GST roll-out: Tax refund on stocks without invoice may go up

In some relief for business, the goods and services tax (GST) Council might on Saturday enhance the refund limit for input taxes already paid on existing stock with traders without an invoice, up from the 40 per cent decided earlier.

This comes after strong demand from companies. The latter have argued that a partial credit refund will adversely impact the supply chain, as most distributors would like to get into the GST regime with zero heldover inventory. Business’ demand for enhancement of the refund limit ranges between 60 and 100 per cent.

“We will address the concern. We have proposed enhancing the limit from the current 40 per cent to somewhere close to 60 per cent. But, we also have to balance our revenues. We cannot give out more refunds than the tax revenues. We will give 100 per cent refund if the invoice is furnished,” said a government official, who did not wish to be named.

Under GST, tax paid on stock transfers is fully available as input tax credit. However, in the current system, dealers do not get any input tax credit on excise duty paid.

The government is also likely to propose a mechanism or guideline for high-value items where substitute documents could be furnished in the case of unavailability of bills to avail of full credit refund. 

The draft transitional credit rules provide for some respite by way of 40 per cent deemed credit on the Central GST portion. “We want the industry to get 100 per cent refund for taxes already paid on inputs. So, we will also mention supporting documents that could be declared if the invoice is not available. Maybe proof from the buyer company will do,” said another official.

With about four weeks to go for the GST roll-out from July 1, the Council meeting (chaired by Union Finance Minister Arun Jaitley, with state counterparts as members) is expected to finalise rules for the transition and returns.

“Industry has demanded an increase in this 40 per cent limit as this is not sufficient to offset the loss traders might incur on transition stock, particularly where the GST rate is 28 per cent (as against the current value added tax of 13-14 per cent),” said Pratik Jain, leader, indirect tax, PwC India.  

If the limit is increased, he added, it would be good news, being needed relief for companies which have seen a dip in sales over the past couple of months due to the apprehension regarding loss of tax.

Other items

The Council will also take up the structure of the anti-profiteering body under the GST regime. And, rates for the remaining seven items where these have not been finalised — gold, textiles, footwear, handicrafts, agricultural implements, etc.

“Approval of amendments to the draft GST rules and related forms are also on the agenda, among others,” went an official statement on Friday.

And, the Centre is likely to propose an anti-profiteering body under the Central Board of Excise and Customs (CBEC), with both central and state officials. It seems likely to be headed by someone of the rank of chief commissioner. CBEC has been favoured due to its reach and personnel, which bodies like the Competition Commission of India (CCI) or Consumer Forum lack. 

The proposed body would act on its own initiative against erring companies or on information from any source.

Various sections have also lobbied for a review of the rates decided earlier by the Council. In the fast-moving consumer goods sector, for instance, there is a demand for jams and pickles to be put in the 12 per cent tax bracket, as against the decision on 18 per cent. The argument is that small and medium enterprises will be otherwise hit. The Union food processing ministry has recommended a review of the rate proposed on products such as pickles, murabbas and papads.

The ministry has also forwarded Coca-Cola India's request to not include fizzy drinks in the 'sin goods' category.

Automobile makers want a lower rate for hybrid cars, at the current incidence level of 30.3 per cent, as against the 43 per cent (28, plus 15 per cent cess) decided by the Council. Union Roads Minister Nitin Gadkari has said that he will take up the case on hybrid cars with the finance minister.

The Union is likely to make a case for two different rates on biscuits, depending on their prices. And, a proposal to tax gold at five per cent.

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