GST rules set to get easier as big changes in laws on anvil

A panel comprising government officials has proposed 46 categories of amendments in GST-related laws, with a broader idea to reduce compliance burden, simplify the indirect tax system and bring more entities under the tax net.

Amendments such as the omission of liability to pay tax on the reverse charge, enabling new return filing procedures, allowing more service providers to opt for composition scheme, among others has been suggested. These recommendations are open for public comments till July 15.

Thereafter, final suggestions will be submitted to the Goods and Services Tax (GST) Council on July 21 for approval. The revision in the Central GST (CGST) Act, 2017 will then have to be cleared by the Cabinet and will ultimately require the Parliament’s nod.

A new section is expected to be added in the law to enable the new return filing procedure as proposed by the returns committee and approved by GST Council in its meeting on May 4.

In addition, the panel has proposed that a taxpayer can make changes in the return form, in case of an error in the entry while filing return.

“This provision existed in a pre-GST regime and is a trade friendly measure which would enable the taxpayers to correct inadvertent mistakes in the returns by filing an amendment return,” according to the copy of draft provisions.

Reverse charge mechanism

The panel has suggested deleting sub-section (4) of section 9 of CGST) Act, which mandates that all registered persons will have to pay tax on reverse charge-basis on purchases made from unregistered entities.

The liability to pay tax on reverse charge has currently been suspended till September 30.

However, it has proposed ‘enabling power’ to the GST Council to notify a class of registered persons who would be liable to pay tax on reverse charge basis in case of receipt of goods from an unregistered supplier, at a later point of time or as and when it is required.

Composition scheme

As decided by the GST Council earlier this year, dealers with an annual turnover of up to Rs 1.5 crore, instead of Rs 1 crore can opt for composition scheme.

The scheme is a simpler plan for small taxpayers, aimed at easing compliance burden, by introducing a quarterly return filing system and a single-digit low tax rate. However, dealers under the scheme cannot claim input tax credit.

The government has also recommended an addition of more service providers under the scheme. Currently, only restaurant services can opt for the composition scheme.

Towards this, a new provision is being proposed, which will enable taxpayers to avail the benefit of composition scheme if they ‘supply services of value not exceeding 10 percent of the turnover in the preceding financial year in a State/Union territory or Rs 5 lakh, whichever is higher’.

Input tax credit

The scope of availability of tax credit availability has been expanded, as now it will be available for vehicles such as dumpers, work-trucks, and other special purpose motor vehicles.

“After the amendment is carried out, input tax credit would be denied only in respect of motor vehicles for transport of persons having approved seating capacity of not more than 13 persons (including the driver), vessels and aircraft when these are used for personal purposes,” the draft said.

In addition, a modification in law has also been suggested such that tax credit will not be denied in case motor vehicles are used for transportation of money for or by a banking company or a financial institution.

Other amendments

Calling the proposed revision in law ‘taxpayer friendly’, the panel has suggested amendment in the CGST Act’s clause (x) of section 24 such that only those e-commerce operators who are required to collect tax at source (under section 52) would be required to take compulsory registration.

“Other e-commerce operators who are not required to collect tax at source under section 52 would henceforth not be required to take registration if their aggregate turnover in a financial year did not exceed Rs 20 lakhs,” according to the draft.

In an attempt to reduce compliance burden, the draft suggests issuance of consolidated credit/debit note, in respect of multiple invoices issued in a financial year, without linking it to individual invoices.

Currently, a registered taxpayer is expected to issue credit/debit note invoice-wise.