The Goods and Service Tax (GST) Council had earlier formed a panel that was assigned with the task to determine the feasibility and possible consequences of offering tax incentives to users on digital transactions. The report presented by the panel recommends against the proposal, giving the reason that it will strongly affect tax revenues.
The panel was chaired by Bihar’s finance minister and deputy chief minister Sushil Kumar Modi. Other members included Gujarat deputy chief minister Nitinbhai Patel, Haryana excise and taxation minister Capt Abhimanyu, West Bengal finance minister Amit Mitra and Punjab finance minister Manpreet Singh Badal.
The final decision, however, will be made by the GST Council, probably in its next meeting. The panel will present its report to the council, recommending to put off any such incentives for a year. “The Group of Ministers (GoM) will be recommending to the Council that it may think about the proposal of incentivizing digital transaction again after a year. The GoM is recommending deferring the proposal for a year,” said Sushil Modi while talking to the reporters.
Modi explained that the panel has decided to recommend to defer the incentive plan for digital payments for a year as it is expected to have serious revenue implication. “Let returns and GST revenues stabilize, then we can think about incentivizing digital transaction,” he said.
The decision on the implementation of the Reverse Charge Mechanism (RCM) is also on hold for some time now. A separate panel of ministers chaired by Mr. Sushil Modi was tasked to make a decision in this matter. The panel is going to make its recommendations at the 28th meeting of GST Council which is scheduled for July 21. As per the report, the panel is going to recommend the Council to have the power to notify the registered taxpayers who fall under the RCM. The panel will also recommend that the Council clearly define a class of registered taxpayers who would have to pay taxes on the reverse charge basis.
“We have recommended omitting the present Section 9(4) and introducing a new Section 9(4) which will permit the government, on the recommendations of the GST Council, to notify specific class of registered persons who would be covered under RCM provision,” Modi said.
The proposal to offer a 2% concession in the tax rate on goods/services for which payment is made by cheque or via any digital mode was discussed by the GST Council in its 27th meeting in May. The discount is proposed to be offered only on items on which the current GST rate is more than 3% and the maximum discount is to be capped at 100 rs per transaction.
On June 29, the GST Council had further postponed the decision on the levying of RCM for another 3 months, till September 30. Under the RCM law, a registered dealer buying goods from an unregistered dealer is required to pay tax on such supplies.