Highlights of 11th GST Council Meeting dated 4th March, 2017

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The 11th meeting of the GST Council was held on 4th March 2017 in Vigyan Bhavan, New Delhi under the Chairmanship of Hon’ble Union Finance Minister, Shri Arun Jaitley. In the said meeting Shri Arun Jaitley approved the drafts of SGST and IGST Bill as vetted by the Union Law Ministry. This clears the deck for the Central Government to take these two Bills to the Parliament for their passage in the on-going Budget Session.

The key highlights as suggested by the press release by Press Information Beuro are as under:

Single GST Registration State-wise:

There would be state-wise single registration for a taxpayer for filing returns, paying taxes and to fulfill other compliance requirements. Most of the compliance requirements would be fulfilled online, thus leaving very little room for physical interface between the taxpayer and the tax official.

Single GST Return:

A taxpayer has to file one single return state-wise to report all his supplies, whether made within or outside the State or exported out of the country and pay the applicable taxes on them. Such taxes can be Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), Union Territory Goods and Services Tax (UTGST) and Integrated Goods and Services Tax (IGST).

Annual Turnover Threshold:

A business entity with an annual turnover of up to Rs. 20 lakhs would not be required to register with GST, unless he voluntarily chooses to do so to be a part of the input tax credit (ITC) chain. The annual turnover threshold in the Special Category States (as enumerated in Article 279A of the Constitution such as Arunachal Pradesh, Sikkim, Uttarakhand, Himachal Pradesh, Assam and the other States of the North-East) for not taking registration is Rs. 10 lakhs.

It appears that the threshold of 20 lakhs and 10 lakhs (for North-Eastern States) has been retained. Alternatively, an assessee below threshold can obtain registration voluntarily to enable them to claim input tax credit.

This threshold could be a cause of concern for many as even a tea, paan or chaat stall vendor could have a turnover of over 20 lakhs.

Composition Scheme:

A business entity with turnover upto Rs. 50 lakhs can avail the benefit of a composition scheme under which it has to pay a much lower rate of tax and has to fulfil very minimal compliance requirements.  It was declared that hotels with a turnover below 50 lakh would pay the lowest tax of 5%.

The Composition Scheme is available for all traders, select manufacturing sectors and for small restaurants (5% GST) in the services sector.

Input Tax Credit:

In order to prevent cascading of taxes, ITC would be admissible on all goods and services used in the course or furtherance of business, except on a few items listed in the Law.

Cross Utilization Of ITC:

In order to ensure that ITC can be used seamlessly for payment of taxes under the Central and the State Law, it has been provided that the ITC entitlement arising out of taxes paid under the Central Law can be cross-utilised for payment of taxes under the laws of the States or Union Territories. For example, a taxpayer can use the ITC accruing to him due to payment of IGST to discharge his tax liability of CGST/ SGST/ UTGST. Conversely, a taxpayer can use the ITC accruing to him on account of payment of CGST/ SGST/ UTGST, for payment of IGST. Such payments are to be made in a pre-defined order.

Flow of ITC in Service Sector:

In the Services sector, the existing mechanism of Input Service Distributor (“ISD”) under the Service Tax law has been retained to allow the flow of ITC in respect of input services within a legal entity.

Prevention Of Lock -In of Exporter’s Capital:

To prevent lock-in of capital of exporters, a provision has been made to refund, within seven days of filing the application for refund by an exporter, ninety percent of the claimed amount on a provisional basis.

Single Administrative Interface:

In order to ensure a single administrative interface for taxpayers, a provision has been made to authorise officers of the tax administrations of the Centre and the States to exercise the powers conferred under all Acts.

Exemption to Agriculturist:

An agriculturist, to the extent of supply of produce out of cultivation of land, would not be liable to take registration in the GST regime.

Advance Ruling Authority:

To provide certainty in tax matters, a provision has been made for an Advance Ruling Authority.

Provisions for Appellate mechanism:

Exhaustive provisions for Appellate mechanism have been made.

Transitional Provisions under GST:

Detailed transitional provisions have been provided to ensure migration of existing taxpayers and seamless transfer of unutilised ITC in the GST regime.

Anti Profiteering Provisions:

An anti-profiteering provision has been incorporated to ensure that the reduction of tax incidence is passed on to the consumers.

Tax Payments In Installments:

In order to mitigate any financial hardship being suffered by a taxpayer, Commissioner has been empowered to allow payment of taxes in instalments.

The remaining two Bills namely, SGST Bill and the UTGST Bill, which would be almost a replica of the CGST Act, would be taken-up for approval after their legal vetting in the 12th GST Council Meeting.

Source: https://www.gstcouncil.gov.in