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22nd GST Council Meet – A critical analysis


22nd GST Council meet which concluded yesterday was nothing more than a political drama. Relief to small traders and taxpayers whose annual turnover is less than Rs. 1.5 crores is merely an eyewash. It is going to make the procedures more cumbersome and lead to more tax evasion.

1. The basic concept of invoice level matching has now been virtually abolished. The person buying goods from a small taxpayer (who is liable to file returns and pay tax on quarterly basis) shall claim the input tax credit on the basis of the invoice in his possession without matching it on monthly basis. Also government has agreed to provide input tax credit without payment of tax by the small taxpayer. It is illegal and against the provisions of section 16(c) of the Act. Law needs to be amended in this regards. The small taxpayers shall now become the den of tax evasion as people will start forming multiple entities and fraudulent acts such as bogus GSTIN shall now commence.

2.The turnover limit for composition scheme has been increased from Rs. 75 lakhs to Rs. 1 Crore. The person can now opt for such scheme till 31.03.2018. Mere increase of Rs. 25 lakhs will not make a difference. The restrictions of not selling the exempted goods or selling outside the state have not been removed. There is virtually no use of composition scheme now as the taxpayer whose turnover is less than Rs. 1.5 crores have also been given the option to file quarterly returns. Also the service sector which contributes over 35% of the GDP has still been kept out of the composition scheme.

3. A welcome step that the service providers who are availing the threshold exemption of Rs. 20 lakhs shall now be allowed to make inter-state services. This will boost the freelancers who are exporting their services or are providing the service to other states. Also now the consultants like Chartered Accountants etc. who usually provide interstate services shall now opt to remain unregistered. This is a welcome step and certainly a big relief for small service providers. 

4.Government is already showing signs of abolishing the reverse charge mechanism. The council decided to abolish the reverse charge in cases where a registered person buys any goods/services from an unregistered person. It should be noticed that the activities which are specifically notified to be covered under reverse charge shall continue to be taxed under reverse charge. For example, Advocate services 2) Recovery Agent Services etc. There is only partial relief which will be reviewed after 31.03.2018. The reverse charge mechanism in case of unregistered sellers is a bad idea as it virtually abolishes the minimum threshold benefit. The government should completely withdraw it.

5.The government has also provided that no GST shall now be paid on advances received by a registered person whose turnover is up to Rs. 1.5 crores. The intent of GST to stop tax evasion in name of advances has now vanished. People will create entities through which such advances will be routed and the famous entry operation business will get its pace again. Tax on advances was introduced in order to curb the cash practices but it seems that government has forgotten all that and has given another opportunity to generate black money. Moreover government has to get the law amended in order to enforce such provisions.

6.The mechanism of e-way bill which we thought would curb the illegal movement of goods has now been postponed till 31.03.2018. This means that the taxpayer can now continue to send the goods as per old law without any checks. By the time e-way bills will be introduced, taxpayers will find means and resources to avoid e-way bills. E-way bill should have actually come on day one of GST, but it seems that government is comfortable if the taxpayer evade tax for another 6 months. Government has no mechanism at all to keep a check on illegal movement of goods. It is the roll of inspector raj again.

7.Government has announced that exports refunds for the month of July shall be given by 10.10.2017 and for the month of August the refunds shall be ordered by 18.10.2017. It looks like is in such s confused state that they themselves don’t know what they are doing. I fail to understand that till the time GSTR 1 , 2 and 3  for the month of July and August are not filed, how shall the government process the refunds. It is merely an eyewash to create newspaper’s headline.

The government should sit back and give a considered thought as to what have they made of GST. It is no more Goods and services Tax, it is “God Save Taxpayers. Because if this continues, government should forget about the 2019 general elections.

Thanks and Regards


Keshav R Garg
(B.Com, FCA, CS, ISA (ICAI))
Author: Bharat's GST Ready Reckoner
            A Handbook on GST

Member: Indirect Tax Committee of CII, 
Founder: MyGst.MyTax Foundation
Adviser: Industries Association of Chandigarh
Adviser: Chambers of Chandigarh Industries

Address: 3328, First Floor, Sector 27 D, Chandigarh, India - 160 019
Phones: +91-172-461-3328, +91-98880-90008

Mail: keshavgarg@kdai.in

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