The 49th meeting of the Goods and Services Tax (GST) Council was recently conducted, where key decisions were taken to improve the old indirect tax regime. The primary focus of the meeting was the constitution of a new GST Appellate Tribunal. As disputes under the previous system continue to rise, a consensus has been reached to create this institution to address these issues.
The GST Appellate Tribunal
The GST Appellate Tribunal is set to be a national tribunal mechanism with state benches for dispute resolution. The tribunal will handle the increasing number of disputes under the GST regime that currently burden High Courts and other judicial bodies. The Finance Bill to be presented this year will likely include legislative provisions enabling the establishment of this tribunal.
The GST Tribunal will have a principal bench in New Delhi and various other benches or boards in the states. Each bench will consist of two technical and two judicial members, ensuring equal representation. However, all four members will not preside over every case – hearings will be decided on the threshold or value of dues involved.
Compensation and Penal Charges
The GST Council approved repayment of the remaining Rs 16,982 crore for June 2022. Additionally, GST compensation of Rs 16,524 crore was finalized for six states/UTs: Delhi, Karnataka, Odisha, Puducherry, Tamil Nadu, and Telangana.
The council also agreed to lower penal charges for late filing of annual returns by businesses turning over up to Rs 20 crore a year. An Amnesty Scheme has been introduced for taxpayers unable to file three statutory returns, offering conditional waivers or reductions in late fees for such filings.
Rate Changes and Efforts to Plug Tax Evasion
Several items have had their GST rates changed, including pencil sharpeners and rab (liquid jaggery). Furthermore, GST exemptions have been extended to educational institutions and central and state educational boards for conducting entrance examinations through any authority, including the National Testing Agency.
To combat tax evasion, compensation cess levied on pan masala and gutkha commodities will shift from an ad valorem basis to a specific tax-based levy which will boost first stage collection of revenue. Exports will now only be allowed against letters of undertaking assuring GST compliance.
About the GST Council
The GST Council is a joint forum composed of the Center and the states. The President established it per Article 279A (1) of the amended Constitution. Members include the Union Finance Minister (Chairperson), the Union Minister of State (Finance) from the Center, and a nominated minister in-charge of finance or taxation or any other minister from each state.
GST and its Concept
GST is a value-added tax system that applies to the supply of goods and services. It is a comprehensive indirect tax introduced in India in July 2017 through the 101st Constitution Amendment Act, replacing indirect taxes like excise duty, VAT, service tax, and luxury tax.
Tax Structure under GST
GST divides into three categories: Central GST (covering Excise duty, Service tax, etc.), State GST (covering VAT, luxury tax, etc.), and Integrated GST (IGST) covering inter-state trade. IGST is not a tax but a system that coordinates state and union taxes.
Challenges with GST
Despite its merits, the GST system in India faces several challenges such as complexity, high tax rates, a heavy compliance burden, technical issues, negative impact on the unorganized sector, and lack of clarity on certain aspects of the regime.
A Way Forward
Solutions proposed include simplifying compliance processes, providing easier access to information, increasing support for taxpayers, addressing technical glitches, raising awareness and understanding of the GST system among small businesses and traders, and improving communication and coordination between the central and state governments.