From cess to ITC refunds: PHDCCI flags 7 key GST 2.0 concerns to CBIC chief

Industry body PHD Chamber of Commerce and Industry (PHDCCI) has raised key GST-related issues regarding its smooth implementation, while also raising technical queries and concerns around its dissemination. The industry body has submitted a detailed representation to CBIC Chairman Sanjay Kumar Agarwal, and reiterated its commitment to ensuring GST 2.0 becomes more industry-friendly, transparent, and growth-oriented.

Key issues submitted by PHDCCI:

1. Accumulated Compensation Cess: The PHDCCI says large unutilised balances of compensation cess remain in the hands of distributors and retailers in the automobile and beverage sectors, requiring a policy resolution.

2. Inverted Duty Structure in Food & Pharma Industries: The association has sought the refund of input services and capital goods is presently disallowed, leading to working capital blockage.

3. Anti-Profiteering Applicability: The national body flags that there are practical difficulties in implementing anti-profiteering provisions at the distributor and retailer level need reconsideration.

4. Unutilised Cess Credit in Automobile and other Sector: It highlighted that there are significant cess balances, which remain unutilised, and proposed amendments have led to a slowdown in vehicle purchases.

5. Accumulated ITC due to GST Rate Reductions: The industry body says with reductions in GST rates, ITC accumulation has become a cost burden on companies. "Refund of such ITC should be permitted, since mandatory benefit passing to consumers often leads to financial strain."

6. Passing GST Reduction Benefits: It also says that the mechanism for passing benefits should allow flexibility beyond MRP relabeling, such as through discounts or equivalent measures, duly substantiated.

7. Impact of ITC Reversal on Exempt Goods: The body has sought clarification on the treatment of costs arising due to ITC reversal and blockage on goods that have newly become exempt.

Post-Sale Discount Issues

The industry body has requested the CBIC to issue a circular on post-sale discounts to remove ambiguity and litigation. It has sought clarity on the non-reversal of Input Tax Credit (ITC), where discounts are passed through financial/commercial credit notes.

It has also sought the treatment of post-sale discounts as additional consideration in dealer–customer transactions. The industry body has also sought clarification on whether post-sale discounts as part of promotional or marketing activities by dealers will be treated as taxable consideration.