GST reforms should be the beginning of more reforms in all laws

Last week, the Goods and Services Tax (GST) Council recommended rationalisation and reduction of GST rates on most items of mass consumption, consumer durables, motor vehicles, and some services such as goods transport agency, certain categories of job-work, etc. Such changes have received sufficient media coverage, and so, I will focus more on certain other aspects.

 

On zero-rated supplies of goods and services, the jurisdictional GST officers already have the powers to provisionally grant, within seven days of receipt of application, 90 per cent of refunds claimed. The GST council has now recommended that starting this November, such provisional refunds must be granted on the basis of identification and evaluation of risks by the system. 

 

The council has recommended similar treatment for refund claims arising out of the inverted duty rate structure, a sensible move as the reduction in GST rates will leave many suppliers with unutilised input tax credit (ITC). The council has also recommended the removal of the minimum threshold limit of ₹1000 for the grant of GST refunds on exports, with a view to helping exporters of small consignments through couriers.

 

Presently, the imports of ‘intermediary services’ do not attract GST, whereas the exports of such services do. The GST council has now recommended that it should be the other way around. So, after suitable amendments to the GST laws, indenting agents and consultants who find clients in India for service providers abroad will not be required to pay GST, whereas exporters and others who employ agents abroad to procure orders will have to pay GST on a reverse charge basis and take ITC of the same.

 

An important change recommended by the council, in the case of post-sale discount, is to omit the requirement that the discount should have been agreed upon upfront before the supply of goods or services. After suitable amendments to the laws, such discounts can be given by suppliers through credit notes, and on that basis, the recipients can reverse their ITCs. 

 

The council has asked the authorities to withdraw certain circulars and issue fresh clarifications on this matter. The council has also recommended simplification of registration procedures for small and low-risk businesses and small suppliers making supplies through e-commerce operators and suitable amendments to the law prescribing valuation on the basis of retail sale price for GST on pan masala, cigarettes, gutkha, chewing tobacco, zarda, scented tobacco, and unmanufactured tobacco.

 

A notable announcement is that the GST Appellate Tribunal (GSTAT) will be operational for accepting appeals before this month, and will commence hearings before this year's end. The GST appeals to the tribunal must be filed before June 30 next year. The principal bench of GSTAT will also function as the national appellate authority for advance ruling.

 

The impact of the changes in the GST rates and processes is difficult to predict, but there is no room for complacency.  Hopefully, this is only the beginning, and more useful changes will come about not only in the GST laws but also in all other laws. The political leaders and the officials at the Central and State Governments deserve all praise for coming together to bring about the GST changes and signal the resolve of the country to face the difficulties caused by the loss of export orders due to high tariffs in the United States for Indian goods.

 

Email: tncrajagopalan@gmail.com