When goods and services tax (GST) was implemented on 1 July, after years of delays, there was apprehension as to how corporate India would handle the transition to the new tax regime. However, most companies and other assessees started doing business quickly and were able to issue tax invoices.
The key challenge has been meeting the first set of compliance requirements. The government had delayed the filing of the first set of monthly returns by one month (i.e. July supplies to be reported in September rather than August) except for a summarized version called the GSTR-3B. Both the government and taxpayers will understand the implications of GST implementation once these forms are processed.
Even as GST is adopted, the government continues to review and monitor the impact of GST on various sectors and is welcoming input for improvements and anomalies. GST Council meetings are being held on a regular basis to address various issues including GST rates. Based on such input, the GST rates in respect of several services were discussed in the 20th GST Council meeting, held on 5 August. In the light of decisions taken in this meeting, the government published various notifications on 22 August. Highlights of the changes are discussed below.
Goods transport agencies (GTAs) have been given an option to pay GST at 12% after utilizing the credit of input tax in respect of goods and services used in supplying the transport service. If the GTA opts for payment of tax under forward charge and hence discharges GST at 12%, there will be no reverse charge liability on the recipient. Likewise, the suppliers of services of renting of motor cab and transportation of passengers by motor cab where cost of fuel is included in the consideration have been allowed to take input tax credit on their procurements on payment of GST at 12% as against 5% without input tax credit.
The government also revised rates in respect of certain specified composite supplies of works contract services, such as those relating to construction, repair, maintenance, etc., of infrastructure such as roads, bridges, etc., historical monuments and other specified activities. The reduction in rate to 12% is a relief to the construction and works industry as these services were exempt under service tax law but suddenly attracted a rate of 18% in the GST regime.
The position in respect of printing services has been clarified where only content is provided by the publishers to the printers. The reduction of GST rates on such printing services from 18% to 12% has also provided relief to the printing industry as the taxes charged on these printing services accumulated as cost owing to the exemption granted to printed books.
The government also provided relief to the textile industry by notifying the rate of job work in relation to textiles and textile products falling under specific chapters at 5%.
One of the notifications provided additions to the list of service exemptions. The services provided by fair price shops to the central and state governments by way of sale of specified goods under the public distribution system, where consideration is in the form of commission or margin, have been granted exemption. Exemption is also provided, subject to fulfilment of specified conditions, in respect of services provided by and to FIFA and its subsidiaries in relation to any events under FIFA U-17 World Cup India 2017.
The other important notification relates to the electronic commerce industry. For services provided by way of housekeeping activities such as carpentry, plumbing, etc., through an e-commerce operator, the operator has been made liable to pay tax as if it is the supplier of such services unless the person supplying the services is registered.
In addition to the above-mentioned notifications, the government has allowed taxpayers to utilize the credit carried forward under the earlier tax regime for payment of GST for the month of July on the condition that the taxpayer file Form GST TRAN-1 by 28 August along with GSTR-3B.
There are bound to be hiccups in the initial period of any regime change and GST is a massive change. There are however concerns regarding the IT infrastructure. The administration is providing continuous support to ensure a smooth transition to minimize the challenges faced by the taxpayers. With every GST Council meeting, a new revelation will be made in favour of the smooth functioning of the tax regime. It will be worthwhile to keep a close watch on the outcomes of these meetings.
L Badri Narayanan is a partner and Geetika Srivastava is a joint partner at Lakshmikumaran & Sridharan.
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