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SC upholds Compensation to States Cess under GST constitutionally valid

SC upholds Compensation to States Cess under GST constitutionally valid

The Supreme Court Wednesday upheld the constitutional validity of Goods and Services Tax (GST) Compensation to States, Act saying it was not beyond the legislative competence of the Parliament.

The top court said the Compensation to States Act, enacted by the Parliament in 2017, is not a “colourable legislation”.

A bench of Justices A K Sikri and Ashok Bhushan said the Act does not violate the Constitution (One hundred and first amendment) Act, 2016 nor is against the objective of Constitution (One Hundred and First Amendment) Act, 2016.

It held that the levy of ‘Compensation to States’ Cess is an increment to goods and services tax which is permissible under the law.

The bench while dealing with constitutional validity of the (Compensation to States) Act said that the expression ‘cess’ means a tax levied for some special purpose, which may be levied as an increment to an existing tax.

“The Scheme of Compensation to States Act, 2017 as noticed indicate that the cess is with respect to goods and services tax. There are more than one reason to uphold the legislative competence of Parliament to enact the Compensation to States Act, 2017,” it said.

The bench said that Article 248 read with Articles 246 and 246A clearly indicate that the residuary power of legislation is with the Parliament.

It said that in the present case, no contention has been raised that the subject matter of legislation was within the competence of State Legislature, and that the Parliament had no competence to legislate.

The bench said that after Constitution (One Hundred and First Amendment) Act, 2016, as per Article 270, Parliament can levy cess for a specific purpose under a law made by it.

It said that when Constitution provision empowers the Parliament to provide for Compensation to the States for loss of revenue by law, the expression “law” used therein is of wide import which includes levy of any cess for the above purpose.

“We, thus, do not find any merit in the submission of the counsel for the petitioner that Parliament has no legislative competence to enact the Compensation to States Act, 2017,” it said.

Dealing with second question, whether the Act transgresses the Constitution, the bench said that the Preamble of Compensation to States Act, 2017 expressly mentions the Act to provide for compensation to the States for the loss of revenue arising on account of implementation of GST in pursuance of the provisions of the Constitution (One Hundred and First Amendment) Act, 2016.

“Thus, the Compensation to States Act, 2017 has been enacted under the express Constitution (One Hundred and First Amendment) Act, 2016. We, thus, also do not find any force in the submission of the counsel for the petitioner that Compensation to States Act, 2017 transgresses the Constitution (One Hundred and First Amendment) Act, 2016,” it said.

The court said it does not agree with the submission that Compensation to States Act, 2017 is a “colourable legislation”.

“We having held that Parliament has full legislative competence to enact the Act and the Act having been enacted to implement the Constitution (One Hundred and First Amendment) Act and the object being clearly to fulfil the Constitution (One Hundred and First Amendment) Act’s objective, we reject the submission of the petitioner that Compensation to States Act, 2017 is a colourable legislation”, it said.

With regard to the question, whether levy of Compensation to States Cess and GST on the same taxing event is permissible in law, the bench said that GST imposed under the 2017 Acts and levy of cess on intra-State supply of goods and services or both as provided the CGST Act and supply of goods and services or both as part of IGST Act are two separate imposts in law and are not prohibited by any law so as to declare it invalid.

“We, thus, do not find any substance in the submission that levy of Compensation to States Cess on same taxable event is not permissible,” it said.

The bench also refused to set off payments made towards clean energy cess payment of Compensations to States Cess.

The apex court verdict came on an appeal filed by Centre against the Delhi High Court order passed in a case of Mohit Mineral Pvt Ltd which has challenged the validity of the Goods and Services Tax (Compensation to States) Act, 2017 and the Goods and Services Tax Compensation Cess Rules, 2017.

The Delhi High Court in its interim order provided that additional levy on the stocks of coal on which petitioner Mohit Minerals Ltd had already paid Clean Energy Cess in terms of Finance Act, 2010, shall not be required to make any further payment.

It had said however that on stocks of coal on which no Clean Energy Cess under the Finance Act, 2010 was paid any payment in terms of the Act would be subject to the result of the petition before it.


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Sources: Economic Times
Last date to file IT returns is Oct 15: Know what all documents you need

Last date to file IT returns is Oct 15: Know what all documents you need

It is now essential for every business or professional, to provide GST details in their income tax returns. While the compliances are relatively less for proprietors and individual businessmen, companies have been asked to give a split of their expenses, between payments made to GST registered and not registered entities for the FY 2017-18.

This makes the financial statements and GST filings inter-connected. There is substantial cross-reporting between the two, let’s understand this further.

The GSTIN and turnover/gross receipt as per GST must be reported while filing ITR-4. This, of course, applies only if you are registered under GST. Details of CGST and SGST or IGST paid on Sales/ Purchases/ Expenses must be given in the profit and loss account, by all those who are filing ITR-3, ITR-5 and ITR-6. Additionally, the amount of input tax credit remaining unclaimed as of 31st March 2018 should be disclosed in ‘Schedule OI'( Other Information ) of the ITRs listed above.

As per the Income Tax Act, 1961, companies are required to furnish their returns in the ITR – 6 form, except for those earning income from property held for the charitable purpose, who must file ITR-7. These companies while filing the ITR-6, have to disclose the break-up of their total expenditure including purchases from entities which may or may be not registered under GST.

This requirement is applicable to all companies whether or not required to get their books of accounts audited under section 44AB. Earlier, GST related reporting in Form 3CD was relaxed until 31st March 2019. But this relaxation has not been extended to ITR-6. Being the first filing season post the GST implementation, an interim relief was expected until the GST system settles in.

The assessees under the GST schedule of ITR-6 must declare the following:

  • Total summary expenditure: The assessee must state the total amount of expenses made during the year after GST was implemented; the break-up of the aggregate of the expenditure as reported in the schedule Part A – Profit & Loss/ Profit & Loss as per Indian Accounting Standards between July 2017 up to March 2018.
  • Purchases from or expenditure made to entities registered under GST must be reported. This is done by giving break up of expenses into 3 buckets – for goods and services exempt from GST, purchases from composition dealers and balancing figure will be reported purchases/expenses under ‘other registered entities’.
  • Expenditures relating to entities not registered under GST.
  • Companies need to report the breakup of the total purchase and expenses booked in the Profit and Loss Account (P&L) in the GST schedule. There should be a clear bifurcation of expenditure that attracts GST and those that do not attract GST. Such expenditure may include the purchase of inputs, consumables, freight, repairs, rents, audit fees, etc.
    These assessees are required only to give a summary of the expense details, and not report on the GSTIN level. The objective behind this is to gauge in total the transactions taking place under registered GST and unregistered GST entities.

With regards to the ITR to be filed by businesses opting for presumptive tax scheme, declaring GSTIN-4 will have significant relevance. An assessee opting to presumptive taxation scheme must have turnover below 2 crores if doing a business (Section 44AD) and under Rs 50 lakh if pursuing specified professions (under Section 44ADA). The GSTIN disclosure gives IT Department a source to verify the turnover with that declared under GST system.

In conclusion, company assessees are inconvenienced with little clarity on how this data may be used and what to expect in the coming months on compliance. The data so reported by assessees may be subject to changes later and this may need a revision too; this means that the data being reported in the income-tax returns and the GST returns must be aligned to avoid potential disputes in the future.

There is still time for GST return filing for the month of September 2018, which is due on 20th October 2018. But reconciliation for FY 2017-18 by businesses between GST returns and books of accounts is of utmost importance even before filing of Income tax returns for AY 2018-19 (now due on 15th October 2018). Since the management and the auditor will sign off on the financial statements which include GST numbers. Timely reconciliation will save assessees from pain and revisions later.


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Source: Economic Times
GST collections likely to top Rs 1 lakh crore in November, December

GST collections likely to top Rs 1 lakh crore in November, December

The finance ministry expects the GST collections to cross Rs 1 lakh crore in November and December on account of festive season demand and the anti-evasion measures initiated by the revenue department. and the anti-evasion measures initiated by the revenue department.

The Goods and Services Tax (GST) revenue rose to Rs 94,442 crore in September and officials feel it could surpass the landmark one lakh crore on increased demand during festival season.

“With the current trend for GST mop-up, it is expected that the monthly collections could again touch Rs 1 lakh crore around November and December,” an official said.

The collections during November and December 2018 would reflect the sales and purchases made during the months of October and November 2018.

“The GST collection should cross Rs 1 lakh crore because of festive season demand. This is the time when people make purchases and companies offer discounts and come up with promotional offers to boost sales. We expect an increase in sales which in turn will result in higher revenues for the government,” said Lakshmikumaran & Sridharan Partner L Badri Narayanan.

AMRG & Associates Partner Rajat Mohan said the duo of Indian festivities and wedding season would push the overall demand, temporarily lifting the GST collections for November and December.

“Controlling fiscal deficit with the help of an increase in revenue collection is an economically more feasible option than restricting government spending, even if this increase by means of implementing the stringent anti-evasion measure,” Mohan said.
The finance ministry official, however, has expressed the apprehension that revenues could witness a decline thereafter as sales and purchases usually taper off in the last quarter of fiscal.

The finance ministry has targeted monthly GST collections to be Rs 1 lakh crore for this fiscal, but the actual mop-up has fallen short of the target month after month. The sole exception was the month of April in which the numbers exceeded Rs 1 lakh crore.

The collections stood at Rs 94,016 crore in May, Rs 95,610 crore in June, Rs 96,483 crore in July, Rs 93,960 crore in August and Rs 94,442 crore in September.


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Source: Business Today
Centre, states apportion Rs 29,000 cr IGST in September

Centre, states apportion Rs 29,000 cr IGST in September

As much as Rs 29,000 crore lying in the Integrated GST or IGST pool has been apportioned between the Centre and states in the month of September.

The central government will get about Rs 14,500 crore and the remaining would be distributed among the states in proportion to the revenue collection in September.

The apportionment would help improve indirect tax position of both the Centre and states, this is the fourth time that IGST funds have been dividend between the Centre and states.

As much as Rs 12,000 crore was settled between them in August, Rs 50,000 crore in June and Rs 35,000 crore in February this year.
As much as Rs 12,000 crore was settled between them in August, Rs 50,000 crore in June and Rs 35,000 crore in February this year.A policy decision has been taken that when some substantial amount accrues to IGST pool it should be apportioned so that funds do not lie idle with the Centre, the official said, adding Rs 29,000 crore has been apportioned this month.Under GST, the tax levied on consumption of goods or rendering of service is split 50:50 between the Centre and the state. Such tax is known as Central-GST or CGST and State-GST or SGST.
On inter-state movement of goods as well as imports, an Integrated-GST or IGST is levied, which accrues to the Centre. A cess is levied on top of these taxes on sin and luxury goods which make up for the compensation kitty used to make good of any revenue shortfall faced by states on implementation of GST.
Ideally there should be ‘nil’ balance in the IGST pool since the amount should be used for payment of Central GST and State GST.
As some businesses are ineligible to claim the benefits of input tax credit or ITCNSE -0.87 %, the balance gets accumulated in the IGST pool.
The Finance Ministry has targeted monthly GST collections to be Rs 1 lakh crore for this fiscal, but the actual mop up has fallen short of the target month after month. The sole exception was the month of April in which the numbers exceeded Rs 1 lakh crore.The collections stood at Rs 94,016 crore in May, Rs 95,610 crore in June, Rs 96,483 crore in July and Rs 93,960 crore in August.


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Source:economictimes.indiatimes
Companies may have to show ledgers for claiming GST credit of over Rs 25 lakh

Companies may have to show ledgers for claiming GST credit of over Rs 25 lakh

Companies that availed of more than Rs 25 lakh credit under the goods and services tax (GST) regime in lieu of levies paid under the previous system will soon have to give details of their purchase ledgers for six months before the new tax regime was rolled out.

The government will soon bring out a new ‘credit growth return’ form. This comes after a detailed analysis of the top 50,000 taxpayers showed a sharp rise in the closing balance of credit of many at the end of June last year compared with September 30, 2016. These top 50,000 taxpayers have claimed about Rs 1.5 lakh crore worth of credit.
GST was rolled out on July 1 last year. “The form would be notified soon,” a government official with knowledge of the development told ET.

Companies that have shown more than a 25% jump in credit between October 2016 and June 2017 will also have to share these details. This form will be restricted to central GST as states captured purchase details under the value added tax (VAT) regime.

The move implies that tax authorities are looking to turn up the heat as GST collections remain far from buoyant. There is a worry that companies may have claimed more credit than they were entitled to, leading to suppressed GST revenue.

Most states, barring six, have suffered a revenue shortfall and will have to be compensated by the Centre. GST collections in August stood at Rs 93,960 crore, less than Rs 96,483 crore in July.

The deadline for availing past credit expired on September 30. GST replaced multiples state and central taxes such as excise duty, service tax, countervailing duty, value added tax, purchase tax, and octroi. The government had in December last year issued a warning to industry to amend any inflated returns filed for credit in lieu of taxes paid prior to the rollout of GST.

Under the transition rules, traders and retailers are allowed to claim a credit of 60% of taxes paid earlier against CGST or SGST dues where the tax rate exceeded 18%. In cases where the GST rate was below 18%, only 40% deemed credit was allowed against CGST and SGST dues.

The government also allowed refund of 100% excise duty on goods that cost aboveRs 25,000 and bore the brand name of the manufacturer along with a serial number such as televisions, refrigerators or car chassis. Tax experts say instead of prescribing another form, tax authorities should rely on data captured under the VAT regime.The government can surely verify the purchase details with respect of opening credit claimed by businesses as on July 1, 2017, and there might be some genuine concerns around possible excess credit claimed in specific cases.


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Source: economictimes.indiatimes
State authorities told to check if companies passing on GST cut benefits

State authorities told to check if companies passing on GST cut benefits

In a drive to ensure companies passed on the reduction in Goods and Services Tax (GST) to consumers, the Centre has directed state metrology controllers to assist GST officers to cross-verify revised sales price (MRP) of pre -packaged commodities and consumer authorities will undertake a drive to check labelling.

In the latest round, the GST Council cut tax rates on a host of white goods to 18% from 28% and exempted sanitary napkins from any tax effective July 27.

The government is keeping a close tab on the price scenario on the products that saw rate cuts to ensure the benefit is passed on to consumers and not pocketed by companies.

The anti-profiteering machinery is also keeping a close watch on whether companies are passing on the benefit or not. ET had reported earlier this month that authorities were looking into instances of consumer durables companies not passing on the benefit to customers.

The consumer affairs secretary had informed the GST Council about the directive, according to an office memorandum issued by the council.

“The memorandum on GST officers collaborating with state legal metrology controllers clearly demonstrates government’s seriousness to ensure that the impact of rate reduction and additional input tax credit reaches the intended beneficiaries that is the end consumers”

The consumer affairs ministry had earlier issued a directive under the Legal Metrology Act permitting companies to affix pasting or stamping of new prices on old when the rates were slashed in November last year and again in July this year.

As per the directive, revised MRP declaration can be by way of stamping or putting sticker or online printing provided original MRP continues to be displayed.

Companies also had to advertise price changes and circulate notices to dealers.

“With this explicit directive by the government, industry, and specifically the consumer goods industry, should revisit and ensure passing on of any tax benefits which have accrued to them with implementation of GST.”


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Source: economictimes.indiatimes
TDS, TCS for GST kick-in from October 1

TDS, TCS for GST kick-in from October 1

The GST law requires TDS to be deducted by certain specified Government bodies/ PSUs, where the total value of supply, under a contract, exceeds Rs. 2,50,000.

After the GST regime gained momentum, the government decided to introduce TDS and TCS provisions. The GST law requires TDS to be deducted by certain specified government bodies/ PSUs, where the total value of supply, under a contract, exceeds Rs 2,50,000.

The recipient of supply i.e. the TDS Deductor is obligated to deduct 2% (1% CGST + 1% SGST) from the payment made or credited for taxable goods or services or both. The aim to bring this provision is to keep a watch on tax evasion and leakages to the extent possible.

The sudden but delayed implementation of TDS provisions from 1 st October 2018 has presented certain challenges amongst the industry. The challenges would range from initial hiccups to long-lasting impact on the business of companies. Some noticeable challenges with this implementation are outlined below.

Transitioning to TDS:

The priority for the deductors at this stage is smooth transition considering the additional compliance and legal requirements to deduct tax. This has resulted in businesses analyzing the trigger point for deduction of tax. One key issue is whether TDS provisions apply to supplies made prior to 1 st October but where payments are received after this date. In order to answer this question, the interpretation of legal provisions becomes critical.

TDS on inter-State supplies:

The GST Law excludes TDS where the supplier registration and the place of supply registration of the TDS deductor are in different states. The provisions do not say that TDS is not applicable to inter-State supplies. However, the FAQ
released by Karnataka Government seems to indicate TDS is not to be deducted on inter-State supplies (irrespective of the location of supplier/ place of supply/ location of recipient).

Although the understanding in the FAQ seems to be incorrect, the Department is yet to clarify this position or make the relevant changes to the law. Till then, it remains unclear whether TDS is to be deducted on inter-State supplies.

TDS on inter-unit transactions:

The transactions between two registrations of a same company (even without any consideration) are taxable under GST. As per the provision under TDS, deduction is to be made on payment made or credited to the supplier.

Different companies follow different practices with respect to the compensation mechanisms between its units. In such cases, TDS provisions may pose significant accounting and legal challenges.

Contract value or supply value?

The TDS provision specifies that the tax is to be deducted where the total value of such supply, under a contract, exceeds 2.5 lakh. The question that arises is whether the tax is to be deducted for all supplies under one contract, where the contract value exceeds 2.5 lakh, or the value qua each supply is to be considered irrespective of the contract value. In absence of clarification, the provision could have serious ramifications.

Deduction of exempt supplies?

As per the legal provisions, TDS is to be deducted from payments made or credited for taxable goods or services or both. Taxable supplies have been defined as “supply of good or services or both leviable to tax under the Act”. Therefore, the supplies which have been made exempt by virtue of exemption notifications would also be considered as taxable supplies.

This brings us to the question, whether TDS is to be deducted on payments pertaining to supplies which have been made exempt? Under the Income Tax Law, various Circulars have clarified the non-requirement of deduction in
situations where the income is unconditionally exempt. Under GST laws, similar clarifications have not been issued and have been a concern for companies.

Compulsory registration for deductors:

Persons who are required to deduct tax are required to obtain registration (whether or not registered separately). The provision does not address the situation where a person is operating through multiple places of business in one State. It remains unanswered whether such a person would require separate registration for each place of business to comply with the compulsory registration provision or a single registration for the entire State would be enough.

Additional compliance burden:

In addition to legal issues, the business would be required to prepare themselves for certain compliance requirements. Over and above the existing returns, the person deducting the tax would also be required to file GSTR-7 for furnishing the details of tax deducted.

The Deductor would also be required to furnish to the Deductee (supplier of goods or services) a TDS certificate mentioning the contract value, rate of deduction, amount deducted, and amount paid to the government within 5 days from the date the TDS is deposited.

With fresh challenges under the GST, all the stakeholders must be ready for implementation of the TDS provisions before 1 st October 2018. There is a dire need to clarify the open issues to avoid confusion.

It will be interesting to see whether the issues relevant for TDS implementation are discussed and clarified during the 30th GST Council Meeting scheduled on 28.09.2018.


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Source: Financial Express
On Table for GST Council’s Meet: Higher cess on luxury items to raise more money for natural calamities

On Table for GST Council’s Meet: Higher cess on luxury items to raise more money for natural calamities

The 30th meeting of the GST Council will be chaired by finance minister Arun Jaitley through video-conferencing today. The GST Council will examine a proposal on whether and how a cess on luxury and demerit goods can be increased to raise additional funds for states affected by natural calamities.

A panel of officials from the finance ministry has been looking at various mechanisms to raise additional funds, in line with what the Kerala government has been asking after the devastating floods swept through the southern state leading to severe loss of life and property.

The officials will submit their proposal to the Council that is expected to meet via video conference on Friday.

Another way to raise additional funds, a government official said, will be to create a specific cess to address the concern of natural calamity, which states in hilly areas such as Himachal Pradesh and North Eastern states also faced recently.

While officials fear the possibility of the proposed cess snowballing into a political tool in the hands of states hit by natural calamities, the exact contours and shape of the cess will be finalised and approved by the Goods and Services Tax (GST) Council. Another crucial aspect is whether cess will come with a sunset clause, a decision that will be taken by the Council.

While constitutional amendment as per Article 279A (4), says that the ‘Council will make recommendations to the Union and the States on important issues related to GST, like…special rates for raising additional resources during natural calamities/disasters’, officials said that it is not clear if a cess can be imposed for any purpose other than giving compensation to states.

On September 20, Kerala Finance Minister Thomas Isaac met Finance Minister Arun Jaitley to discuss the proposal to levy a calamity-related cess for a short duration.

“GST must be made flexible to accommodate unforeseen urgent demand for resources as in the case natural calamities. Kerala welcomes the suggestion of hon’ble FM for a national level cess on selected commodities for a specified period to help such states. GST Council to discuss,” Isaac said in a tweet last week.

The Council, headed by finance minister Arun Jaitley will also discuss ways to address revenue shortfall. Revenue collection from GST declined to Rs 93,960 crore in August, the lowest in the current financial year 2018-19. The average collection during April-August was Rs 96,705 crore, less than the government’s monthly target.

While the government may not be in a position to cut rates, some states have demanded a reduction in the rate levied for cement from 28 percent slab to 18 percent.
The Council will also discuss the cases and progress of the anti-profiteering mechanism under GST.


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Source: moneycontrol
Deadline for filing GST returns extended

Deadline for filing GST returns extended

The due date for filing GSTR-1 for the months from July 2017 to September 2018 has been further extended up October 31 on the advice of the GST Council, the Commercial Taxes Department said.

Migration woes

This follows several registered dealers under the Goods and Service Tax Act, 2017, experiencing difficulties with the migration.

For filing GSTR-1 from October 2018 to March 2019, the due date is set as 11th of the succeeding month of filing the return.

Previously, dealers were supposed to furnish electronically the details of outward supplies of Goods & Services in Form GSTR-1 on or before the tenth day of the succeeding month.

However, the due dates for filing GSTR-1 were extended periodically considering the difficulties faced by dealers.

For dealers having an aggregate turnover in the preceding financial year or current financial year up to ₹ 1.5 crore and those having opted for filing of quarterly GSTR-1, the due dates for filing GSTR-1 from July 2017 through September 2018 are October 31, while for October-December 2018 it is January 31, 2019 and January-March 2019 is April 30, 2019.

Also, for registered persons whose principal place of business is in Mahe region of the U.T. of Puducherry and have opted for quarterly filing, the due date for filing GSTR-1 for the quarter from July, 2018 to September, 2018 is extended up to November 15.

Further, for those dealers who have migrated to GST through special procedure vide G.O. Ms. No. 39 dt. 10.08.2018, GSTR-1 for the months from July 2017 to November 2018 and for those who have opted for quarterly filing, GSTR-1 for the quarters from July 2017 to September 2018, shall be filed on or before December 31.

Dealers are requested to file GSTR-1 before the due dates as mentioned above to avoid penal action, G. Srinivas, Commissioner (ST) said.


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Source: TheHindu
20% cashback on GST likely on RuPay, BHIM using QR codes

20% cashback on GST likely on RuPay, BHIM using QR codes

The government is working on a proposal whereby citizens could avail of the proposed 20% cashback on goods and services tax (GST) on payments made through RuPay cards and BHIM app if they make the transactions using QR codes.

The idea is to automatically capture all transaction details including GST rate and the cashback accordingly, a senior government official told ET.

For those who are not comfortable scanning QR codes for digital transactions, the alternative will be to compile all the receipts and then claim GST refund from the government in the same way as income-tax returns and refunds are filed, the official said.

Last month, the GST Council approved the recommendations for incentivising digital payments through RuPay card network and BHIM Unified Payments Interface system through cashbacks.

Once implemented, customers making payments using RuPay card or BHIM app will get a cashback of 20% of the total GST amount, subject to a maximum of Rs 100. There has been a series of discussions between the ministry of electronics, National Payments Corporation of India (NPCI), GST Council and Goods and Services Tax Network on how to offer this cashback to consumers, the government official said. “The option to use QR codes is an evolved solution but also a best bet, since it will capture all the details which is not possible in other modes,” the person said. The plan includes working out an average rate of tax for different categories of products since it varies greatly in some cases such as hotel bills.

“The proposal needs further refinement from NPCI,” the official said. The finance ministry will give it final go-ahead.

NPCI said the initiative is at the proposal stage and GST Council is working to draft the scheme and its modalities. “We would be in position to share further details if the proposed cashback scheme is implemented and operationalised,” the corporation said in a statement to ET.


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Source: economictimes