The meeting was a truncated affair with just eight out of the 15 items in the agenda being taken up for discussion. There was no correction of the inverted duty structure, an exercise which also leads to rationalisation of rates. There was no attempt either to move towards the much-debated convergence of rates.
The long awaited, much delayed 48the GST council meeting held on December 17 was a disappointing affair. This was a meeting held after a gap of more than five months, and there were a lot of expectations riding on it. The meeting itself was a truncated affair with just eight out of the 15 items in the agenda being taken up for discussion. There was no correction of the inverted duty structure, an exercise which also leads to rationalisation of rates. There was no attempt either to move towards the much-debated convergence of rates.
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Having said that, there were some decisions of note.
There was the perfunctory tampering of rates — reduction in husk and ethyl alcohol suppled for blending purpose for instance — but no increase of rates on any commodities. A clarification was also issued on the needless dispute about what constitutes a sports utility vehicle (SUV) and the applicability of 22% cess on such SUVs.
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Decriminalisation under GST has been mentioned in the press release as a trade facilitation decision taken. The threshold limit of tax evaded for launching prosecution has been increased from Rs 1 crore to Rs 2 crore for the twelve specified offences liable for prosecution currently under the law, except in the case of issuance of invoice without supply. There has also been a welcome relaxation in provisions relating to compounding of offences, an alternate dispute remedy solution.
The offences of obstruction, preventing an officer from discharging his duties, and tampering of evidence or failure to supply information which currently can lead to initiation of prosecution and possible mandatory imprisonment ranging from 6 months to a year and up to three years will no longer be considered grave enough for the department to launch prosecution. They were included in the CGST Act to empower the officers in the discharge of their functions. Prospective offenders need not get emboldened — these three situations are considered as offences under the IPC which can be invoked.
The decision to facilitate intra-state supply by unregistered micro enterprises and composition taxpayers to use the e-commerce platforms was taken in the 47th Council meeting in June 2022. The Council has approved the amendments and notifications required to operationalize the proposal — to be implemented from October 2023. Given the importance of micro enterprises and the fact this was a long pending request, the proposed date of implementation is surprising to put it mildly.
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Refund, which was restricted only to registered persons, will now be available to unregistered persons also in specified cases. It has also been clarified that there will be no GST on third-country exports, in bond sale or high seas sales applied for the period from July 1, 2017, February 1, 2019, retrospectively ‚ with no refund unfortunately for the taxpayer who had paid.
Measures for streamlining compliance have also been announced. These include running a pilot in Gujarat for biometric based Aadhaar authentication and risk-based physical verification — essential to confirming that the taxpayer is in existence at the given address. Similarly, an OTP-based verification is to be conducted at the time of registration — "trust but verify" obviously is the mantra. Given the large number cases of detection of fraudulent invoices, this is a necessary step. The circulars/notifications to give effect to the recommendations will throw light on the exact nature of the changes and impact they would have.
The elephant(s) in the room — finalising, the modalities of a much-needed GST Tribunal and, the issue of levy on online gaming, were not even discussed in this meeting. The other important item on the agenda, the issue of levying GST on industries suspected to be evasion-prone, based on production capacity, also did not come up for discussion.
The issue of setting up a GST Tribunal is of critical importance. With the law having been in force for more than five years, it is essential that a tribunal to hear appeals is available. The absence of such a tribunal has meant that aggrieved taxpayers must necessarily go to the courts for relief. This is expensive-apart from burdening the courts. A Group of Ministers (GoM) set up to examine the issue has submitted its report. The report was not even discussed.
The issue of online gaming has been hanging now for a long time. In the meantime, because of the confusion, cases are being booked, notices issued and litigation increasing. The GoM constituted to examine the issue could not arrive at any consensus and has tossed the ball back to the Council. This is unfortunate and perhaps reflective of the confusion caused by the intense lobbying in the media by the online industry. There are obviously going to be multiple points of view . A decision is needed.
The other issue is the proposal of levying GST in respect of evasion-prone industries on the basis of the production capacity of the machines installed .GST is a destination based tax on consumption of goods and services. Only value addition is taxed with set-off available for taxes paid at the earlier stages of production. Conceptually the proposal to tax based on production capacity will militate against this fundamental premise of GST. One will have to wait for the contours of the proposed levy.
GST has settled down well — revenue has consistently been above Rs.1.4 lakh crores for the entire financial year. Compliance has obviously improved thanks to better data analytics and better awareness. Every fiscal law will always have scope for improvement . The GST Council has been doing well in seeking to improve facilitation and compliance. The GST Council should meet at regular periodicity — this is essential . This would help in bridging the trust deficit of the states, the key partners in the successful implementation of the levy .
— Najib Shah is a former chairman of the Central Board of Indirect Taxes & Customs. The views expressed in this article are his own.
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