Bengaluru/New Delhi : The GST Council is set to give additional time to the authorities to demand tax arrears and refunds to businesses in view of the disruption caused by the pandemic for the past years. The council may also revise tax rates on certain items such as goods used by cancer patients, imported defense items and tetra packs.
According to the agenda of the council meeting reviewed by Mint, the council is likely to give clarifications regarding tax on several service sectors such as ice cream parlors, ropeway travel and rental of transport vehicles. The Center and states will also consider changes in several rules to improve tax compliance in a two-day meeting of the council beginning June 28.
Additional time is being proposed for seeking tax arrears and refunds in view of COVID related disruption which has slowed down the processes. The law currently allows a tax officer to demand any tax which has not been paid or is wrongly refunded within three years from the due date of filing of annual return. The plan is to give time till the end of September 2023 to raise the tax demands for FY18. Without this change, the authorities would have had time till early February 2023 to issue demand for FY18, given that the extended due date for filing annual returns was in February 2020. In addition, the period between 1 March 2020 and 28 February 2022 will be excluded. From calculation of limitation period for businesses to collect tax refunds, as well as for tax inspectors to issue demand in case of wrong refunds.
The GST Council meeting is set to focus on the fiscal woes of state governments and steps to boost the efficiency of the GST system, with major reforms in tax rates and deferred slabs due to rise in inflation. The council is expected to consider proposals to remove tax exemptions and fix inverted duty structure, besides examining proposals by a ministerial group that recommends strict enforcement and GST registration process led by data analysis. Is.
The council may revise the GST rates on items where a so-called fitment panel has recommended revision. It suggested that a Group of Ministers on rate rationalization should examine the increase in the GST rate on cut and polished diamonds from 0.25% to 1.5%. The panel argued that the lower rate on cut and polished diamonds is causing blockage and blockage in tax credits for the gems and jewelery industry.
The panel has proposed to reduce the GST rates on orthopedic devices, including pouches, to 5% from the existing 12% to collect waste from the body, which are used by cancer patients. It has also recommended a uniform rate of 5% for orthopedic implants, braces and prostheses.
“The way to increase revenue is to prevent theft. Full focus will be on closing the leakage. With this, you will have so much revenue that anyone can reduce the rates. If the revenue is not sufficient then it is the inefficiency of the administration. Raising rates is not the solution. Get an honest tax regime, low rates and high revenue,” said a state finance minister on condition of anonymity.
Experts hoped that the focus on compliance would not affect honest businesses. “Businesses will expect the revenue pressure on states due to the proposed end of GST compensation not to increase audits of compliant taxpayers,” said MS Mani, partner, Deloitte India.
The committee also recommended that the basic customs duty and integrated GST exemption on certain defense goods may be extended to imports by private entities, provided the end user is defense forces. Currently, this exemption is available only on imports made by armed forces and state-run firms.
If the recommendations are approved by the council, the GST rate on tetra packs could be increased from 12% to 18%, bringing it at par with other packaging items like cartons and plastic bottles, which attract 18% GST. Is.
“Initially in terms of the GST structure, it was expected that there would be very few exemptions as they distort the value chain. Therefore, any move to remove or reduce exemptions would be in line with the architecture of the GST as originally envisaged,” said Mani at Deloitte.
Emails sent to the Finance Ministry and the GST Council Secretariat on Wednesday remained unanswered till press time.