Bonanza ahead of Budget: GST Council cuts rates of 29 goods, 53 services

The goods and services tax (GST) Council on Thursday approved rationalisation of rates on 29 goods and 53 categories of services including old vehicles, sugar-boiled confectionary, fertilisers, 20-litre drinking water bottles, hybrid buses, diamonds and precious stones, vibhuti, etc.

The new rates would be effective from January 25. The only item that saw a rate hike was cigarette filter rod.

The Council, at the crucial meeting before the Budget, also discussed the broad contours of simplification of returns filing and anti-evasion measures.

In order to plug the leak in the GST revenues that have been declining since its launch in July last year, it approved the implementation of the e-way bill for inter-state trade from February 1. Only 15 states would be introducing it for intra-state.

"The Council reviewed the GST collections and there was an opinion that so far we have been relying on the unilateral declarations of the trade itself and therefore, it is necessary to build in some anti-evasion measures and e-way bill itself will be an anti-evasion measure," Finance Minister Arun Jaitley, who heads the Council, told the media after the meeting.

The Council could not finalise the simplified process for filing returns on the GST Network (GSTN) at Thursday's meeting. Jaitley said till a final call on it was taken businesses could continue to file the GST Return (GSTR)-3B along with suppliers or sellers uploading invoices. This implied that the three returns forms – GSTR-1, GSTR-2 and GSTR-3 – that were initially expected to be filed every month may be done away with. This would mean that instead of filing 37 returns in a year, taxpayers would now be required to file just 12 returns.

The minister told the media that two alternative proposals for simplified returns filing were presented by Infosys chairman Nandan Nilekani during the meeting. Infosys has designed the IT backbone of the GST system.

"The direction of the discussion was that GSTR-3B return filing would continue and all the sellers/suppliers would upload their invoices and give details of their supplies… Eventually, it would be taken in the direction where only supply invoices are filed and based on that taxes are deposited and credit claims by buyers and sellers can be verified," he said.

The Council also looked into the report on handicraft submitted by a subcommittee headed by Central Board of Excise and Customs (CBEC) chairman V N Sarna.

"The report was considered and accepted and now the fitment committee will fix the rates for about 40 handicraft items. There could be some more items added because some states want it," said the FM.

Jaitley said the issue of meagre collections under composition scheme due to "under-declaration" was also discussed.

The Council "provisionally" decided to divide Rs 35,000 crore of the Rs 1.35 lakh crore integrated GST (IGST) collected till now among the states and the Centre.

"In the reviewed (GST) collection, the large amount of collection lying in the IGST was one of the factors which were considered. Instead of allowing that to be blocked, it was decided provisionally that about Rs 35,000 crore of the IGST would be divided between the centre and the states," said Jaitley.

Many urgent issues relating to inclusion of real estate and petroleum products under GST, central registration for service providers, adding more items in the input tax credit lists and others were not taken at the meeting.

Vishal Raheja, DGM, Taxmann, said that it was "unfortunate" that the issue of bringing petroleum products under GST was not taken up.

"It was highly expected that GST Council would decide the fate of petroleum products under GST to remove cascading effect but unfortunately no decision has been taken yet. Also, all-powerful GST Council has not finalised single form return under GST which was the main agenda of the meeting," he said in a statement issued by Taxmann.

Harpreet Singh, partner, indirect tax, KPMG, said the consensus on simplification of the return process by continuing with Form 3B and uploading of only supplier invoice details was good news for the industry.

"It simply means lesser and easier compliances and resultant less compliance costs," he said.

Singh, however, regretted that no discussion on the inclusion of real estate under GST was taken up.

"It was expected that the GST Council would at least start the discussion leading to the final inclusion of the complete sector in coming meetings. The sector would need to perhaps wait a little longer to ripe the benefits of GST," he said.

According to him, relaxation of the penal provisions for the first two months on the e-way bill would provide respite to the GST dealers as they would now have more time to set their systems and processes in place to be e-way-bill ready.