The first year of GST ushered in a series of changes in response to the initial “teething” problems–four rounds of rate cuts/rationalisation, suspension of GSTR-2 and GSTR-3 returns, tweaking rules for providing incentives for small firms and deferment of reverse charge mechanism. The indirect tax regime in its second year is expected to usher in inclusion of items still outside its ambit, mainly some of the petroleum products, along with lesser rate tweaks and a move towards a new simplified returns filing system.
Various industry groups were expecting further rate rationalisation but it’s unlikely in the near future as the government is keeping a close eye on the revenue trend. Demand for rate cuts for cement and white goods have been kept on hold, though the next few meetings of the GST Council may take up inclusion of natural gas. “The five petroleum products are the key items still outside GST. Natural gas would be the first one to be discussed since it is having a corresponding impact on the fertiliser industry. The GST Council had earlier discussed inclusion of natural gas but could not converge on a decision. If and when it gets discussed, the decision will take several rounds of talks and is unlikely to come through in one meeting,” a senior official said. Alcohol for human consumption, real estate and five petroleum products — crude oil, diesel, petrol, natural gas, aviation turbine fuel — are still out of the GST ambit, resulting in a cascading effect.
Data Analytics, Compliance
Though the return filing system is broadly settled along with a monthly average revenue collection of Rs 89,885 crore (for 2017-18), concerns remain over the less-than-desired compliance rate, especially for the assessees under the composition scheme. The government is not in favour of keeping the assessees, especially the smaller ones, on a tight leash, but is looking at ways beyond the pan-India e-way bill system and the proposed reverse charge mechanism to check tax evasion.
A special focus is being entrusted upon the data analytics and intelligence wings of the GST setup —Directorate General of GST Intelligence and Directorate General of Analytics and Risk Management. These agencies will then share their data analysis with the enforcement agencies in a bid to boost compliance, revenue collections and check evasion. Also, the GST authorities will undertake audit of the tax returns filed vis-à-vis the tax history of the assessees. “Audit will start taking up parties for auditing. There will be some methodology adopted to choose who will be audited and why will they be taken hem up first compared to others. Where there will be possibilities of misuse, possibilities of excesses, we would choose those parties and start doing their audit first. This combined with smaller cases by some of the field formations and states along with action under the e-way bill system will help in getting compliance from trade,” another senior government official said.
The initially proposed features of GST — reverse charge mechanism, where the tax liability lies on the buyer in case of unregistered seller and tax deduction at source/tax collected at source are in limbo but may come into force in the second year of GST.
A new and simplified returns filing system has already been approved though it is expected to kick in only after 2019 polls. All taxpayers, except composition dealers and dealers with nil transactions, will be required to file one monthly return and a three-stage transition period has been proposed, after which input tax credit will be provided only on the seller-uploaded invoices. Invoice matching, which was one of the initial features, will come into force with the adoption of the new returns filing system.