NEW DELHI: Friday may witness the largest shake-up in goods and services tax (GST) rates since its rollout on July 1, with top GST Council members including Finance Minister Arun Jaitley and Bihar Deputy Chief Minister Sushil Kumar Modi indicating that the rates of some 200 daily-use items might be cut from 28 per cent to 18 per cent.
The 23rd meeting of the Council, being held in Guwahati, will also deliberate on the suggestions made by Assam Finance Minister Himanta Biswa Sarma-headed GoM to cut tax rates for the composition scheme businesses to 1 per cent and lower rates for non-AC restaurants.
The Council, comprising state finance ministers, is also set to review the GST returns filing cycle and make it taxpayer friendly.
The Council may today rationalise rates in sectors where the total incidence of taxation has gone up because the goods were either exempt from excise or attracted lower VAT rates under the previous indirect tax regime.
The Council is also likely to discuss whether to replace monthly returns filing with quarterly filing for all GST assessees and increasing the composition scheme threshold limit yet again to Rs 1.5 crore.
The Group of Ministers (GoM) set up to look into the issue, headed by Assam Finance Minister Himanta Biswa Sharma, had also recommended that manufacturers and restaurants be taxed at 1 per cent and traders at 0.5 per cent from 5, 2 per cent and 1 per cent currently.
It was in favour of doing away with the tax rate distinction between AC and non-AC restaurants, those which are not covered under the composition scheme and tax them at a flat 12 per cent.
Currently, non-AC restaurants are taxed at 18 per cent.
It also suggested that eating out at hotels that have room tariff of more than Rs 7,500 should attract a uniform 18 per cent rate instead of any separate category for 5-star hotel, which currently falls under the 28 per cent bracket.
Meanwhile, to make filing returns easier for small traders, the GoM may recommend filing of only the summary return form GSTR3B instead of GSTR1, GSTR2 and GSTR3. Also on the cards, according to reports, is to bring real estate under GST and provide some incentives for digital payment of taxes.
Modi has stated twice in as many days that 80 per cent of the 227 items in the 28 per cent slab are set to be removed and placed in lower tax slabs. However, both Jaitley and Modi have added that whether the proposals go through will depend on the position taken by the states.
“With a view to giving further relief to small taxpayers (businessmen) and consumers at large, it is expected that tax rates will be brought down from 28 per cent to 18 per cent on over 200 items of daily use,” Modi reiterated on Friday.
While it seems likely that the Council will implement significant rate cuts for many daily-use items and in sectors where the total incidence of taxation has gone up because the goods were earlier either exempt from excise or attracted lower VAT rates in the previous indirect tax regime.
However, sources say that the discussion on real estate inclusion is at a very conceptual stage and a presentation on the same may be presented to the Council. Inclusion of real estate under GST is likely to face opposition from states due to the large contribution that stamp duty etc makes to states’ balance sheets.
As the Council tries to accommodate industry concerns on tax rates, after estimating the impact on revenue, a rationalisation of items in the 28 per cent tax bracket is expected.
"Most of the daily-use items like shampoo could be lowered to 18 per cent. Tax rate on items like furniture, electric switches and plastic pipes could be relooked at," an official said.
Besides, making the composition scheme more attractive is on the agenda and as per the Group of Ministers (GoM) recommendations, the Council may decide to allow businesses in inter-state trade to opt for the arrangement.
With regard to traders, the GoM came up with a two- pronged approach for taxation under the composition scheme.
It suggested that traders who want to exclude sale proceeds of tax-free items from turnover can pay 1 per cent GST. However, for those who pay tax on total turnover, the tax rate has been proposed at 0.5 per cent.
While a regular taxpayer has to pay taxes on a monthly basis, a composition supplier is required to file only one return and pay taxes on a quarterly basis.
With a view to easing compliance burden of taxpayers, the Council is also going to review the requirement of filing three returns every month under the GST set-up.
Businesses have to file returns in GSTR-1, GSTR-2 and GSTR-3 forms for every month. These forms detail outward supplies of taxable goods and/or services, inward supplies for claiming input tax credit and monthly returns.
The review follows businesses complaining about problems in matching invoices while filing July returns. Businesses have also complained of trouble in invoice matching while filing GSTR-2.
"It would be reviewed whether matching of invoices should be done every month or that should be made only quarterly," the official added.
The Assam finance minister-headed GoM has already suggested allowing all businesses to file quarterly returns under the GST regime, akin to those businesses whose monthly turnover is up to Rs 1.5 crore.
The first three months of GST rollout have earned a cumulative revenue, including Integrated GST collections, of around Rs 2.78 lakh crore for the exchequer.
The businesses have initially filed sales returns or GSTR-3B and paid taxes.
GSTR-3B was introduced for making compliance easy and would be available only till December. The official further said that GSTR-3B might be extended beyond December as the government feels that businesses have adapted themselves to the system.
3B is required to be filed by the 20th of next month.
The final GST returns are to be filed by submitting forms GSTR-1, 2 and 3.
Over 47 lakh businesses have filed GSTR-1 return for July. These sales returns will have to be matched with the purchase invoice to be filed in GSTR-2.
Over 21 lakh businesses have filed July GSTR-2 and the due date for filing has been extended by a month to November 30.
After matching of GSTR-1 and 2, the businesses will have to file July GSTR-3, the last date for which is December 11.
(with PTI inputs)