New Delhi, March 8, 2018
The GST Council meeting will on Saturday consider proposals to further delay rolling out the e-way bill system by about 5-6 months and levy GST on a concentrated form of alcohol.
The 26th GST Council meeting will also try to reach a consensus on simplifying tax returns.
The GST Council meeting, earlier planned as a video conference, will now be held in New Delhi as this is expected to make it easier to explore consensus on technical issues relating to tax rebates that are proving to be a stumbling block in simplifying tax returns, a person privy to the development said on condition of anonymity.
The GST Council wants to make sure that businesses, logistics firms and the IT backbone for rolling out e-way bills are fully prepared before electronic permits become compulsory for the movement of goods. Consensus is eluding council members although Bihar deputy chief minister Sushil Kumar Modi, who leads a panel on this subject, said last month that e-way bills could be rolled out from 1 April for inter-state shipments.
E-way bills will automate the paperwork for goods transportation, check instances of inflating or under-reporting the value of consignments aimed at tax evasion, create an electronic trail of goods movement and generate valuable data about goods consumption pattern across the country.
The scheme, earlier proposed to be enforced from 1 February was deferred on the same day due to technical glitches. Policymakers now do not want premature roll out of the scheme risking a trade disruption.
The GST Council will also examine if extra neutral alcohol (ENA), a highly concentrated form of spirit that is not fit for direct human consumption, can be brought into the GST net. The legal opinion that the council has secured favours its inclusion in GST, but the challenge is that the final product meant for human consumption—potable liquor—is constitutionally kept outside GST. That would mean any GST paid on ENA will become an embedded cost on the final product, leading to a possible price increase.
The GST Council is also expected to consider new definitions for identifying various handicraft items as well as the feasibility of reduced tax rates on them in the interest of states with strong handicraft and cottage industries, said a second official, who also spoke on condition of anonymity.
To simplify GST returns, the broad idea is to replace the system of four returns to be filed every month by regular assessees with a new system in which a modified summary return of all transactions in a month along with sales invoices will be sufficient.
However, the GST Council is divided over whether the buyer should be allowed provisional tax credits based on his summary returns or whether to wait till the seller uploads his invoice details, said the first person cited above. In the current system, credit is available to buyers based on his summary returns. Waiting for the seller to upload invoice details could lead to delays in the buyer getting tax credits and could affect his liquidity.
The GST Council has to balance the need for simpler procedures with the requirement of putting in place enough safeguards to prevent tax evasion.
Experts said it is possible to resolve this issue if two dates are specified for filing returns for large and small taxpayers.
“Several measures to improve working capital usage such as permitting provisional credits based on initial returns, having multiple dates for return filing for large and small businesses, etc could be considered. These would also make GST more business friendly,” said M.S. Mani, partner, Deloitte India.