GST Council may meet next week; NAA extension likely to be on agenda

The next meeting of the GST (goods and services tax) Council could take place as early as next week after approval from the new finance minister. The focus will be on tackling the unfinished agenda requiring immediate attention like tax structure for solar projects, uniform tax rate on state-organised and state-authorised lotteries, taxing non-potable alcohol besides certain changes in the law, extension for the National Anti-profiteering Authority (NAA) and rate rationalisation.

“The next meeting is now expected anytime in early June. Though items that need urgent attention will be taken up first, issues like inclusion of natural gas along with other petroleum products and merging of the 12 per cent and 18 per cent slabs will be discussed in subsequent meetings as they are high up on this government’s agenda,” said an official.

The Delhi High Court had last month directed the government to review the tax structure for solar power projects. The government had provided a deemed valuation provision that entailed taxing 70 per cent of contract value as goods, taxable at 5 per cent, and balance 30 per cent as services, taxable at 18 per cent. However, the industry argued that the ad-hoc valuation did not provide a fair estimate of the actual split of goods and services. Typically, the said ratio in the solar sector is 90:10, the industry argues.

Besides, the divergent rulings by the Advance Ruling Authorities added to the confusion and a writ was filed by the Solar Power Development Association. “We are doing consultations with the Central Board of Indirect Taxes and Customs (CBIC) and the ministry of new and renewable energy,” said another government official.

The Council may also take up the case for extension of the NAA’s tenure, which is coming to an end in November. The NAA Chairman B N Sharma has informally asked for an extension due to pending cases. The Council has asked the NAA for data on the number of orders passed and the status of pending cases to come to a decision on extension. “There are two views. One is that the NAA should get a finite extension with a fixed timeline to clear cases, as was the objective initially. The other view is that the NAA may be needed for a longer time as certain items like petroleum and alcohol are yet to be brought under the GST ambit,” said a government official.

According to the anti-profiteering rules under GST, “benefits of input-tax credit should have been passed on to recipients by way of commensurate reduction in prices”. The authority is still catering to complaints related to the rate reductions made in July last year on a number of consumer durables and on 178 items in November 2017.

With GST shortfall in 2018-19, the Council would also discuss ways to improve revenue by preventing leakages. In April, the collections crossed ~1 trillion for the third time in four months.

“The next GST Council meeting could chart out agenda for the next year or so. Aspects like e-invoicing and other measures to plug tax leakages, timelines for new compliance mechanism to be implemented, further rate rationalisation, and industry-specific issues such as those pertaining to solar industry may be discussed, along with few legislative changes,” said Pratik Jain, partner, PwC India.

The Council will also take up the report by the group of ministers led by Maharashtra Finance Minister Sudhir Mungantiwar, which has favoured a uniform GST rate of 18 per cent or 28 per cent on state-sponsored and state-authorised lotteries. The SGST rate on state-organised lottery could be retained to either 18 per cent or 28 per cent. While the GST rate on state-authorised lottery would be retained at 28 per cent or brought down to 18 per cent. “Kerala is not in favour of reducing rate on sate-authorised lotteries, while Maharashtra, Punjab and Assam are keen,” said a government official.

Besides, the Council may consider levying GST on extra neutral alcohol (ENA), which is a key ingredient of alcoholic beverages and medicines. The proposal is to levy an 18 per cent GST on ENA as the pharma industry is unable to avail input-tax credit on the same. Alcohol for consumption and potable alcohol is constitutionally out of GST, whereas its input — ENA — had been a grey area. Industrial alcohol is within GST. The Centre has taken a view of additional solicitor general, who has pointed out that ENA is liable to GST as it is not potable alcohol.

The Council is also expected to deliberate and decide on inclusion of excluded sectors like oil & gas, real estate (constructed properties), electricity, etc, and rate rationalisation on cement.

K.C MAHATO

K.C. MAHATO is expert in GST Consultancy and has an experience of more than 10 years in Indirect tax, Direct Taxes and the accounting profession. He is also giving GST Practical Training to Students and SME Traders. He provide services that most effectively meet client needs. His experience is concentrated in performing GST Laws & Practices and compliances of gst in a variety of industries.