Simplification of Goods and Services Tax
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TOPIC: General Studies 2
In News: In an attempt to simplify the process of filing GST, Finance Minister Nirmala Sitharaman held a meeting with chartered accountants, traders and other stakeholders as part of efforts to further simplify Goods and Services Tax (GST) forms and make the filling process more user friendly.
- To highlight the problems faced by GST filers, the stakeholders attempted to file specific returns on a real-time basis in the meeting and tried to show where they were facing difficulties.
- The Finance Minister assured the stakeholders that their suggestions on simplification of GST filing will be implemented soon.
After the recent extension given for filling GST annual returns for 2017-18 and 2018-19, the Finance Ministry reached out to stakeholders to understand and resolve the pending issues being faced in filing the returns. Technical glitches were one of the main issues faced by taxpayers when the new indirect tax regime was rolled out in July 2017. With the new GST returns proposed to be rolled out from April 1 next year, hearing out and resolving taxpayers’ issues and a constant exchange between the CBIC and the GSTN will help in improving compliance and preparing for a smoother roll-out of the new returns system.
What were the issues?
- Many believe that the Goods and Service Tax is the cause of the sluggish economic growth. When there was a persistent demand from trade and industry to reduce tax rates, it was shocking to hear reports that there was further increase in GST rates in the offing. Any more increase would sound the death knell to the already sagging economy.
- The unrealistic high rates of tax had induced evasion of tax besides driving away honest traders from the industry.
- Non-availability of any Minister or authorised officials to directly discuss and submit their grievances and problems in GST continues to hamper development of trade, industry and service activities which led to economic crisis in the country.
- Some of the issues are also related to taxpayers not knowing the existence of a functionality in the system, while some other problems occur because of manual errors.
What had happened: The Centre released ₹35,298 crore to the States in Goods and Services Tax (GST) compensation, just two days before a crucial meeting of the GST Council.
- Earlier in Nov 2019, the Centre had written to States voicing concern that due to lower GST collections, the compensation cess might not be enough to pay for the losses arising out of the adoption of the tax system.
- While the government had budgeted for ₹6,63,343 crore in GST collections for the current fiscal, 2019-20, it had garnered only about 50% of its budget estimate in the first eight months.
Some suggestions that have come in by the Tamil Nadu Chamber of Commerce and Industry
- The tax rates should be refixed at 5, 10, 15 and 18% only and that the 28% tax rate which was not in vogue in any other country, should be withdrawn.
- Essential food products — both branded and unbranded — should be tax-exempted.
- The HSN Code system, which comprises about 5,000 commodity groups, is divided into several chapters that are ambiguous about the GST rate of the product. The government should fix only one rate of tax for all the products covered in the chapters.
- For intra-State transactions, one consolidated GST should be levied similar to that of inter-State transactions.
- Tax payers with annual turnover up to ₹ 5 crore should be exempted from filing annual returns and auditor’s certificate. Changes in tax provisions, rules and clarifications given should only be prospective and not retrospective.
- There should be no levy of tax on goods and services without input tax credit benefit.
- Also, there should be further simplification of monthly return formats.
- In order to enable submissions and discussions directly to the GST council, a high-level committee with representatives from leading chambers of commerce and industry must be constituted
- It would probably be a better idea for the government to forget the forms for 2018 and focus instead on the forms for March 31, 2019, which is not only one full financial year ahead, but also a period with some stability in the laws.
- The government should ensure that a concerted effort is made to ensure that the law is not further complicated.
- In 2020, we would hope to see a new system of invoicing and a fresh set of GST returns that take us back to the concept of matching of invoices, which was thought of during the early days of the GST but never saw its way into the legislation.
About GST Council
- The GST Council is a constitutional body established under Article 279A of Indian Constitution
- It makes recommendations to the Union and State Government on issues related to Goods and Service Tax (GST).
- The GST Council is chaired by the Union Finance Minister.
- Its other members are the Union State Minister of Revenue or Finance and Ministers in-charge of Finance or Taxation of all the States.