GST Council decisions mixed bag, say analysts

September 20, 2019 11:14 pm | Updated 11:14 pm IST - NEW DELHI

The decisions taken by the Goods and Services Tax Council has elicited a mixed response from tax analysts and economists, with some recognising the need to minimise the revenue loss, but others questioning the increase in rates of some items to the highest 28% slab.

Yet others say that the decision to exempt certain categories from filing annual returns for financial years 2017-18 and 2018-19 means that the establishment of the originally envisaged GST structure still remains elusive.

“While the proposed GST rate cuts are indeed a good news to promote hospitality industry, the GST Council seems to have rightly refrained from offering larger rate cuts across other demanding sectors considering the overall revenue involvement as an immediate priority,” Krishan Arora, partner, Grant Thornton India, said.

“While the rate cut was expected for automobile sector and the hotel industry, a very limited benefit has been announced so that the fiscal discipline is maintained,” Abhishek A Rastogi, Partner, Khaitan & Co. said. “The need is to identify those sectors which would lead to employment growth.”

“Taxing anything at 28% is not a good sign at all,” Mr. Rastogi added, referring to the Council’s recommendation to increase the rate on caffeinated beverages to 28% with a 12% cess. “To make up the numbers, rate rationalisation is essential to merge 5% and 12% to perhaps 8%, and 12% and 18% to perhaps 15%.”

The Council also decided to waive the filing of GSTR-9A for those taxpayers in the Composition Scheme for financial years 2017-18 and 2018-19, and also made it optional for those taxpayers with a turnover of up to ₹2 crore a year to file the GSTR-9 form for those years.

“On the ease of compliance front, while small industry players especially trading community and unorganised sector would be happy with relaxation on filing of annual returns and audits for two years, the government needs to also ensure adequate alternate steps to control revenue leakages and ensure adequate compliance levels,” Mr. Arora added.

“The extension of the compliance deadlines once again doesn’t augur well,” Mekhla Anand, partner, Cyril Amarchand Mangaldas, said. “GST Version 2 which required a consolidated relook at the tax slabs as well as compliance modalities continues to remain an elusive reality.”

Commenting on the reduction in GST rate on hotel room rates, Zubin Saxena, managing director and vice-president, operations, South Asia, Radisson Hotel Group, said: “Widening the net for hotels to be charged at 12% GST is a step in the right direction and will help the hospitality business to slightly ease off amongst several pressures. Reducing the rate for hotels above ₹7,500 also bodes well for the industry.”

SIAM’s reaction

SIAM president Rajan Wadhera said the auto industry was very hopeful of GST reduction. It is clear that there is no reduction of GST rate on vehicles, from 28% to 18%.

The sub-segment of 10-13 seaters, which is of less than 4-metre, has seen reduction in GST Compensation cess, which is a long-pending request of SIAM and is a positive step by the government. SIAM had requested for abolishing compensation cess for the whole segment of 10-13 seaters vehicles, however, the benefit has been partially met.

The industry has to find its own balance to enhance demand. We hope the festive season with positive financial market boost noticed, will bring positive consumer sentiments, he said.

We are hopeful that all the recent measures by government will support growth and once the market stabilises and the revenue rises to comfortable levels, government would rationalise GST levels and reduce rates on vehicles, he added.

(With inputs from Lalatendu Mishra)

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