GST Council to cut rates on 150-200 items; SMEs may have to file only one return

To make the process simpler, small firms may be allowed to file of only one summary return form GSTR3B, doing away with filing of GSTR1, GSTR2 and GSTR3

ByShreya Nandi

Tax rates on 150-200 items are likely to be cut from 28 percent, with the GST Council set to approve sweeping changes including simpler procedures and a single return filing form for small firms in its next meeting on Friday.

Top sources in the finance ministry told Moneycontrol that the Prime Minister's Office (PMO) is steering the proposed changes aimed at reducing tax and compliance burden for millions of small traders, ease rules and cut rates on many goods and services that currently fall under the 28 percent slab.

The GST Council—the apex body for decision making headed by finance minister Arun Jaitley—will review the return filing process in its next meeting that will be held in Guwahati.

A group of ministers (GoM) headed by Bihar Finance Minister Sushil Modi will present a paper to the Council, proposing crucial changes in the return filing process, an official said.

To make the return filing process simpler, especially for small taxpayers, the GoM may recommend filing of only the summary return form GSTR3B, and doing away with filing GSTR1, GSTR2 and GSTR3.

GSTR3B is a summary form, which a business is supposed to file for July to December before the 20th of the next month. However, a taxpayer does not have to provide invoice level information in the form.Currently, businesses have to file returns in GSTR1 (outward supplies or goods that they sell), GSTR2 (inward supplies or inputs and raw material that they buy) and GSTR3 (finalisation of outward and inward supplies of taxable items) and one annual return.

Last month, the Council approved a proposal to allow small tax payers with a turnover of less than Rs 1.5 crore filing quarterly returns, compared to the earlier requirement for filing monthly returns to reduce compliance burden.

The government has also, time and again, extended return filing dates. Last week, the date for filing GSTR2 form for July, was extended till November 30 from October 31. July GSTR-3 returns for July were also extended by a month to December 11.Since its implementation from July 1, the new indirect tax system has faced criticism owing to the teething troubles including lack of clarity on return filing, errors in invoice matching, and major technical snags on the information technology portal GST Network (GSTN), among others.

According to Pavan Peechara, CEO of a GST Suvidha Provider Adequare, filing of just GSTR3B should not be looked as a permanent option. “Filing of GSTR3B needs to be continued beyond December but it should not be looked at a permanent option. Filing of just GST3B would indicate going back to the self-declaration and audit intensive method, replacing the proposed transparent sharing of data via filing GSTR1,2 and 3,” Peechara said.

Apart from easing the return filing process, rates of daily use items such as furniture, geometry boxes, furniture, cocoa products will be shifted to a lower tax bracket, another government official said.“An exhaustive list is being prepared by the fitment committee (an officials’ panel that proposes GST rates for goods and services). A major overhaul in rates is expected. Changes in rates may not be restricted to moving non-sin goods out of the 28 percent bracket. It could be across other slabs tax (12 and 18 percent),” a senior government official said.

The fitment committee is currently doing the math, as shifting a product into a lower tax slab could have revenue implications. The officials will present its recommendation to the GST Council in its next meeting.The GST Council has addressed a number of issues, particularly providing relief to small and medium enterprises (SMEs) and exporters grappling with procedural irritants, delayed refunds and technical glitches on returns filing.

GST, billed as the country's biggest indirect tax overhaul, has consolidated a dozen of state and centre duties into one single levy. All goods and services have been fitted into four broad slab structure –5, 12, 18 and 28 percent—along with a cess on luxury and demerit goods such as tobacco, pan masala and aerated drinks.

The Council has till now rationalised rates of over 100 items and non-sin items under the 28 percent slab could also be brought down to a lower rate.The reduction in rates will be a significant step towards simplification of GST to support the trader community ahead of the election in Gujarat that will be held in two phases—December 4 and 11.

Sources said that the SMEs have been hit by the implementation of the new indirect tax system and crucial steps will be taken to mitigate their challenges.