 "GST")
The government’s decision to levy tax on the retail sale prices of some of the evasion-prone commodities, such as pan masala and tobacco products, may have hit a roadblock.
However, a tighter regime proposed to plug the revenue leakage in these commodities could be implemented in a phased manner.
A retail sale price-based levy would mean that manufacturers would have to pay the cess on the final retail price of these products at the time it crosses the factory gate.
The fitment committee comprises revenue officials from states, and the Centre said it had received representations regarding challenges faced in "determining the rate of compensation cess”, in cases where it is legally not required to declare the retail sale price.
The committee, which deals with tax rates on goods and services, might recommend notifying earlier rates as applicable on March 31 for such goods by amending the earlier notification.
However, it couldn’t be ascertained whether the issues cited are with all goods in the category or just some of them.
The retail sale price-based GST cess rate for the sector came into effect on April 1. The idea was to depart from the earlier regime that imposed cess over and above the 28 per cent GST rate on an ad valorem basis.
Under the earlier regime, the cess rate on tobacco products was 290 per cent, whereas that on paan masala was 135 per cent. Further, the cess part of the tax is based on the actual sales value (ad valorem tax).
Meanwhile, the law committee, which is examining the tighter enforcement measures to curb leakage in these sectors, might ask the council to implement those in a phased manner.
A group of ministers (GoM) led by Odisha Finance Minister Niranjan Pujari had proposed a stricter mechanism that the Council had approved in its last meeting held on February 18.
According to the law panel, the GST Network (GSTN) will examine the "technical modalities" required for the implementation of the proposal.
It is of the view that suggested measures create additional compliance requirements, which need to be reviewed after a period of one year.
Further proposed measures, such as stamping, mandatory e-invoicing (irrespective of turnover), mandatory e-way bills (irrespective of invoice value), vehicle tracking, priority alerts in e-way bills, etc. "may be examined in "subsequent phases", a Council member privy to the talks said.
On specific measures, such as registration of machines used in such products and filing of a special monthly return, the law panel is of the view that they should only be implemented through a system-based portal.
The issue of fake invoicing and fraudulent exports for claiming undue refund was also taken up for discussion by the GoM. It was suggested that for such commodities, the IGST refund route on exports be closed, similar to the recommendation made for Mentha oil, and, if necessary, exports may only be allowed against a letter of undertaking with the consequential refund of accumulated input tax credit.
The law panel is of the view that it requires an enabling provision for restricting the IGST refund route in respect of certain supplies or suppliers and may be notified at the earliest.
