New Delhi: A host of amendments are proposed to the laws governing the goods and services tax (GST), including allowing taxpayers to amend their tax returns in order to rectify errors and widening the scope for availing of input tax credit.
These changes are aimed at reducing the compliance burden on taxpayers and improving the ease of doing business. However, in a move that may have a retrospective impact, the amendments propose to clarify that transitional credit cannot be claimed for cesses levied in a pre-GST era.
The government aims to bring these amendments in the monsoon session of Parliament beginning 18 July. If passed, they will address concerns expressed by industry, reduce some of the anomalies and plug loopholes to reduce litigation.
The draft of the amendments put up on the GST council’s website propose to facilitate the introduction of new tax return forms approved by the GST council. Further, the amendments propose to allow firms to get multiple registration in the same state for different business verticals. Taxpayers will not have to pay interest in case of delayed payments to suppliers. Also, to lessen the compliance burden, consolidated credit/debit notes can now be issued by firms instead of a note for every invoice. Further, only e-commerce operators who need to collect tax at source now need to register under GST. The amendments have also clarified that no GST will be levied on jobworks on items imported into India like gold and diamonds and then exported.
The provisions related to reverse charge mechanism–entities registered under GST that purchase goods from small unregistered dealers have to pay a tax on behalf of the latter–has been done away with. However, the central government has been empowered to bring in certain taxpayers under the reverse charge mechanism through a notification subject to the approval of the GST council.
The proposed changes will also widen the ambit of the composition scheme for small traders. In line with the decision of the GST council, the threshold for availing of the composition scheme has been raised to ₹1.5 crore from ₹1 crore. Besides this, manufacturers and traders supplying services will be able to opt for the scheme if they supply services of value not exceeding 10% of the turnover or ₹5 lakh, whichever is higher. This is expected to benefit small taxpayers.
Under the composition scheme, taxpayers can pay a fixed low rate of tax and do not have to face the onerous compliance requirements.
The amendments also propose to allow input tax credit for food and beverages, health services, and travel benefits to employees that have to be mandatorily provided by employees under existing laws. Credit can also be availed of in case of motor vehicles having approved capacity of not more than 13 persons (including the driver), thus extending the credit facility to rental cabs as well. However, no input tax credit can be levied on general insurance, servicing, repair and maintenance of those motor vehicles.
“Amendments like deletion of general reverse charge provisions on procurements from unregistered dealers, enabling provisions for new GST return filing process, allowing single debit/credit note for multiple invoices, etc would aid in bringing quite an ease to businesses from a GST perspective,” said Abhishek Jain, tax partner, EY India, said.
However, denial of transitional credit for cesses will adversely impact industry. The matter is already under litigation with many companies challenging the denial of transitional credit on cesses. It remains to be seen if the government inserts the clarification retrospectively as it is applicable for credit claimed for the period before 1 July 2017-the date of GST implementation.
“The industry will be disappointed on provisions relating to restriction on transfer of credit balance of education cess etc. It would be interesting to see which provisions are proposed to be given retrospective effect and which are given effect prospectively,” said Pratik Jain, Partner and Leader Indirect Tax, PwC.