Friday, July 1, 2022

More time for GST recovery, some change in rates is likely

Bangalore / New Delhi : The GST Council will give officials extra time to file tax arrears and to allow businesses to seek refunds in the wake of the outbreak. The council may revise tax rates on certain items used by cancer patients, such as imported protective equipment and Tetra packs.

The council is expected to provide tax clarifications on a number of service areas, including ice cream parlors, ropeway travel and transport vehicle rentals, as per the agenda of the council meeting reviewed by the Mint. In a two-day meeting of the council starting June 28, the center and the states will consider a number of rule changes to improve tax compliance.

Considering the covid-related disruption, additional time is being proposed for filing tax arrears and refunds which has slowed down the process. The law currently allows the tax officer to claim any tax paid within three years from the date of filing the annual return or without receiving a false return. It is planned to give time till the end of September 2023 to increase the tax demand for FY18. Without this change, authorities would only have until February 2023 to issue FY18 demands, as the deadline for filing annual returns was February 2020. In addition, the period between 1 March 2020 to 28 February 2022 will be omitted. From the calculation of the limitation period for obtaining tax refunds for businesses, as well as to the issuance of demands to tax inspectors in case of incorrect refunds.

The GST Council meeting will focus on the planned major reforms of tax rates and slabs due to rising inflation, the financial difficulties of the state governments and the steps to be taken to boost the efficiency of the GST system. The council is expected to take up proposals to remove tax breaks and reverse the tariff structure, in addition to examining proposals from a group of ministers recommending stricter implementation and conducting a GST registration process led by data analysis.

The council is likely to change the GST rates on the items recommended by the so-called fitment panel. The group of ministers on rate rationalization should look into raising the GST rate on cut and polished diamonds from 0.25% to 1.5%. The panel argued that lower rates on cut and polished diamonds were reversing charges for the gems and jewelry industry and hampering tax credits.

The panel also proposed to reduce the GST rate on existing Ostomy equipment, including body waste collection pouches used by cancer patients, from the current 12% to 5%. Also 5% uniform rate is recommended for orthopedic implants, braces and prostheses.

“The way to increase revenue is to steal. The whole focus will be on closing the leak. With their help you will have so much revenue that rates can be reduced. If the revenue is not enough then it is inefficiency of the administration. Raising rates is not the answer. Have an honest tax system, lower rates and higher revenue, “said a state finance minister on condition of anonymity.

Experts hope that focusing on compliance will not affect honest businesses. “Businesses hope that the proposed termination of GST reimbursement will not increase compliance taxpayer audits due to revenue pressures on the states,” said MS Mani, a partner at Deloitte India.

The committee also recommended that basic customs and integrated GST exemptions on certain defense items be extended for import by private entities, but the end user is the protection force. Currently, this discount is only available on imports made by the Armed Forces and government companies.

The GST rate on Tetra packs could be increased from 12% to 18% so that they can apply 18% GST on other packaging items such as cartons and plastic bottles, if the council approves the recommendations.

“Initially, in terms of the GST structure, it was expected that there would be very few rebates because they distorted the value chain. Therefore, any move to remove or reduce the rebate would be in line with the original concept of GST, “said Mani of Deloitte.

Emails sent to the Finance Ministry and the GST Council Secretariat on Wednesday remained unanswered until press time.

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