Availing of provision credit by businesses also on agenda
The main item on the agenda for the GST Council meeting on Friday is likely to be the simplification of the return filing system into a single form and a decision on whether businesses can avail of provision credit or not, according to tax analysts.
According to the GST law, the return filing process involves three forms — two of which have been kept in abeyance to ease the compliance process for businesses. The GST Council is to decide on how best to reduce these into a single form.
“Tomorrow’s [Friday] meeting will primarily deal with the revised returns issue,” said Pratik Jain, Indirect Tax Leader, PwC India. “The Sushil Modi-led Group of Ministers met with all the stakeholders over the last one month, such as CII, FICCI, and some select indirect tax experts, and received inputs from them. So that’s what the Council will discuss, which model of return filing to go for,” he added.
So far, there are two models of return filing under consideration, with the key difference between the two being whether businesses can avail of provisional credit when the supplier has not yet filed returns, or if they can only avail of the credit based on the returns filed.
“What we have been waiting to hear is what the Council wants to do regarding provisional credit,” said Archit Gupta, founder and CEO of Cleartax. “Once they put GSTR-2 and GSTR-3 on hold, what is the manner in which they want people to report their purchases and should people continue to claim provisional credit?”
“Right now, there are at least three return forms as prescribed by the law,” said M.S. Mani, Partner at Deloitte India. “That three-stage process is going to be brought down to a one-stage process. The debate over that one-stage process is whether the buyer will be able to take the credit irrespective of the seller’s payment of the tax or should the buyer be able to take provisional credit, and later on if the seller does not pay, then the buyer reverses the credit.”
“That is where there is a lot of debate,” Mr. Mani added. “To me, it seems that they will settle on a system where the buyer can take the credit even if the seller does not pay, because it is unfair to blame the buyer for the seller’s mistakes.”
The other issue that could come up for discussion is the revival of the reverse charge mechanism, applicable for registered dealers doing businesses with unregistered dealers.
“There was one provision in the law that when a registered dealer bought from an unregistered dealer, then the registered dealer pays tax on behalf of the unregistered dealer and takes the input tax credit,” Mr. Mani explained. “While this was revenue neutral for the buyer, it created a lot of compliance issues for the registered dealers. Therefore, the government kept this in abeyance. After discussion, this is expected to be revived.”
Other issues that could come up for discussion include the delay among certain States in rolling out the e-waybill system for intra-state movement of goods. While the e-waybill system was rolled out across the country for the inter-state movement of goods on April 1, the billing mechanism for the intra-state movement of goods was to be rolled out across States in a phased manner.
As of April 25, 17 States and Union Territories have implemented the system for intra-state movement, but the rest of the country, including manufacturing States such as Maharashtra and Tamil Nadu, have still not done so. The reasons behind the delay of the roll-out by these States could be a topic of discussion during the meeting, according to tax analysts.