GST Council To Consider Return Simplification, Introduce Sugar Cess

The Goods and Services Tax Council is likely to consider simplification of the return filing framework and introduction of a sugar cess in its meeting today, three government officials told BloombergQuint.

The Council may allow buyers to avail credit based on the invoices uploaded by the seller, the officials said. In the new return filing framework, the seller will have to upload all invoices on the GST Network portal which will have to be acknowledged by the buyer. The buyer will then be able to avail input tax credit. If the seller fails to pay the tax, the first priority of the tax authority would be to recover tax from the supplier, one of the officials quoted above explained. In case recovery from seller cannot be made, credit availed by the buyer will be reversed, or tax would be recovered from the buyer.

In the current model of GST filing framework involving GSTR-1, GSTR-2 and GSTR-3, if the seller does not pay tax in stipulated time, the buyer has to reverse the credit availed, along with interest.

“[In the proposed model] the credit for buyers would be restricted to the extent the supplier is uploading invoices,” said Pratik Jain, leader-indirect taxes at PwC India. Buyers would be able to check invoices uploaded by the seller in real time, Jain told BloombergQuint.

This model was discussed in a meeting of state and central government officers today. Once finalised, there would a transition period of six months to move to the new return filing framework.

Sugar Cess On Cards?

The GST Council is also likely to consider levying a cess on sugar – a proposal that was opposed by state government officials in today's meeting, since states do not get a share of the cess collections. The quantum of cess proposed on sugar is around 5 percent or an ad valorem rate, two officials quoted above said.

This comes after the government decided to provide a subsidy of Rs 5.5 per quintal to sugarcane farmers on Wednesday. Food Minister Ram Vilas Paswan had said last week that the government will consider imposing a sugar cess and cutting the GST rate on ethanol to help mills clear dues worth Rs 19,000 crore to sugarcane farmers.

Jain said the introduction of a sugar cess would be a “bad move". Cess on sugar was abolished after the implementation of GST; reintroducing the levy would initiate a trend where various other cesses might follow, he added

“If the government intends to increase its revenue, it can do so by increasing the GST rate on sugar rather than imposing a cess,” he said.

Central government officials had also proposed lowering the GST rate on ethanol to 12 percent from 18 percent. This too was opposed by state government officials, one of the people quoted above said.

State-Owned GSTN?

The Council may also take a call on making GSTN a public sector enterprise. The central government has proposed to buy the remaining 51 percent stake in the not-for-profit company from private players.

The central and state government currently hold 24.5 percent stake each in GSTN while the remaining 51 percent is held by HDFC, HDFC Bank, ICICI Bank, NSE Strategic Investment Co and LIC Housing Finance Ltd, according to data on GSTN's website.

The central government is looking to buy out the entire stake held by private players as it fears that traders' data may get compromised, two of the officials said. Turning GSTN into a state-owned company will bring it under the purview of the government's data protection norms, they added.

As part of the government's proposal, the current terms and conditions of GSTN's employees will continue for the next five years.

Representatives of state governments, however, raised some concerns on the independence of GSTN should it be converted into a state-owned entity.