A Group of State Finance Ministers on Sunday reached on a consensus to recommend putting off GST discount on digital payments. It has also decided to suggest empowering the GST Council to finalise goods for the applicability of reverse charge mechanism (RCM).

“'In principle’, we support GST discount in digital payments. However, considering the current revenue situation, it would be better to wait for some more time. Accordingly, we have proposed to defer this proposal,” Sushil Kumar Modi, Chairman of the Group and Deputy Chief Minister of Bihar, told reporters here.

Further, he added that the proposal could be considered after one more year of revenue collection under GST. Now this recommendation along with that on RCM will be placed before the 28th meeting of GST Council scheduled to be held through video conferencing on July 21.

The proposal of GST discount talks about providing “a concession of 2% in GST rate on B2C (Business to Consumer) supplies, for which payment is made through digital mode [1 per cent each from applicable CGST and SGST rates, if the applicable GST rate is 3 per cent or more] subject to a ceiling of Rs. 100 per transaction.” This scheme, however, would not be available to registered persons paying tax under the composition scheme.

With this incentive, consumer will be offered two prices: one with normal GST rates for purchases made through cash payment and the other with 2 per cent lower GST rate for digital payments. As a result, the consumer will see visible benefits of making payments through digital mode, in terms of reduction in tax amount payable.

For example, if the GST rate applicable to supply a particular goods/service is 18 per cent, and if the payment is made through digital means, then applicable GST will be at the rate of 16 per cent. Sushil Kumar Modi said one important reason for deferment of this proposal is revenue implication of 14-15 thousand crore.

Reverse charge mechanism

Earlier in the day, the group had finalised a recommendation on deleting sub-section (4) of section 9 of the CGST Act, 2017 and sub-section (4) of section 5 of the IGST Act, 2017 which prescribe the reverse charge mechanism.

It is a mechanism where the buyer of the goods or service will have to pay GST, which is otherwise paid by the seller. The charge is applicable on a registered dealer, if he buys goods from a dealer not registered under GST. However, the receiver of the goods is eligible for input tax credit, while the unregistered dealer is not.

“We have decided to recommend for empowering GST Council to finalise goods for which RCM to be made applicable,” Sushil Kumar Modi said.

Since the introduction of GST, this scheme has generated a lot of debate because of which it was decided at the 22nd meeting of GST Council, held on October 6, 2017 to defer it till March 31, 2018. It was also decided that the scheme would be reviewed by a committee of experts. Date for suspension has been extended twice and now the new date is September 30, 2018.

He also informed that once the council decides about deletion, September 30th deadline will have no meaning.

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