{"id":34097,"date":"2018-10-30T15:49:26","date_gmt":"2018-10-30T10:19:26","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=34097"},"modified":"2018-10-30T15:49:26","modified_gmt":"2018-10-30T10:19:26","slug":"gst-council-to-tighten-norms-for-composition","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/gst-council-to-tighten-norms-for-composition\/","title":{"rendered":"GST council to tighten norms for composition\u00a0"},"content":{"rendered":"<p><a href=\"http:\/\/www.thehindu.com\/business\/Industry\/gst-council-to-tighten-norms-for-composition-scheme\/article20068714.ece\"><b>GST council to tighten norms for composition<\/b><\/a><b>\u00a0<\/b><\/p>\n<p><b>Context<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The twenty-third meeting of the Goods and Services Tax (GST) Council in Guwahati is all set to tighten the noose on players who have started splitting their business operations into smaller entities to avoid higher tax liabilities.<\/span><\/li>\n<\/ul>\n<p><b>What are the new steps?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Council is also set to cut tax rates on a large number of product lines.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Council is expected to further liberalize the Composition Scheme for small businesses and traders to pay a flat and low tax on their turnover.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The annual turnover eligibility threshold is likely to be raised to \u20b91.5 crore from the \u20b91 crore limit.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A proposal to permit firms making inter-State good supplies to participate in the Composition Scheme is in consideration.<\/span><\/li>\n<\/ul>\n<p><b>The emergence of parallel economy<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The government is anxious about the emergence of a parallel economy despite the restrictions on the Composition Scheme, whose original threshold limit was just \u20b975 lakh a year.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A Group of Ministers were asked to simplifying the Composition Scheme and they have recommended a new regulation that would bar all associated enterprises from participating in the scheme, if their combined turnover crosses the specified threshold limit.<\/span><\/li>\n<\/ul>\n<p><b>What is happening?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Businesses are getting fragmented to take advantage of the Composition Scheme. Existing firms are creating multiple entities so that the turnover of each entity remains below the threshold.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">This will not only result into a loss of revenue for the exchequer but also dents the ease of doing business in the country.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Central and State GST laws already define associated enterprises in line with the Income Tax Act, which lays down, among other parameters, common management, control and shareholding patterns among different firms to determine if they are linked.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The restriction on inter-State supplies by businesses under the Composition Scheme could also fuel the prospects for more informal trade outside the tax net.<\/span><\/li>\n<\/ul>\n<p><b>Restaurant rates<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The group of ministers have also recommended harmonizing the tax rates on all restaurants to 12% instead of differential rates for those that have air-conditioners or a liquor licence.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The revenue department is worried about a potential revenue loss of \u20b94,000 crore from the move as well as the implications of offering such businesses input tax credits for their raw materials and rent.<\/span><\/li>\n<\/ul>\n<p><b>No resolution yet<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Group of Ministers has still not been able to arrive at a consensus on the question of whether supplies from small firms that are part of the Composition Scheme should translate into input tax credits for larger firms who buy from them. <\/span><\/li>\n<\/ul>\n<p><b>What is Goods and Services Tax (GST)?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">GST is an indirect tax reform which aims to remove the tax barriers between states and create a single market.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It is a single tax on the supply of goods and services, right from the manufacturer to the consumer.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Government had introduced the 122nd Amendment Bill, 2014, in the Parliament to facilitate the introduction of GST in the country.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Bill was finally passed by both the Houses in 2016<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It is a consumption based tax\/levy. It is based on the \u201cDestination principle.\u201d<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">GST is applied on goods and services at the place where final\/actual consumption happens.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It came into force from 1 July, 2017.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It is levied at multiple rates ranging from 0% to 28%.<\/span><\/li>\n<\/ul>\n<p><b>There are three components of GST:-<\/b><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">1.<\/span> <span style=\"font-weight: 400;\">Central GST (CGST) \u2013 it will be Levied by Centre<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">2.<\/span> <span style=\"font-weight: 400;\">State GST (SGST) \u2013 It will be levied by State<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">3.<\/span> <span style=\"font-weight: 400;\">Integrated GST (IGST) \u2013 It will be levied and collected by Central Government on supply of goods and services<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><\/p>\n<p><b>Detailed provisions of GST Act:<\/b><\/p>\n<ul>\n<li><b><span style=\"font-weight: 400;\">The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services.<\/span><\/b><\/li>\n<li><span style=\"font-weight: 400;\">In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Under current laws only the Centre can impose a tax on services. GST will empower states to collect service taxes<\/span><\/li>\n<\/ul>\n<p><b>What was the need for GST?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The exclusive division of fiscal powers between the states and centre government has led to a multiplicity of indirect taxes in the country.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Multiplicity of taxes at the State and Central levels has resulted in a complex indirect tax structure in the country that is ridden with hidden costs for the trade and industry.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">In the prevailing tax systems, there were several cases where the government has not been able to detect evasion and loss of tax revenues.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">VAT rates and regulations differ from state to state. And it has been observed that states often resort to slashing these rates for attracting investors. This results in loss of revenue for both the Central as well as State government.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Before implementation of GST, taxes used to \u2018cascade\u2019, with the levied on several inputs (good or service) that have already been taxed, along with inputs to those inputs.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Cascading of tax leads to inefficient tax collection and evasion of taxes.<\/span><\/li>\n<\/ul>\n<p><b>What are the objectives of GST?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">To eliminate the cascading effects of taxes: for example tax on tax, on production and distribution of goods and services across the country.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">One Nation, One Tax: Uniformity of tax rates across the India by subsuming all indirect taxes at the centre and state levels.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">To reduce tax evasion and corruption.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Increasing tax to GDP ratio and revenue surplus.<\/span><\/li>\n<\/ul>\n<p><b>What are the benefits of GST?<\/b><span style=\"font-weight: 400;\"><br \/>\n<\/span><b>Benefits from GST:<\/b><\/p>\n<ol>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It will help to get rid of the current patchwork of indirect taxes by simplifying them.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It will enlarge the tax base for larger resource generation.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Due to simplification of tax structure, large scale sectors will benefit as there will be one general rate to be paid by all companies.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The cascading effect of taxes will reduce in the supply chain thereby reducing production costs making exports more competitive<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It can facilitate seamless movement of goods across states<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It will reduce the transaction costs of businesses.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The GST is expected to reduce manufacturing costs as logistics cost will decline. It will boost productivity through efficient resource allocation and greater tax compliance.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">GST will accelerate the growth and economy of the nation as it will make the industry more competitive and efficient.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">positive credit profile of India at rating agencies because this shows government\u2019s will to improve ease of doing business<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Will facilitate MAKE IN INDIA by making one India oppose to current regime which fragment India along state lines which levied different states tax.<\/span><\/li>\n<\/ol>\n<p><b>What are the criticisms of GST?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The new tax system does away with the barriers to free trade within and between States, effectively turning India into a single free market for goods and services.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">GST being a Consumption tax decreases the income in some states where consumption is low and every state will see some revenue loss as many other local body taxes are also merged with GST.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Some kept out of Basket: Alcohol, real estate, electricity are kept out of GST which defeats the very own purpose of having one tax.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Though anti-profiteering provisions are given the act, chances are high that due to high rates the seller may keep the profit to himself, putting the load on consumers.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>GST council to tighten norms for composition\u00a0 Context The twenty-third meeting of the Goods and Services Tax (GST) Council in Guwahati is all set to tighten the noose on players who have started splitting their business operations into smaller entities to avoid higher tax liabilities. What are the new steps? The Council is also set&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/gst-council-to-tighten-norms-for-composition\/\">Continue reading <span class=\"screen-reader-text\">GST council to tighten norms for composition\u00a0<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-34097","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704739659},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/34097","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=34097"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/34097\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=34097"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=34097"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=34097"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}