Here’s what will change under GST regime from January 1

Come January 1, the GST regime will undergo a series of changes including liability on e-commerce operators to pay tax on services provided through them by way of passenger transport or restaurant services.

The correction in inverted duty structure in footwear and textile sectors would also come into effect from the New Year wherein all footwear, irrespective of prices, will attract GST at 12 per cent while all textile products, except cotton, including ready-made garments will have 12 per cent GST.

Shoes, ready-made apparel to be dearer

The price of clothes and shoes is all set to shoot as the government has raised the GST on fabrics and footwear below ₹1,000 from 5 per cent to 12 per cent.

Fabrics woven out of silk, cotton, wool, coarse animal hair, jute or flax will not attract 12 per cent GST.

The decision hasn’t been received well in the industry with the Retailers Association of India asserting that it wasn’t a justified step, especially when the textile industry is the second-largest revenue generating sector after agriculture. The traders’ body has said that the issue of Inverted Duty Structure (tax on finished product is lower than tax on inputs) affects only a marginal section of the industry and that a GST raise of 7 per cent is enough to address the issue.

The RAI said that the government through its steep GST hike would end up affecting 85 per cent of the industry in a bid to help only 15 per cent of the industry.

GST on online transport services

While the passenger transport services provided by auto rickshaw drivers through offline/ manual mode would continue to be exempt, such services when provided through any e-commerce platform like Ola, Uber etc would become taxable effective January 1, 2022, at 5 per cent rate.

5% GST must for Swiggy/Zomato

As part of the procedural changes, e-commerce operators like Swiggy and Zomato have to shell out and collect 5 per cent GST with the government on restaurant services supplied through them from January 1.

They would also be required to issue invoices in respect of such services. There would be no extra tax burden on the end consumer as currently restaurants are collecting and depositing GST. Only, the compliance of deposit and invoice raising has now been shifted to food delivery platforms.

The move comes after government estimates showed that tax loss to exchequer due to alleged under-reporting by food delivery aggregators is Rs 2,000 over the past two years. Making these platforms liable for GST deposit would curb tax evasion.

Mandatory Aadhaar authentication for claiming GST refund

The other anti-evasion measures which would come into effect from the New Year include mandatory Aadhaar authentication for claiming GST refund, blocking of the facility of GSTR-1 filing in cases where the business has not paid taxes and filed GSTR-3B in the immediate previous month.

Currently, the law restricts filing of return for outward supplies or GSTR-1 in case a business fails to file GSTR-3B of preceding two months. While businesses file GSTR-1 of a particular month by the 11th day of the subsequent month, GSTR-3B, through which businesses pay taxes, is filed in a staggered manner between 20th-24th day of the succeeding month.

Also the GST law has been amended to allow GST officers to visit premises to recover tax dues without any prior show-cause notice, in cases where taxes paid in GSTR-3B is lower based on suppressed sales volume, as compared to supply details given in GSTR-1. The move would help curb the menace of fake billing whereby sellers would show higher sales in GSTR-1 to enable purchasers to claim input tax credit (ITC), but report suppressed sales in GSTR-3B to lower GST liability.

(With inputs from agencies)