A high-level panel on the goods and services tax (GST) in its meeting on Sunday recommended major changes in the new indirect tax system that may ease the compliance burden for all assessees and make the composition scheme more attractive.
It also proposed further easing the burden for restaurant owners.
The group of state finance ministers (GoM), led by Assam Finance Minister Himanta Biswa Sarma, recommended that all GST payers be allowed to file quarterly returns, even as those with an annual turnover of above Rs 1.5 crore had to pay the tax every month, sources said.
The GST Council in its previous meeting had decided to allow taxpayers with a turnover of up to Rs 1.5 crore to file quarterly tax payment and return filing.
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Additionally, the panel suggested a reduction in late filing fees to Rs 50 per day, against Rs 200 at present.
In a mega relief for small and medium enterprises, the panel recommended an overhaul of the composition scheme in the form of reducing rates, hiking the eligibility threshold to Rs 1.5 crore, from Rs 1 crore, and allowing interstate supply.
It also proposed reducing rates to a flat one per cent for manufacturers and restaurants, against the current rates of two per cent and five per cent, respectively.
For traders, it recommended a lower rate of 0.5 per cent in the case of a cumulative turnover of exempted and non-exempted goods, and one per cent for non-exempted goods.
The composition scheme, which offers easier compliance, has received a lukewarm response, prompting the GST Council to give it a relook.
“We have decided on a slew of measures to make the composition scheme attractive. It will be taken before the Council for a final decision,” said Sarma, after the meeting in New Delhi.
Even job work under manufacturing will be allowed in the composition scheme.
The other members of the panel are Bihar Deputy Chief Minister Sushil Modi, Jammu & Kashmir Finance Minister Haseeb Drabu, Punjab Finance Minister Manpreet Singh Badal, and Chhattisgarh Minister of Commercial Taxes Amar Agrawal. The recommendations will be placed before the GST Council in its meeting in Guwahati on November 10.
The GoM, constituted by the Council, has suggested allowing interstate sales for composition dealers.
“The GST is one nation, one tax. Hence, dealers should be allowed to make interstate sales,” said Sarma.
It also decided that restaurants outside the composition scheme — both AC and non-AC — must continue to get input tax credit even if their GST rate was reduced from 18 per cent to 12 per cent.
“We feel that restaurants must continue to get input tax credit. The rates in that case will be decided by the Council, considering the revenue implications,” said Sarma.
However, the panel could not work out a consensus over allowing input tax credit for business-to-business transactions under the composition scheme. The Council will decide the issue.
To date, 1.5 million registered entities, amounting to a sixth of 8.9 million GST assessees, have opted for the composition scheme so far. The Council, chaired by Union Finance Minister Arun Jaitley, had raised the eligibility threshold for the composition scheme to Rs 1 crore, from Rs 75 lakh. The new window will be available till March 31. A composition dealer needs to furnish one return, i.e., GSTR-4, on a quarterly basis, and an annual return, Form GSTR-9A, as against three forms every month by a normal taxpayer.
Besides, there is no requirement of invoice-wise details or Harmonised System of Nomenclature codes in their returns. The scheme is not available for manufacturers of tobacco and tobacco substitutes, paan masala, and ice cream.