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GST Council Revises Rates, Mulls Simpler Return Filings

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The Goods and Services Tax Council, in its 25th meeting, revised the rates applicable on several goods and services categories, and discussed further simplification of the returns filing process.

The panel accepted a proposal to reduce the GST rates on 29 goods and 53 categories of services, Finance Minister Arun Jaitley said in a media conference after the meeting. The new rates will be effective from Jan. 25, he added.

The fitment committee, that decides what goods and services fall under which tax slab, also defined the items that fall under handicrafts. The committee identified 40 such handicraft items and more will be added based on the suggestions of the GST Council, Jaitley said.

This is a “populist move” with the objective of generating employment and ease of doing business, Abhishek Rastogi, partner at Khaitan and Co., said in an emailed statement. This will also "increase competitiveness in international markets" and give a fillip to exports, according to Vishal Raheja, DGM at law an taxation publisher Taxmann.

For all the key decisions taken by the GST Council and the full list of revised rates, read our live blog.

Simplifying GST Returns

The GST Council also discussed another important issue of the simplification of the return filing process. Nandan Nilekani, chairman of Infosys Ltd., which is also the software service provider for the GST Network, made a detailed presentation before the panel on a simpler, alternate method of filing returns, the finance minister said.

For now, the current process of filing the GSTR-3B form continue, with a 3B return and a suppliers’ invoice, the Council decided. However, it also told the two ministerial groups to formalise the alternate process which will be up for approval in the next meeting, Jaitley said.

"If implemented, this may simplify the GST return filing process but at the same time keep any possible revenue evasion in check." - Abhishek Jain, Tax Partner, EY

No firm decision was taken on simplification of return filing as “some members of the Council thought we should not jump on it too fast”, Vanaja Sarna, chairperson of the Central Board of Excise and Customs told BloombergQuint. “Some of the stakeholders and return filers should also be made part of the decision,” she added.

"When you’re going in for a change, you won’t want to make a change that isn’t acceptable. If you’re making a change, you want to do it very well." - Vanaja Sarna, Chairperson, CBEC

In its previous meeting, the GST Council had advanced the introduction of the e-way bill system for inter-state transfer of goods to Feb. 1. Fifteen states have informed the Council that they will start intra-state the e-way bill from the same month, Jaitkey said. The e-way bill, which was started on a trial basis earlier this month, will act as an "anti-evasion measure", he added.

The composition scheme, which offers a flat GST rate to dealers at the expense of not getting an input tax credit refund, was also discussed, Jaitley said. In first three months of the rollout of the new indirect tax regime, only Rs 307 crore were collected from near 17 lakh dealers. "The compositions scheme has not been enthusiastically responded to," Jaitley said.

This would be factored in when some "minor changes" are made to the Central GST, Integrated GST and State GST Acts through an amendment. The amendment will be circulated among the Council before the next meeting and approval will be sought, the finance minister added.

Noting that a large amount of credit was lying idle, the Council decided to provisionally divide Rs 35,000 crore between the Centre and states from the Integrated GST collections. The division of IGST credit will boost the indirect tax position of both the central and state governments, Jaitley said.

"What would’ve come in later, is being divided now to assuage the problem of revenue both for Centre and State. This is a temporary solution for this year." - Vanaja Sarna, chairman, CBEC

The next meeting of the GST Council would be held through video-conferencing. Uttarakhand Finance Minister Prakash Pant told BloombergQuint that the panel is expected to meet after 10 days.

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