GST likely to be simplified further

GST council may propose a faster refund procedure, deferment of electronic way bill, further simplification of composition scheme

After reducing the rates of more than  200 items in the previous Goods and Services Tax (GST) Council meet, the panel might now significantly tweak rules to simplify procedures and ease rules for businesses.

The six-member advisory panel formed by the government for simplification and rationalisation of GST will likely propose a faster refund procedure, deferment of electronic way bill, further simplification of the composition scheme, among others.

It is expected to submit its report by the first week of December to the government.

“The key recommendations will essentially revolve around making refunds easy, putting off e-way bill and reverse charge mechanism for a year or so.

"In addition there is a demand for allowing inter-state supply in the composition scheme,” said a government official.

He added these recommendations would be seriously considered by the government as the focus is on easing pain for small enterprises and reviving demand in the economy.

According to committee member Praveen Khandelwal, secretary general of the Confederation of All India Traders, at least  Rs 2 lakh crore worth of input tax credit for four months was stuck, impacting working capital of companies.

“The refund process should be automated. The ITC should be released within the same month. Matching and adjustment may be done later,” he said.

However, as the GST revenue fell to its lowest in four months in October to Rs 83,000 crore, the government attributed it to self-declared tax payments.

“Since implementation of some of the main features of GST such as matching of returns, e-way bill and reverse charge mechanism have been postponed, tax compliance might not be up to the mark,” the government had said.

The advisory panel might also recommend doing away with declaration of HSN code in the invoice for easier return filing.

Besides, the classification should be such that the raw material and finished product are in the same slab. This would make refunds easier, added another member.

The council might pitch for a 1 per cent composition tax for restaurants under composition scheme as against 5 per cent charged at the moment.

In the last meeting, the Council lowered rates for manufacturers in the composition scheme to 1 per cent from 2 per cent earlier, bringing it on a par with the rate for traders.

However, the rate under composition scheme was unchanged for restaurants at 5 per cent, even as the normal GST rate for restaurants was reduced from 18 per cent to 5 per cent.

“We will ask for a common rate of 1 per cent under composition scheme even for restaurants,” said Khandelwal.

He added that inter-state supply must also be permitted under the composition scheme, which offers easier compliance and a flat rate of tax for small taxpayers.

The GST Council in the last meeting had hiked the threshold for the composition scheme to Rs 1.5 crore from Rs 1 crore, which will need amendment in the law.

It is expected to come up in the winter session of Parliament next month.

The panel received more than 700 representations on problems faced by industry over return filing, the e-way bill, input tax credit, and exports.

The panel may recommend doing away with e-way bill for at least two years and coming up with an alternative mechanism in the meantime.

Chief Economic Advisor Arvind Subramanian in an interaction with Business Standard on Tuesday said the priority must be simplifying GST further for small and medium enterprises.

“The government is open to taking feedback from industry and rectifying the anomalies in the law.

"We are putting in efforts to make the GST industry-friendly and will be open to incorporating suggestions by the advisory panel,” said a government official.

Prime Minister Narendra Modi had said last month that the government was open to accepting issues raised by traders and businesses.

Photograph: Danish Siddiqui/Reuters