Page 49 - GSTL_26th March 2020_Vol 34_Part 4

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with revenue surplus, while Andhra Pradesh has slipped to a revenue gap of 13
per cent. from revenue surplus of 2 per cent. last year.
This year, ` 80,000 crore has been collected as Compensation Cess, but
States have been given ` 12 lakh crore. GST authorities expect a Compensation
Cess shortfall to be around ` 48,000 crore this year and the compensation payout
for December-January is already delayed, while only part payment has been
done for October-November.
A series of compliance related measures were also announced, including
waiver of late fee for delayed filing of annual returns for FY2018, FY2019 by enti-
ties with a turnover of less than ` 2 crore. It was also clarified that interest will be
levied on net tax liability from July 1, 2017 for delayed GST payments instead of
gross basis for which the law will be amended accordingly to effect the change
retrospectively. The FM said the Council has asked Infosys to deploy more
skilled manpower, raise capacity of hardware of GST Network to ensure the sys-
tem is glitch-free. The Council has asked Infosys, which has designed the GSTN,
to provide a better GSTN system by July, 2020, she added.
[Source : The Indian Express, New Delhi, dated 15-3-2020]

Reverse charge : Why so shy, GST Council?

The Goods and Services Tax Council has raised GST on mobile phones
from 12% to 18%, the same rate that is levied on phone components, parts and
battery. The move to harmonise the rates of tax on inputs and final output is wel-
come. But it would have been better if the GST Council had lowered the tax rate
on inputs to achieve the same effect.
When the tax rate on inputs is higher than that on the output, Input Tax
Credit is a problem. For 12% of the phone price to be at least as large as 18% of
the value of inputs, value addition in the conversion of inputs into the phone
must be a minimum of 50%. This does not happen in India’s phone manufactur-
ing story. So, the inverted duty structure led to a pile-up of Input Tax Credits
and problems in claiming refunds, blocking working capital for manufacturers.
This had to change. But the rate hike on phones will make them more expensive
from April. The India Cellular and Electronics Association claims this will stymie
domestic consumption. Instead, the GST rate could have been unified down-
wards by lowering the GST on inputs. Higher sales of mobile phones would off-
set any revenue loss due to the reduction of GST on inputs. A review by the
Council, which has deferred revision in GST rates on items such as fertilisers and
footwear, merits consideration.
Lowering the GST for Maintenance, Repair and Overhaul (MRO) ser-
vices to 5% from 18%, with full Input Tax Credit, is welcome. Why the Council
had to think up a newfangled ‘know your supplier’ scheme is difficult to fathom.
If the supplier has GST registration, there is nothing more to know. If the suppli-
er is below the threshold for GST registration, the solution is to make reverse
charge compulsory on all such purchases. The Council should stop shying away
from reverse charge.
[Source : The Economic Times, New Delhi, dated 16-3-2020]

GST LAW TIMES  26th March 2020  145