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Is a GST Council-like federal body for public expenditure a good idea?

Is a GST Council-like federal body for public expenditure a good idea?

The Economic Advisory Council to the Prime Minister (EAC-PM) has recommended a GST Council-like mechanism for the Centre and states to oversee public expenditure. This is not the first time such a call has been made.

Earlier, former finance minister Arun Jaitley had highlighted the need for such a body. He had made a case for setting up such federal institutions to promote healthcare, rural development and agriculture sectors by optimally utilising resources of the Centre and states.

According to a report in The Indian Express, EAC-PM chairman Bibek Debroy has made a similar request, but in the larger domain of public expenditure.

He stated fiscal consolidation issue as a reason behind the recommendation. This year, the target of the Centre’s fiscal deficit is 3.3 per cent of GDP. The government will have to keep its expenditure within this limit. Fiscal deficit crossed 61 per cent of the target in June.

Jaitley had said that both the Centre and states spend a lot of money on sectors such as agriculture, rural development and healthcare.

As such there is a need for utilising the resources in an optimal manner by enhancing coordination between the centre and state governments for essential developmental activities.

“I think a coordination body on a non-statutory basis like the GST Council, as a federal institution can do that job (coordination),” Jaitley had said.

The GST Council, chaired by the union finance minister, comprises finance ministers of all states.

So far it has held 36 meetings and all the decisions, including rate cuts, have been taken on a consensus basis. This was despite the fact that there is a mechanism for voting in case there is no consensus.

The calls for a GST Council-like body for public expenditure is that not all items of public expenditure are in the Concurrent List. Why will the state governments give up their sovereignty to the Centre on the list which is exclusively their domain?

Of the three issues, highlighted by Jaitley—agriculture, health and education—only the part of the last one including technical education, medical education and universities, is in the concurrent list.

States agreed to the GST Council because there are some benefits for them such as they can also impose service tax, which was not possible before the constitutional amendment for GST.

States and the Centre have already pooled their sovereignty in indirect taxes, what would be left for the former in the economic sense if they lose their power in expenditure as well.

As such, some win-win situation will have to be explored before the idea can be embraced by the states.

If one looks at fiscal consolidation, it is the Centre that has not been able to exercise restraint on expenditure. States are doing their jobs pretty well.

In 2018-19, Centre’s fiscal deficit was 3.4 per cent of GDP, breaching the budget estimates of 3.3 per cent. The deficit had stood at 3.5 per cent in the previous financial year.

Combining it with the fiscal deficits of all states, the general fiscal deficit (of both the Centre and states) was projected to stand at 5.8 per cent of GDP in FY’19 (Budget Estimates), sharply lower than previous year’s 6.4 per cent. In absolute terms, combined fiscal deficit stood at Rs 1,099,797 crore in FY19 as compared to Rs 1,100,425 crore in FY18.

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Source: Business-Standard
80% Visakhapatnam traders yet to file GST returns 

80% Visakhapatnam traders yet to file GST returns 

With the August 31 deadline for filing central goods and service tax (CGST) returns only a fortnight away, CGST officials are in a fix as 80 per cent of traders in the city have not yet filed their returns.

“All taxpayers should file their GST returns for 2017-18 by August 31, else they would face severe consequences, including a hefty penalty,” said chief commissioner of Customs and CGST, Visakhapatnam Zone, Naresh Penumaka.

The chief commissioner denied that the cumbersome process is the reason for delay in filing returns and cited a 90 per cent compliance rate at the national-level, with compliance in some states as high as 70 per cent. “Some deliberately delay payment,” he said.

The process involves a consolidated filing of monthly returns filed by traders. The date had been extended several times in past and CGST officials said the deadline will not be extended further. “So the traders who are yet file the returns should approach the nearest central excise official for filing returns,” suggested Penumaka.

The chief commissioner warned that any fraud in input tax credit, attempts to use it as working capital or not remitting GST collected from consumers might lead to imprisonment. “Traders should also issue a bill collecting GST as per the reduction effected by the GST council from time to time,” he added. The target for 2018-19 in Andhra Pradesh has been set at Rs 58,222 crore, but till July 2019 only Rs 16,037 crore has been collected.

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Source: Times-of-India
North eastern states witness over 30% growth in Apr-Jul GST collection

North eastern states witness over 30% growth in Apr-Jul GST collection

North eastern states registered over 30 per cent growth in GST collection during the first four months of the current fiscal 2019-20, much more than the increase witnessed in larger manufacturing states. Growth in Goods and Services Tax (GST) collection recorded by most of the seven sister states is over three times the national average of 9 per cent.

In absolute terms, the total tax collectionduring April-July of this fiscal year rose to Rs 3.56 lakh crore, as per the data accessed by .

Among the north eastern states, Nagaland registered highest growth of 39 per cent at Rs 393 crore during April-July period, the data revealed.

It was followed by Arunachal Pradesh with 35 per cent growth at Rs 514 crore and Sikkimwith 32 per cent increase to Rs 370 crore.

While Meghalaya clocked a growth of 30 per cent in GST collection at Rs 680 crore, Mizoram’s growth was a tad lower at 27 per cent with Rs 350 crore collection.

The laggard states of Tripura and Manipur too registered 16 per cent growth, more than double of large industrial states like Maharashtra, Haryana and Gujarat.

Out of 37 states and union territories, Delhi, Lakshadweep and Puducherry registered de-growth of 2 per cent, 17 per cent and 8 per cent respectively.

GST collection of Delhi declined to Rs 12,700 crore during April-July 2019, compared with a little under Rs 13,000 crore a year ago.

According to experts, Delhi has been adversely hit as the tax arbitrage on central sales tax (CST) has ended. In the past, Delhi imposed a lower CST of 1 per cent, prompting many companies to ship goods from the union territory by locating their offices here.

Big states like Maharashtra and Gujarat recorded a single-digit growth of 6 per cent in GST collection. Punjab clocked 7 per cent growth, while Haryana’s growth was at 9 per cent.

Tamil Nadu and Karnataka recorded 10 per cent and 11 per cent growth in GST collections, respectively.

In contrast, consuming states like Bihar, Odisha, Uttar Pradesh and Madhya Pradesh are faring better than the industrial states with double-digit growth. DP CS RVK

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Source: Economic Times.
GST Council to meet on September 20 in Goa

GST Council to meet on September 20 in Goa

The Goods and Services Tax (GST) Council is likely to meet next on September 20 in Goa, a senior government official told Moneycontrol.

“The agenda hasn’t been finalised yet. But, the healthcare industry’s demand on input tax credit maybe considered. Though it is too early to comment on the final agenda,” the official said.

Healthcare providers have been pushing for a 5 percent GST, since in the absence of input tax credit, they end up absorbing taxes paid on goods purchased from vendors. Input tax credit is not allowed as healthcare services are exempt from GST, except cosmetic surgery and hair transplant. Tax is applicable on implants and artificial limbs.

The Indian automobile sector has hit its worst phase because of a persistent liquidity crunch among India’s shadow banks, leading to a collapse in sales. In July, the passenger vehicle industry recorded its worst sales performance in nearly 19 years.

According to data released on August 13 by the Society of Indian Automobile Manufacturers, sales fell 31 percent to 200,790 vehicles last month from 290,931 units a year earlier. It was the worst sales performance since a 35 percent decline in December 2000.

Representatives from the sector had recently met the finance minister to discuss ways to revive sales. “It’s unlikely that any GST relief would be possible for us to provide as of now,” the official said.

Source: Money-Control.

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UT ranks first in GST return compliance

UT ranks first in GST return compliance

In a major achievement, the UT Excise and the Taxation Department has topped the country in the GST 3B monthly tax return compliance rating of 92.44 per cent among all states and UTs in the first four months of the current financial year. This has been revealed in the latest report of the GST collection and compliance. In this category, Punjab (87.72 per cent) stood second and Gujarat (86.35 per cent) third.

Sources said the city had around 18,000 registered dealers and it was ensured that maximum dealers filed the returns under the GST law. The department has recently carried out an intensive physical checking of the dealers who had not been filing their returns. After the checking, the GST registration of over 806 dealers, who failed to file return for more than six months, was cancelled. Notices have been issued to other dealers who did not file their returns.

Sources said the checking was started on the direction of Excise and Taxation Commissioner Mandeep Singh Brar, who now directed the department officials to achieve the target of up to 95 per cent GST return compliance.
The steps have been taken to ensure there was no tax evasion at the dealers’ end.

The department has collected Rs 466.94 crore as tax in the last four months with a hike of over 12 per cent against the corresponding period last year. RK Chaudhary, Assistant Excise and Taxation Commissioner, said the department also carried out a survey in various markets and directed dealers to issue proper bills to consumers.

Source: Tribune-India


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Poorer states leave industrialised peers behind in GST collection rates: Report

Poorer states leave industrialised peers behind in GST collection rates: Report

Heartland states such as Bihar, Uttar Pradesh, Madhya Pradesh and Odisha showed improved performance in goods and services tax (GST) collection for 2019, as compared to the previous year, reports the Times of India.

Their performance stood out against that of industrialised states, with only West Bengal bucking the trend, the report said.

Delhi, with a 2 per cent drop, reported the worst collection of Rs 12,700 crore for April-July 2019, compared to Rs 13,000 crore a year back, it said, adding that the overall GST collection for the period rose by 9 per cent to Rs 3.56 lakh crore.

The top performers in terms of collection rates were Nagaland (39 per cent), Arunachal Pradesh (35 per cent) and Sikkim (32 per cent). Their GST collection volumes, along with Meghalaya, were between Rs 370 crore and Rs 680 crore, the report said.

Odisha saw collection rate spike by 20 per cent to Rs 9,264 crore for April-July 2019 from Rs 7,666 in April-July 2018, Uttarakhand by 19.9 per cent (Rs 3,676 from Rs 3,067); Bihar by 17.8 per cent (Rs 11,625 – Rs 9,869) and Madhya Pradesh by 14.6 per cent from Rs 14,024 to Rs 12,240.

Assam recorded a 14.1 per cent rise (Rs 6,197 – Rs 5,433), Uttar Pradesh (12 per cent from Rs 34,783 to Rs 31,056), Karnataka 10.7 per cent (Rs 29,789 – Rs 26,908), Tamil Nadu – 10 per cent (Rs 27,959 – Rs 25,425), Andhra Pradesh – 9.1 per cent (Rs 14,482 – Rs 13,271), and Telangana – 8.7 per cent (Rs 16,121 – Rs 14,832).

Maharashtra rose by 7.2 per cent (Rs 54,208 – Rs 50,557), West Bengal 6.4 per cent (Rs 19,014 – Rs 17,862), Gujarat 6.2 per cent (Rs 24,663 – Rs 23,221) and Kerala 4.7 per cent (Rs 14,542 – Rs 13,888).

MS Mani, a partner at consulting firm Deloitte, told the paper that the above-average collections in consuming states were “expected even prior to GST launch as it is structured as a destination-based consumption tax”.

“However, originating states, where the collection growth has been slower, would need to consider the fact that the compensation mechanism comes to an end in 2022, unless extended,” he said.

Anticipating this development, Gujarat, Maharashtra and Tamil Nadu had demanded that the Modi-led government begin negotiations for implementing GST – demands that the BJP-rules states later dropped.

As per stipulations, states with less than 14 per cent annual growth would be compensated by the Centre for five years. However, some of these states – going by the GST numbers – would not require the support, the paper pointed out. The compensation is paid out of cess imposed on soft drinks, tobacco and automobiles among others.

Experts told that paper that the development has been good for poorer states and would augur well for states with high production and consumption base as well, such as Maharashtra.

However, states with lower populations such as Haryana and Punjab could be adversely affected as the various taxes subsumed into GST would affect their monies.

Source: Money-Control.

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Source: Live-Mint

Govt unlikely to offer GST concessions to auto firms

Govt unlikely to offer GST concessions to auto firms

The government is unlikely to offer goods and services tax (GST) concessions to the auto sector as it believes that companies have been slow in responding to consumer demand on BS-VI. Besides, it fears that sops to one sector will open the floodgates to demands from other sectors.

Banks are, however, being encouraged to step up lending to ensure that absence of a fund flow does not choke demand. While acknowledging that lending is an issue, sources said the government is making efforts to push loans and get banks to make up for the deficit due to the absence of some of the NBFCs from the market.

With the government itself facing pressure on the revenue front, chances of a GST reduction are remote, especially when states too have to agree to it in the GST Council. Several auto industry leaders have suggested that a tax cut could provide the necessary stimulus.

“There was a demand from the real estate sector so the GST Council lowered the levy but it did not result in a pick-up because the problem lay elsewhere,” said a source. The view in government is that auto makers cut their plans to switch to BS-VI too late, hoping to wrangle an extension in deadline from the courts. There is no sign that the Supreme Court could entertain an extension beyond the April 1, 2020 deadline for introduction of cleaner fuel and consumers have become chary of purchasing BS-IV vehicles.

While the government has held consultations with the auto industry and other sectors, sources said, companies need to consider the full picture and not focus only on the lower demand to seek concessions and a postponement of the transition to electric vehicles. They said many buyers are reluctant to purchase bikes and cars with current emission standards as they fear that the resale value will come down once the new standard kicks in from April.

Companies should already have put in place a product mix which allowed consumers to choose between BS-IV and BS-VI emission standards. “This is taking the ‘Just in Time’ model a bit too far. You can’t get all your BS-VI models close to the switch-over date,” said a source.

Source: Times-of-India

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Do RWAs need to pay GST on society fee?

Do RWAs need to pay GST on society fee?

Even after more than two years of its implementation, there are ambiguities that crop up regarding the implementation of the goods and services tax (GST). For instance, there was little clarity on the applicability of GST on maintenance paid by home owners to residents’ welfare associations (RWAs) for the upkeep of societies. The government recently clarified on this particular aspect.

In a notification dated 22 July 2019, the ministry of finance said that if RWA members contribute less than ₹7,500 a month each, the said RWA is exempt from paying GST, irrespective of the annual turnover.

Note that the rule is not new but was amended to increase the limit. “It is only the clarification that has come recently. The limit was earlier ₹5,000, which was increased to ₹7,500 in January 2018,” said Pratik Jain, partner and leader, Indirect Tax, PwC India. However, RWAs are required to pay GST on monthly subscriptions if the subscription is more than ₹7,500 per member and the annual turnover of the RWA—by way of supplying of services and goods—is ₹20 lakh or more. Also, this GST will be charged on the entire amount of maintenance and not just on the amount exceeding ₹7,500.

The RWA does not need to pay GST if the annual turnover is ₹20 lakh or above, but the members are paying less than ₹7,500 as maintenance charge per month each.

For instance, if a housing society has 100 apartments and the monthly maintenance charges are around ₹4,000 each unit, there will be no need to account for GST, as the monthly contribution is below ₹7,500, even though the annual turnover of the RWA is ₹48 lakh, which is over ₹20 lakh a year. Similarly, if the monthly contribution in a high-end housing society with 10 apartments is ₹15,000 per unit, the annual collection will be ₹18 lakh, which is less than ₹20 lakh a year, the contributions of its members will not attract GST.

GST rules also allow RWAs that have to collect GST on monthly contributions to claim input tax credit (ITC). ITC helps an entity to reduce the GST amount it has paid on goods or services from the amount of GST it has to deposit to the government.

“There were representations made to the government in this regard, and hence, they have clarified. Obviously it is a relief for the residents, particularly those who reside in smaller apartment buildings and complexes. Of course, if you look at the luxury segment, the maintenance amounts might be much higher than ₹7,500. At least it provides relief to a large section of society,” said Jain.

The government’s notification also states that by coming under the ambit of GST, RWAs could in fact lower their tax burden by availing the benefits of ITC, which they would have paid to their suppliers for expenses on goods such as buying generators, water pumps, lawn furniture, taps, pipes, or other hardware as well as for services such as repairs and maintenance.

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Source: Live-Mint
Only about 15% of taxpayers have filed GST Returns, low numbers worry CBIC chief

Only about 15% of taxpayers have filed GST Returns, low numbers worry CBIC chief

With the last date to file GST Annual Return and GST Audit report fast approaching, a complex filing process and numerous data requirement has meant very few taxpayers have been able to comply with the filing process

In a letter to all Principal Chief Commissioners and Chief Commissioners of Central Tax, CBIC Chairman Pranab K Das writes that data available till August 3 shows that only 14,85,863 GSTR-9 has been filed, while all non-composition taxpayers are supposed to file annual returns. This number of taxpayers needed to file GST annual return stands at over one crore. Similarly, the status of filing GSTR-9A stands at 4,33,148 and GSTR-9C at 11,334. About 12 lakh registered taxpayers are required to get their accounts audited and filed under GSTR-9C.

The last date to file GSTR 9, GSTR-9A and GSTR-9C is August 31, 2019, but the dismal figures has prompted Das to get the tax Commissioners to help out with the process and expedite the return filing process.

“Considering the last date is approaching fast, there is a need to reach out to the taxpayers to ask and help them to file the annual returns/reconciliation statement before the due date. Wherever required, they should be guided through the various steps of the return filing process. Towards this end, I request you to organize outreach initiatives in your ones to help the taxpayers file their returns in time. Such outreach programme may be organized at the Commissionerate level as well as Division level. The overarching objective of the exercise is to ensure that the best help and assistance is available to taxpayers in filing their annual returns/reconciliation statement well before the due date,” says the letter from Das.

According to KPMG India, Partner, Harpreet Singh, most dealers are busy in undertaking multiple reconciliations for their pan India operations and sorting the differences. “Also, re-visiting all tax positions and agreeing on them with GST auditors to reduce qualifications is taking time” said Singh.

According to Chartered Accountant, Pritam Mahure, the low numbers of GST Compliances are attributable due to the complex and numerous data requirements for preparing GST Annual Return as well as GST Audit. “Few details, such as eight-digit product codes (HSN) are requested, although legally only four-digit HSN is required. Similarly, HSN-wise purchase summary is another requirement which was not required at the time of monthly GST return, but is now required to be furnished. Given this, GST Council should immediately look into these valid concerns of the GST payers and make the GST Annual Return and Audit process, Good and Simple, in-reality,” says Mahure.

Das in his letter adds that any systemic/policy issue faced by the taxpayer in filing the retur/reconciliation statement should be brought to the attention in the Board urgently.

“Though the numbers look poor at the moment, like any other statutory deadline the compliance would increase significantly with passage of each day towards the deadline” adds Singh.

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Source: Economic-Times.
GST trouble: Businesses reporting 20 per cent revenue fall receive notices

GST trouble: Businesses reporting 20 per cent revenue fall receive notices

GST-registered businesses that have reported decline in annual revenue by 20% or more over the previous year have received a flurry of notices over the last few weeks from the tax department, sources in the know told FE. While notices related to mismatch in declaration between GSTR-3B (summary return) and GSTR-1 (outward supplies detail) were common earlier, the department is now comparing firms’ earning under GST with that of erstwhile service and excise regime.

The notices have asked businesses to produce relevant documents and explain the reasons for decline in sales. The department believes that many such cases could point to possible evasion under the new indirect tax regime. Sources said that the government is sitting on a pile of data that wasn’t available to them before GST. This is further aided by integration of information from Customs and direct tax department. The GST IT system is now throwing up many red flags when tax returns under different tax regimes are compared.

However, the spate of notices are also targeting businesses that have genuine reasons for declining revenue which includes a slowing economy. In one instance, a service provider for multinational companies received a notice but its revenue had slacked due to expiry of certain contracts. In another notice seen by FE, the taxpayer was asked to produce input tax credit documents as it had paid a substantial portion of tax liability through accumulated tax credit.

“While genuine businesses are not worried over these notices, it does raise the cost of doing businesses for them,” Rajat Mohan, partner at AMRG & Associates, said. He explained that replying to notice under GST requires professionals and could cost as much as `1 lakh while earlier, the tax laws had been around for some years and most replies followed a set pattern that didn’t require professional intervention.

Although the GST system generates a lot of data to track evasion, the absence of a full-fledged return system means that there are areas prone to exploitation through fake invoices for claiming additional credit and bringing down tax liability. The Comptroller and Auditor General’s (CAG) report tabled in Parliament recently pointed this out. The new return system is likely to come into force only from next year.

Meanwhile, tax department has estimated that evasion worth as much `1.2 lakh crore may have taken place under GST regime. An official said that while the government had detected evasion worth over `12,000 crore since GST came into force two years ago, rule of thumb suggested that such detection were only 10% of the actual evasion taking place. The GST collection for central government in FY19 fell short of target by over `60,000 crore.

This prompted the government to set relatively modest budget estimate for the current fiscal at `11.89 lakh crore. This translates into an average monthly collection of just below `1 lakh crore. In the first four months of FY 20, the collection have kept pace with the required rate.

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Source: Financial-Express.