided. Here is a list of Positives and Negatives among all.
1. Threshold limit for the regime be Rs. 20 Lakhs. The Council agreed on the preposition to set the threshold exemption limit to Rs. 20 Lakhs for all States except North Eastern states, where this limit will be Rs. 10 Lakhs. However various states were in favour of exemption limit of Rs. 25 Lakhs since such small dealers represent only 2% of total Indirect tax collection. This is a welcome move for small traders, service providers as currently under various State VAT Laws and Service tax laws threshold exemption limit was Rs. 10 Lakhs only. In the GST Model earlier released earlier in June this year these limits were 10 Lakhs and 5 Lakhs respectively.
2. All cesses will be subsumed : This issue was earlier discussed, deliberated and agreed upon under various discussions. However the GST Council acceptance put the final seal on it.
3. Composition scheme limits finalized at Rs. 50 Lakhs : To provide a further relief to small dealers under GST mechanism the composition scheme turnover limit is finalized at 50 Lakhs. This means that assesses having turnover Less than 50 Lakhs shall be absolved from major compliance requirement under GST Law. They just need to file quarterly returns instead of monthly returns for others. Apart from that they would be paying tax at the rate of 1-2%, which will soon be decided by GSTC. However such dealers who opt for Composition Scheme shall not be allowed to take credit of Input Tax paid on Goods and services received.
4. States to assess assesses with annual turnover less than 1.5 crores : This is again a positive move for the states and dealers. The dealers having annual turnover less than 1.5 crores will be assessed by the state authorities. This move is being considered positive due to the reason that the state authorities have wide reach into the farthest areas of a particular state whereas the Central revenue authorities do not have offices in the interior areas of the state. Due to this the smaller assessees will be better placed as they can easily access the authorities concerned.
5. All states agreed on roll out of GST w.e.f. 01.04.2017: During the meeting of the council the states agreed on rolling out the GST w.e.f. 01.04.2017. However this might look easy but will not be that easy to do so, few reasons are:
i) Various states have not yet ratified the Constitutional amendment act as yet. However for making the constitutional amendment consent of only 50% states was required. But the states that have not yet passed may create issues in the final roll out of GST.
ii) The GSTN is not ready with its network as yet. Looking at the GSTN’s no experience earlier in revenue projects, it might be tough task for them to complete the work and stabilize the network will all the expectations of Govt, Industry and volume which they are going to handle.
6. Financial year ended 31.03.2016 to be base year for revenue projection: The GST Council has decided that FY ended 31.03.2016 will be base year for revenue projection on the basis of which compensation will be given to the states for the next five years.
1. No Composition scheme for Manufacturers and Service Providers : The Composition scheme shall not be available for manufacturers and service providers. This is not a negative move as far as flow of credit is concerned. However this will bear a negative impact on the small manufacturers since in present Excise laws manufacturers below turnover of Rs. 1.5 crore were specifically exempted from duty of excise under SSI Exemption. Furthermore in existing VAT Laws this Composition limit was Rs. 50 Lakhs in various states. Small Service providers who were hoping for big relief as a blanket permission for composition scheme would now feel cheated
Important to note: There is one thing important to note that there is no such term as “Service provider or Manufacturer in the Model GST Law. Thus we understand that now the definitions of Service provider and manufacturer are going to be there in final GST law passed.
2. Dual control on assessee’s having turnover of more than 1.5 crore: GST Council has decided that there will be dual control on the assessees having jurisdiction over the assessees. At one point of time they will be examined by either state or central authorities depending upon a risk mechanism. This will cause series of problems with the assessees as they would be confused about their compliances and at a very point it is also possible that both the authorities are grilling the same assessee for different years. As of now the Govt has not come up with any method of assessing risk. So the time will tell how this dual control will fare off. The transfer of documents between the authorities will be another issue in this since every authority would require previous series of documents. There might be fight between authorities for assessing a particular assessee which may create a huge problem for the assessee and since it is a compliance based law the assessee’s compliance may increase manyfolds.
3. For existing Service Tax assessees Central Govt will only assess: GST Council has agreed that assessment of existing 11 lakhs service tax assessees would be done by Central Govt only. This will again create problems as there are number of assessees who are manufacturer and service provider at the same time. There is nothing as yet to decide that who will assess those assessees.
However the finance minister decided to resolve many issues during this meeting for 2 days. However there is turmoil ahead when exemptions and tax rates will be decided. Deciding tax rates is going to be an uphill task for the GSTC as different states have different priorities. Exemptions are going to be very tough as with each exemption the input tax credit flow is going to hamper. There is going to be another meeting on 30th September and thereafter in the month of October on 17th, 18th and 19th. Let’s see what the GSTC has in its Pandora’s Box of possibilities. We will see in the coming time.
(CA Ranjan Mehta, +91-9672372075, email@example.com)
Do you think CBDT should extend Tax Audit Report and relevant ITR Due Date? Please Comment, Vote, Retweet and Like.— Tax Guru (@taxguru_in) September 18, 2018