The Sushil Modi-led ministerial panel will recommend to the GST Council to defer by a year the proposal to incentivise digital payments under the goods and services tax (GST), citing revenue implications of doling out the concessional tax rate.
At its meeting on Sunday, the panel has decided to wait for stabilisation of revenues under GST and the new return filing systems in the current financial year, before considering differential GST rates for people making payments using the digital mode.
Besides, another ministerial panel under Modi, on reverse charge mechanism (RCM), has decided to recommend powers to the GST Council to notify the registered persons who would come under the purview of the RCM.
The recommendations of these ministerial panels will be placed before the GST Council, chaired by the Union Finance Minister and comprising his state counterparts, during its next meeting on July 21. The GoM on digital transaction decided it is not an opportune moment to incentivise digital payments since it will have revenue implications, according to Modi. "Let returns and GST revenues stabilise, then we can think about incentivising digital transaction".
"The GoM will recommend to the Council that it may think about the proposal of incentivising digital transaction again after a year," the Bihar deputy chief minister said.
To incentivise digital transaction, the GST Council in its last meeting in May had discussed giving a concession of two per cent in the GST rate (where the tax rate is three per cent or more) to consumers making payment through cheque or digital mode. The discount will be capped at Rs 100 per transaction.
The five member GoM on incentivising digital transaction include Gujarat Deputy Chief Minister Nitinbhai Patel, West Bengal Finance Minister Amit Mitra, Haryana Excise & Taxation Minister Capt Abhimanyu and Punjab Finance Minister Manpreet Singh Badal.
With regard to the decision on RCM, Modi said the GoM will recommend that the GST Council will decide on the class of registered persons who would be required to deposit taxes on reverse charge basis.
“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 specific class of registered persons, goods which would be covered under RCM provision,” he added.