GST Discount on Digital Payments Deferred

A Group of States’ Finance Ministers on Sunday reached a consensus on putting off a GST discount on digital payments for the time being. It also decided to suggest empowering the GST Council to finalise goods for applicability of the Reverse Charge Mechanism (RCM).

One important reason for deferring the proposal is revenue implication of ₹14,000-15,000 crore.

These two recommendations — deferment of the GST discount on digital payment and RCM — will be placed before the 28th meeting of the GST Council, scheduled for July 21.

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

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

For example, if the GST rate applicable to supply particular goods/services is 18 per cent, and if payment is made through digital means, then the applicable GST rate will be 16 per cent.

Reverse charge mechanism

Earlier in the day, the Group finalised 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 a Reverse Charge Mechanism. “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 a specific class of registered persons and goods who would be covered under the RCM provision,” Modi said, adding that the conditions and the date for levying of RCM will be decided by the council.

RCM 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.

Since introduction of GST, this scheme has generated a lot of debate because of which it was decided in the 22nd meeting of the GST Council, held on October 6, to defer it till March 31, 2018.

It was also decided that the scheme would be reviewed by a committee of experts.

The date for suspension has been extended twice and the new date that has now been fixed is September 30, 2018.