Now, GST is assuming a more acceptable form
The latest GST Council meeting only appeared to have played to a pre-written script. Rates of tax on many items have been reduced, filing of returns has been eased, the composition scheme has been extended and there have been exemptions and relaxations on certain goods and services.
A range of relaxations
The temporary return Form 3B is being made semi-permanent at least till March 2018. Only one return Form GSTR 1 needs to be filed now- quarterly for taxpayers with a turnover below ₹1.5 crore and monthly for all others. The counter party form to the GSTR 1 (GSTR 2) appears to have been deferred till March 2018 which effectively means deferring the concept of matching of invoices.
A large number of taxpayers were unable to file their return in Form 3B within due date for the months of July, August and September, 2017 and the late fee was waived in all such cases. In a welcome move, the Council decided that that where such late fee was paid, it will be re-credited to their Electronic Cash Ledger under Tax head instead of Fee head so as to enable them to use that amount for discharge of their future tax liabilities. A facility for manual filing of application for advance ruling is being introduced for the time being.
Taking cognisance of the late availability or unavailability of some forms on the common portal, the due dates for furnishing the some forms was extended. There will be a uniform rate of tax at 1 per cent under composition scheme for manufacturers and traders with a special condition that for traders, turnover will be counted only for supply of taxable goods. Supply of services by a composition taxpayer up to ₹5 lakh per annum will be allowed by exempting the same. Annual turnover eligibility for composition scheme will be increased to ₹1.5 crore from the present limit of ₹1 crore under the law with a proviso to further extend it to ₹1.5 crore per annum.
After four chaotic months, the GST rates and law appear to be taking a shape they were supposed to look like from the beginning. Irrespective of how much the Government denies it, there can be no doubts that the forthcoming elections played some part in these decisions being taken. Fitment committee and all are fine, but many rates of tax that are in the 5 per cent bracket should have been there ab initio (idli and dosa batter for example).
Economics of GST
While there certainly a good-feel about the way the law is shaping out, a major concern looms ahead on the economics of GST. With these reduction of rates, transition credits on stocks and the exemptions provided, revenues from GST will probably match those in the erstwhile regime.
One should not forget the promise made by the the Centre to States that they would make good all losses that arise from the transition to GST. With patchy data, State Governments are going to claim as high an amount as they can. The million dollar question that arises is how the Government is going to balance GST revenues and its impact on the fiscal deficit.
If GST revenues continue to fall, one should not be surprised if a cess is introduced either in the income tax laws or even in the GST Act. In such a situation, one can only hope that the GST Act in April 2018 will not be a repetition of the Act as it was in August 2017.
The writer is a chartered accountant