GST Council does some corrections

In Goa at its 37th meeting, the Goods and Services Tax (GST) Council made several recommendations to rationalise rates on some items, ease the compliance burden, and clarify several issues in interpretation and implementation of some statutory provisions.
 
For export promotion, the Council recommended exemption from GST/IGST at the time of import on silver/platinum by specified nominated agencies and their supply to exporters of jewellery. And, inclusion of Diamond India Ltd in the list of nominated agencies. It recommended exemption to services provided by an intermediary to a supplier or recipient of goods when both supplier and recipient are located outside the taxable territory. And, notification regarding the place of supply of specified research and development (R&D) services and clarification regarding the place of supply of chip design software R&D services provided by Indian companies to foreign clients by using sample test kits in India.

It also decided to increase the validity of conditional exemption of GST on export freight by air or sea by another year, i.e till the end of September next year.
 
Some measures that could have an impact on export include reduction in the GST rate from 5 per cent to 1.5 per cent on supply of job work services in relation to diamonds. And, a reduction from 18 per cent to 12 per cent on supply of machine job work, such as in the engineering industry.
 
The tourism sector would gain by reduction of GST rates on hotel accommodation from 18 to 12 per cent for daily rents between Rs 1,001 and Rs 7,500, and from 28 to 18 per cent for rents above Rs 7,501. The taxability of passenger service fee and user development fee when levied by airport operators will be clarified. An integrated refund system with disbursal by a single authority will be introduced.
 
On compliance matters, the annual returns are so complex that few have filled these. So, the Council has decided to relieve composition dealers and small tax payers with annual turnover up to Rs 2 crore from this burden.  Also, a committee will examine the simplification of forms for the annual return and reconciliation statement. Introduction of a new returns system is also being deferred by six months, to the beginning of the next financial year. GST Appellate Tribunals are not yet constituted; so, the last date for filing appeals to these will be extended.
 
Clarifications will be issued regarding the procedure to claim refunds after a favourable order in an appeal or any other forum. Also, eligibility where a nil refund application has already been filed and regarding supply of information technology-enabled services being made on one’s own account or as an intermediary.
 
A controversial circular regarding post-sale discount will be rescinded. Restrictions will be imposed on availment of input tax credit by  recipients where details of outward supply are not furnished by the suppliers in their returns. Aadhaar, the unique identity number, might get linked with registration of taxpayers under GST and for claiming of refunds. Reasonable restrictions on passing of credit by risky taxpayers, including risky new ones, will be prescribed.
 
Overall, the GST Council has shown willingness to listen and make necessary course corrections. Even so, the idea of denying credit to a recipient on the basis of whether the supplier has filed the return does not look fair and is likely to lead to unnecessary litigation.
 
E-mail: tncrajagopalan@gmail.com