It is a significant time for everyone as the year comes to a close – not only 2019 is ending, with it ends the decade that has witnessed radical tax reforms under the Indian economy. These reforms established the regime of the biggest indirect tax under the notion of one nation, one market and one tax system.
Seven GST council meetings were conducted this year, each with the agenda to correctly levy GST, modify GST tax rates and ensure efficient payment of tax. Each of these meetings resulted in significant amendments to GST laws, the widening of the GST net as more goods and services were brought under the GST radar, changes in tax slabs and finally, measures to ease tax payment and curb tax fraud. In this article, we throw light over some of the crucial amendments and updates around GST in 2019.
Rate cuts that were welcomed in 2019
• Hospitality industry
Reeling under the pressure of an economic slowdown several rate cuts were announced in 2019. The GST council approved to cut rates on hotel tariffs in a bid to boost tourism in the country. The tax on room tariffs of up to Rs. 7,500 was slashed from 28 percent to 12 percent – a move welcomed by the hospitality industry.
• Corporate tax
A widely appreciated rate cut and one that has been crowned as the best reform so far by experts, the Corporate tax rate cut was a bold move on the part of the current Government. Markets surged after the Government announced the slash in corporate tax rate from 30 percent to 22 percent for domestic firms and down to 15 percent for manufacturing firms.
Important circulars in 2019
• Sales promotion schemes under GST
After much speculation on the taxability of free goods and services under sales promotions and discount schemes, the CBIC issued a circular with clarifications. For buy one get one offers and free complimentary product with purchase offers, the supplier would be eligible to claim ITC on inputs, input services and capital goods used in the supply of goods or services or both as part of such offers. The same is not offered for brands and companies offering free samples and unrelated gifts.
• GST Circular on BPOs and IT Service Providers
Earlier in 2019, the Government had issued a circular that said anyone engaged in the facilitation of supply of goods/services would not be considered to be engaged in export and would now be considered as an intermediary unless it is on his own account. This circular meant that BPO, KPO and IT services were treated as intermediaries under GST laws. As such any refund claims by BPO, KPO and IT services were denied. However, this circular was later withdrawn and BPO, KPO, and IT services could finally have some tax relief.
Simplification of GST returns
Probably the biggest highlight of GST this year and one that has drawn many debates and discussions – in its 31st GST council at the end of 2018, India announced the implementation of a New GST Returns system. This system is likely to be implemented in April 2020 and will contain simplified return forms for ease of filing across all taxpayers registered under GST. Currently, in its trial phase, this New GST Returns System will be introduced in a phased manner to familiarise users with the annexure forms of the system.
The new return systems would follow a workflow-driven mechanism instead of the current supplier-driven one requiring a lot more details including purchases from unregistered dealers – this could mean firms would be required to alter their Enterprise Resource Planning Systems. Additionally, these new returns will have taxpayers contribute to India’s steps toward digital transformation. Invoice uploading will no longer be limited to a window of opportunity, taxpayers can upload invoices to the GST portal 24/7 and even acknowledge or reject an invoice in real-time. Nearly 80% of the tables in the Return forms will be auto-populated and the taxpayer will have to fill in the fields for reporting outward supplies and availing of ITC based on the invoices uploaded by suppliers. For those reporting nil sales can file their returns via SMS.
With both the Central and State Governments involved in the process of disbursal of fund claims, taxpayers have been having difficulties in completing the process for filing refunds – obviously leading to a pile-up of taxpayer grievances. To address this situation, the GSTN issued an advisory for the implementation of an online refund processing system on the GST portal, with disbursal by a single authority and called for disabling the manual filing of refund applications. Under this system, all communication concerning refunds will be conducted online and the refund, once approved, will be disbursed by an accredited bank of the Central Board of Indirect Taxes and Customs (CBIC) through the Public Financial Management System after validation of the assessee’s bank account. All communication while this process is in progress will be conducted over email and SMS. It is expected that end-to-end online processing of refunds would facilitate the Government’s
objective of introducing online assessments in the future.
What’s in store for 2020?
Let’s take a quick peek at how GST might pan out in the next twelve months. 2020 will hopefully bring in a better regimented, efficient and user-friendly tax filing process with New GST returns or GST 2.0. The New Returns system will also be supported by e-invoicing, a convenient way to match invoices using a standard invoice format that will allow the interoperability of invoices across various accounting software.
For us as a tax automation firm, we are excited to see the rise in digital natives and how organizations are warming up to the idea of using artificial intelligence-led technologies for automating tax filing. As the Government moves to integrate multiple user services for ease and convenience of the taxpayer, including possible integration of FASTag, e-invoicing and e-way bills, 2020 could be a riveting year for the AI-led accounting automation industry.
Views expressed in this article are the personal opinion of Manjula Muthukrishnan, Managing Director – India, Avalara Technologies Private Limited.
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