Panel for composition scheme tax cut,12% GST on AC eateries

Panel of state finance ministers suggested fresh changes on Sunday to the Goods and Services Tax (GST), including a cut in the levy at restaurants and a flat 1% tax for small traders, manufacturers and eateries that opt for the less onerous composition scheme.

The scheme, which offers easier compliance, has received a lukewarm response, prompting the GST Council to give it a re-look.

Currently, the threshold for the composition scheme, which had earlier been Rs 75 lakh, stands at Rs 1 crore.

The option of paying a single tax on revenue of all goods, termed the composition scheme, was specially devised for small businesses and its objective was primarily to make GST compliance easy.

For traders, it recommended a lower rate of 0.5 per cent in the case of a cumulative turnover of exempted and non-exempted goods, and one per cent for non-exempted goods.

The other members of the GoM are Bihar Deputy Chief Minister Sushil Modi, Jammu and Kashmir Finance Minister Haseeb Drabu, Punjab Finance Minister Manpreet Singh Badal and Chhattisgarh Minister of Commercial Taxes Amar Agrawal. But the unintended outcome of these recommendations, if adopted by the GST Council, will be more complexity, not less.

The group of ministers, constituted by the Council, has suggested allowing interstate sales for composition dealers.

There are over 1 crore registered businesses under the GST, which has amalgamated over a dozen taxes to make India a single market for seamless flow of goods and services. "Hence, dealers should be allowed to make interstate sales", said Sarma.

However, the GoM, headed by Assam Finance Minister Himanta Biswa Sarma, has also recommended that rates applicable under the composition scheme be tweaked as well.

"We feel that restaurants must continue to get input tax credit". "But, the Council should decide what should be the slab of tax, considering the revenue loss", Sarma added.

Sarma said that on one issue - allowing enterprises in the composition scheme to avail of input tax credits on business-to-business transactions-the panel could not reach a consensus and that this matter will be referred back to the GST Council. For example, it is not very clear how filing of GST returns on a quarterly basis will help if taxes still need to be paid and filed monthly. Additionally, it suggested a reduction in late filing fees to Rs 50 per day, against Rs 200 at present. Establishments can now sign up for the scheme by 31 March 2018, an extended deadline provided by the panel. In early October, it slashed rates on 27 items and eased the frequency of filing returns to four every year from twelve for firms with an annual turnover of less than Rs 1.5 crore.

While a regular taxpayer has to pay taxes on a monthly basis, a composition supplier is required to file only one return and pay taxes on a quarterly basis. Besides, there is no requirement of invoice-wise details or Harmonised System of Nomenclature codes in their returns. The scheme is optional under which manufacturers other than those of ice cream, pan masala and tobacco products have to pay a 2 percent tax on their annual turnover.

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