A simplified returns filing system with single monthly return and incentives for digital payments on retail transactions will be discussed at the 27th meeting of Goods and Services Tax (GST) Council on Friday. Change in ownership structure of GST Network to convert it into a government company and cess on sugar will also be discussed.

The meeting, which is being held by videoconferencing, will discuss the returns filing model finalised by the ministerial panel headed by Bihar’s Deputy Chief Minister Sushil Kumar Modi. As per the proposed model, input tax credit will be provided only on the seller uploaded invoices. The supplier shall be allowed to upload invoices continuously anytime during the month and the purchaser shall also be able to view it simultaneously.

There shall be no system-based matching of input tax credit, implying that credit flow will be based on acceptance of the invoice by the purchaser that has been uploaded by the seller. The misuse of input tax credit due to default in tax payment by the seller shall be controlled by recovery of tax from the seller or reversal of credit from buyer.

Even if approved by the GST Council approves the new returns filing system, it will take time to come through as GSTN, the IT backbone of GST, and industry have demanded adequate preparation time for the new system.

Tejas Goenka, Executive Director, Tally Solutions said, “We are expecting to see a decision along with the timelines of implementation for the simplified model for return filings as proposed by the GoM. The most critical aspect of this model will be how confidently a business can claim input tax credit, and of course how simplified the invoice upload and acceptance process is to reduce the compliance burden on the SMEs of the country. The earlier we get these details, the more prepared the business community can be for these changes.”

According to officials, a three-stage transition period has been proposed. First, till the time the transition to the new return filing process happens, the present system of GSTR-3B and GSTR-1 shall continue. In stage two, GSTR-1 will be withdrawn, GSTR-3B will continue based on which provisional credit shall be provided and new return will also become operational. In stage three, GSTR-3B and provisional credit will be withdrawn and only the new return will be operational.

The GST Council will also discuss the proposal for acquisition of 51 per cent of the equity of GSTN by the government that is currently held by non-government institutions. The government is also looking at changing the composition of the Board of GSTN by inducting four directors each from the Centre and the states and three other independent directors along with the Chairman and the CEO, officials said.

Digital payments for retail transactions for GST are likely to be incentivised. The consumers might be offered two prices: one, with normal GST rates for purchases made through cash payment and the other, with the concessional 2 per cent GST rate, subject to a ceiling of Rs 100 per transaction, for digital payments. Businesses may also be offered some direct tax benefit for undertaking digital payments under GST.

The authorities may only seek an in-principle approval by the Council, while the exact modalities are likely to be finalised along with the new GST returns, officials said.