The Institute of Chartered Accountants of India (ICAI) has submitted suggestions to remove the instances of double taxation under goods and services tax (GST). It claimed that provisions of reverse charge mechanism (RCM) and composition scheme are leading to cascading of taxes. Under GST, if a taxable person procures goods or services from an unregistered person, the recipient is liable to pay tax under RCM, which, ICAI said, leads to double taxation. “A company purchases mineral water bottle from an unregistered person, then the company has already paid all taxes on MRP basis on the said water bottle and further it is liable to pay tax under RCM,” ICAI said.
To avoid cascading of taxes, the institute has suggested deferment of RCM for the MSME sector with annual turnover of less than `2 crore. Additionally, it has asked for availability of credit on such purchases to avoid double taxation.
Similarly, the submission says dealers under the composition scheme are required to pay tax based on turnover including exempted turnover of goods, which is akin to tax on tax. “It is suggested that credit available to composition assessee be passed to the recipient like it was under central excise law,” ICAI suggested.
Among other suggestions, ICAI said exemption from registration should be provided to businesses below a certain revenue threshold which deal in inter-state supplies. Additionally, it also asked for transitional credit to be made available to manufacturers and service providers. Currently, it’s only available to dealers and traders on pre-GST goods, which ICAI said, was discriminatory.