Clarity on anti-profiteering, cross-charge of employee cost among issues that need faster resolution, say experts
Soon a new government will be in place and preparations for the next round of changes in the GST have begun. This exercise will be formalised when the GST Council meets next month.
Suggestions from various industries bodies have started pouring in. Based on them, officials will prepare a detailed note for the new government so that the matter could be taken up by the GST Council immediately.
“The Council is likely to meet before the General Budget, so that its views could be included in the Budget,” a senior Finance Ministry official told BusinessLine.
As of now, industry bodies have listed at least eight issues to be taken up by GST Council on the priority basis. These include lack of clarity in the concept of anti-profiteering, cross charge of employee cost such as salaries, overheads etc, levy of interest on wrong availment of Input Tax Credit (ITC), eligibility to avail ITC depends upon vendor’s compliance which in turn impacts working capital of the assessee, double taxation on ocean freight paid by the importers, ITC on services related to immovable property, beside others.
On anti-profiteering, industry bodies feel that little clarity over the clause has led to confusion over setting of selling prices for goods. The law doesn’t clarify how the costs incurred on account of transition from GST to non-GST era are to be factored in. It also doesn’t specify the method of passing on the benefits by loss-making units. Keeping this in mind, industries have suggested that provisions of the anti-profiteering clause should be elaborated to clarify the method of computing the benefit and mechanism for passing on the said benefit. This shall enable the industry to take up necessary changes wherever required and avoid unnecessary litigation.
Another important issue is cross charge of employee cost such as salaries and overheads. The issue became headline when an Authority for Advance Rulings (AAR) said that activities performed by employees based at corporate office for the branch office located in a different State (distinct person) shall be treated as a supply of service and thus would be subject to the levy of GST. It has also held that value for the purpose of such supply will include the cost of employees. Industry bodies have desired a clarification in this respect stating that employee cost will not be required to be cross charged from branches/ other units operating under a different GSTIN.
Harpreet Singh, Indirect Tax Partner at KPMG, felt that early resolution on issues such as cross charge of employee costs, double taxation on ocean freight, ambiguity on computation of profits for anti-profiteering etc. are some key issues, where early resolution would augur well for the industry. “Issuance of a Master Circular on all key open issues, similar to the one issued under the erstwhile service tax regime, perhaps could be a good idea for further streamlining the new regime,” he said.
Archit Gupta, Founder & CEO of ClearTax, said the new government must focus on stabilising the current GST structure. Changes announced must be notified and implemented within set timelines.