Provisional credit issue a hurdle to simplifying GST; Council to take call

GST
GST returns simplification stuck on provisional credit issue

GST Council to take a call now; six more states to roll out intra-state e-way bill from Friday

DILASHA SETH & INDIVJAL DHASMANA 
New Delhi, 17 April

A goods and services tax (GST) ministerial panel on Tuesday failed to arrive at a consensus on simplified GST returns due to divergent views on provisional input tax credit and the matter will now be discussed by the Council in its next meeting. However, there was a broader view that a “fusion” be created by taking “good” points from two models given to the panel. 

The group of ministers (GoM), led by Bihar Deputy Chief Minister Sushil Modi, had a day-long meeting with trade bodies, tax experts and tax officials on Tuesday. Differences surfaced over provisional credit to be given to tax payers. Stakeholders will now give their comments in a week to the GoM which will then be sent to the GST Council.  

“We discussed simplification of GST returns with various stakeholders today (Tuesday) and also had a meeting with indirect tax experts. The stakeholders will get back with an opinion in seven days and the GST Council will take up the matter for detailed discussions in the next meeting,” the Bihar deputy CM said.

The government had suspended GSTR 2 (buyers’ returns) and GSTR3 (input-output returns) — and had asked a committee headed by GST Network Chairman A B Pandey to suggest simplification of returns. The committee had given different options to the GoM.

Till the time returns are simplified, GSTR1 — sellers’ returns, and GSTR3B — summary input-output returns, will be in place. Earlier, the government had said that these will be there till June, but now it said that it would continue to be there till returns are simplified. 

“Return filing is the soul of GST. We want to give ample time to generate software and to the industry. Till then GST 1 and GSTR 3B will continue,” Modi said. After returns are simplified, there will be only one return a month against three at present. 

Basically, the GoM zeroed in on two models of simplification of returns. One of them is a model, prepared by Infosys co-founder Nandan Nilekani, which suggests that the seller uploads all invoices and the buyer acknowledges these invoices. Based on this, the buyer would get credit for tax paid on inputs. No credit would be available if the buyer claims there are some missing invoices. Nilekani also attended the meeting. 

The other model also talks of the seller uploading the returns. But, it also talks of provisional credit even if the invoice has not been uploaded. But, if the seller disputes that transaction, credit will be reversed at a later stage. 

The vexed issue with respect to simplification pertained to providing provisional input tax credit to the taxpayers and whether it must be linked to tax payments made or not. But, there was broad view that fusion of the two models be adopted, Modi said. He did not specify what the fusion model was. 

However, sources said the fusion model would allow provisional credit once the invoice uploaded by the supplier was verified by the purchaser on the GSTN portal. The GoM will send all the three models to the GST Council and the best of the three will be adopted, Modi said. The date of next meeting of the Council has not been fixed yet. 

He said the returns will be simplified with an aim to protect revenues and reduce hassles for taxpayers, who would match the returns. 

Reverse-charge mechanism

 
The GoM also discussed the feasibility of reintroducing the reverse-charge mechanism to plug revenue gaps, besides assessing the e-way bill rollout. This mechanism requires the registered buyer to deposit the tax to the government in case the seller is unregistered.  The panel will meet again in May to discuss the reverse-charge mechanism. It will decide whether the mechanism be rolled out or not, whether it should come for the composition dealer only, or for certain commodities only, the Bihar deputy CM said. 

E-way Bill

 
Six more states — Bihar, Jharkhand, Haryana, Madhya Pradesh, Tripura and Uttarakhand — will roll out the e-way bill for intra-state movement of goods from Friday. They will join Gujarat, Andhra Pradesh, Kerala, Telangana and Uttar Pradesh, which launched it from April 15 and Karnataka that implemented it from April 1, along with the countrywide roll-out for inter-state movement.

On Monday, 1.03 million e-way bills were generated. “The IT system can handle 7.5 million e-way bills in a single day,” Modi pointed out.

Giving details, GSTN CEO Prakash Kumar said 12.2 million e-way bills have been generated so far. After interception, 542 reports have been filed by officials. Transporters can file reports if their vehicles are detained for more than 30 minutes. Twenty such reports have been uploaded in this regard. 

Modi said the norms for interception and inspection of goods have been issued and only designated officers can do interception and inspection of goods. The move is aimed to avoid harassment of taxpayers.

The panel met 40 stakeholder bodies from across the country, besides meeting 15 indirect tax experts on return simplification. 


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