Dr. Sanjiv Agarwal, FCA, FCS

 Dr. Sanjiv Agarwal

With 23rd meeting of GST Council scheduled for 9-10 November, 2017 to consider various implementation issues and rationalize rates etc, here are few suggestions which ought to be decided by the Council.

  • It is high time that petroleum products presently kept out of GST net be brought under GST at the earliest. April 2018 / Budget 2018 could be a good opportunity. If that is not possible now, it should atleast be done for Railways / Metros / Airlines  / Transportation and Industrial use meant for production of goods.
  • In income tax Act, 1961, transfer pricing (TP) provisions provide for computation of Arms Length Price (ALP) as per TP methods i.e., comparable uncontrolled price, cost plus, resale price, profit split and transactional net margin methods. In GST, valuation in governed by section 15 of the CGST Act, 2017 read with rule 28-31 of CGST Rules, i.e., open market, like kind, cost plus, residual and resale price methods.

It is suggested that GST rules on valuation for TP be aligned with income tax provisions on transfer pricing on methodology, documentation and compliances.

  • Certain mandatory licenses / registrations / fees payable to Government (Central or State), statutory bodies, regulatory agencies, not in the nature of tax be taken out of GST net. These should be considered in the nature of tax.
  • Motor vehicles in business name be considered as capital goods and allowed input tax credit thereon. Motor vehicles are important like any other business asset / equipment / plant / machinery.
  • It should be made clear that second hand / used vehicle sale will not attract GST if sold to unregistered person or if it was not a business asset for a seller (personal use).
  • Electricity used for commercial purposes (non-domestic) may be brought under GST net with a lower special rate. Generation of power through wind mills can also be taxed with input credit facility.  In most of the cases, this is an investment or that planning exercise.
  • Exemption to Resident Welfare Association (RWA) for maintenance of residential units deserves to be extended to units / offices in malls / commercial complexes which will be a great respite to professionals / small businesses. There could be a limit of Rs. 5000 p.m. Assuming there is a charge @ Rs. 2 per sq. ft. for upto 2500 sq. ft. per months would, it will be a great help to small offices.
  • Hotel / traveling expenses meant for business / professional being business expenses, should be allowed for input credit and CGST / SGST paid thereon shall be allowed input tax credit.
  • Registration of any immovable property located in India is taxed as per location of such property. Owner / land lord should be allowed to take single registration at his place of residence and tax may be charged accordingly. In such cases, input tax credit should be specifically allowed. Similar provision should be done for hotel stay for business / professional purposes.
  • Restaurants may be categorized into two categories – serving alcoholic beverages and non-serving alco- beverages. The requirement of air conditioning be done away with as in almost all cases, it has become a necessity and can no longer be considered a luxury- be it at J&K, Rajasthan, Mumbai or Delhi or anywhere.
  • Alco beverages are out of GST regime due to legal / political compulsion for no fault of this industry. In all fairness, there should be some tax benefit for all input taxes paid on input / input services while manufacturing alco- beverages. Though this is a non- priority, looking at consumption levels, it ultimately burdens the consumer, yet yielding huge tax revenue. There can be some refund mechanism for tax enrichment by the State at the cost of consumers. Alternatively, GST Council should explore to include this into GST net.
  • Implementation machinery for checking anti profiteering practices be made more effective and committees be formed at block / panchyat level with people drawn from Government service / education / profession who can receive and forward the grievances for timely and effective redressal.
  • Summary return form 3B may be continued and in fact be made mandatory. Also monthly returns GSTR 1, 2 and 3 be made quarterly for all types of tax payers or at least small ones.
  • Exemptions to schools / pre- school ought to be extended to higher education as well. This was allowed in Service Tax.
  • Late fee for all filings may be waived till 31stMarch, 2018 or be halved.
  • Monetary threshold limit of composition scheme be extended to Rs. 1.50 crore to bring it at par with pre- GST period in Central Excise.
  • Looking at the margins involved, restaurants (outside composition scheme) be asked to reduce their prices for customers in line with anti profiteering law.

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November 2020