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GST rate cut to boost demand may be counterproductive, say finance ministry officials

GST rate cut to boost demand may be counterproductive, say finance ministry officials

The government may not accept the industry’s demand to substantially reduce Goods and Services Taxes (GST) for six months to boost demand as the exemption would block input-tax credit that would have an adverse impact on businesses and may not result into any significant gain to the consumer, two finance ministry officials said.

The GST exemption will make output tax as zero and thus the input-tax credit would be blocked, which will be added to the cost making the product costlier, the officials with direct knowledge of the matter said requesting anonymity.

“This will not only be injurious to the industry but also to the consumer at large and this is certainly not going to revive the demand,” one of the officials said.

The GST is an integrated levy of indirect taxes and a main source of revenue for both the Centre and the states. It is about one-third of the total tax receipts. Over 70% of the GST revenue accrues to the states through their own share and the devolution. Therefore, it is impossible for states to manage their finances without the GST revenue, a second official said.

Several industry associations have said demand generation would be a major challenge before the government after the lockdown is lifted and a substantial reduction in GST rates could be a solution. Niranjan Hiranandani, president, Associated Chambers of Commerce and Industry of India (Assocham) is one of its proponents who had proposed to cut GST rates on almost all products by 50% for six months to boost demand and had asked the government to include it in the part of its economic stimulus package with estimated cost of about Rs 3 lakh crore. HT reported it on April 17.

Responding to the finance ministry officials’ comments, Hiranandani said on Tuesday, “In theory, yes – lost input tax credit (ITC) on exemption from GST is an issue of concern, but that is not what the industry’s suggestion.”

“It has to be viewed from the perspective of incentivizing consumers by inducing them to make a purchase leading to the consumption which is the need of an hour. The argument is that a cut in GST for a short term, say next 6 months, will reduce the amount paid for the good or service, so the consumer will buy more (spend more) and thereby, revitalize the economy. It is a simple issue of reducing (not exempting) GST, so that consumers go ahead and buy – in the present, during the period of reduced GST rather than keep waiting for some other day to do so,” he said.

The logic is that demand generation needs reduction in GST,” he said adding “The aspect of ITC can be dealt with, so long as the suggestion is taken in the proper perspective.”

Experts, however, advised the government to adopt a cautious approach while tempering with GST rates. “There does not appear to be any empirical evidence that any country has exempted GST/VAT [value-added tax] across the board in order to drive up the pandemic-impacted economies. There could be specific sectors/areas where there may be a need to rationalise the GST rates for a temporary period to assist the sector. This needs be done very cautiously ensuring that revenue losses are minimised, leakages are avoided and the reductions do not lead to emergence of inverted duty structure situations,” said MS Mani, partner at Deloitte India.

Abhishek Jain, tax partner at consultancy firm EY said a GST exemption would entail breaking of credit chain, higher input tax costs for businesses and complexities on compliances with credit transitions during taxable and exempt tax periods. “A specified percentage GST rate reduction could be explored vis-à-vis a NIL rate/exemption by the government specifically for the severely impacted sectors. In a scenario, where the said rate reduction entails accumulation of credits, the government should ensure full refund of the credits so accumulated with faster processing of such refunds,” he said.

According to Pratik Jain, partner and leader-Indirect Tax at  India, providing GST exemption leads to complications in terms of blockage of ITC, coupled with rigors of anti profiteering provisions, besides imports become cheaper. “However, there is perhaps a need to make an exception for certain industry sectors such as airlines, hospitality etc. In addition, the government should consider providing working capital cushion to industry by deferring the payment of GST collected by few months to industry at large, without payment of any interest,” he said.

Source: Hindustan Times

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GST Return filing date extended, relief from late fee, penalties

GST Return filing date extended, relief from late fee, penalties

To provide relief to businesses grappling with the economic impact of Covid 19, the government on Tuesday said it is extending the filing of Return for the month of March, April and May 2020 and composition returns under GST June 30.

Addressing the press, Finance Minister Nirmala Sitharaman added that staggered filing will apply. “While I announce 30th June as the date, specific regions will have dates like 27, 29 or 30th.

Significantly, the FM also said companies which have less than Rs 5 crore turnover will not have to pay interest, late fee or penalty. For bigger companies late fee and penalty will not apply and only interest at a reduced rate of 9% will be charged. “This is only for bigger companies. Majority of companies will have no interest, late fee or penalty,” said Sitharaman.

The date for opting for composition scheme has also been extended to June 30, 2020.

“The extension of GST return filing timelines together with the deferment of e-invoicing and new returns announced earlier would allow businesses to focus on resumption of business processes once normalcy resumes in future, “says MS Mani, Partner, India.

He adds that the waiver of interest, late fees and penalties for SME’s would enable them to focus on reviving their businesses once things are back to normal.

There has been a clamour from taxpayers to provide relief from compliances and especially GST. Today’s announcement is likely to provide some relief. “Some key filing and payment relaxations that should bring rejoice to the industry. One hopes this is the first tranche and there are other tranches to follow, wherein benefits like GST rate reductions, exemption from import duties, reduced compliances etc. are announced.” said Harpreet Singh, Partner,  India.

The Government has also decided that the due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents, time limit for any compliance under the GST laws where the time limit is expiring between 20th March 2020 to 29th June 2020 will be extended to 30th June 2020.

Source: Economic-Times

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Govt plans GST lottery offers of Rs 10 lakh-Rs 1 cr for encouraging customers to ask for bills

Govt plans GST lottery offers of Rs 10 lakh-Rs 1 cr for encouraging customers to ask for bills

The Centre is planning to introduce lottery offers between Rs 10 lakh and Rs 1 crore under the GST to encourage customers to take bills while making purchases.

Central Board of Indirect Taxes and Customs (CBIC) member John Joseph said every bill under the goods and services tax (GST) regime will provide a chance to the customers to win a lottery and that would act as an incentive for them to pay the tax.

“We have come with the new lottery system. Every bill under GST is supposed to be a price-winning lottery ticket. It will go for a draw and price are so high that people will say that by not saving 28 per cent, I have a chance of winning Rs 1 crore or Rs 10 lakh. It is a question of changing the consumer behaviour,” Joseph said at an Assocham event.

As per the plan, the purchase bill would be uploaded on a portal and a draw would be held automatically and the winners would be informed.

Under the four-tier GST, goods and services are taxed at 5, 12, 18 and 28 per cent. Besides, cess is levied on luxury, sin and demerit goods on top of the highest tax rate.

The GST Council, chaired by Finance Minister Nirmala Sitharaman and comprising state counterparts, would vet the proposed lottery scheme.

The Council would also decide on the minimum threshold for bills that would be included in the lottery. As per the plan, the money for the lottery would come from the consumer welfare fund, where the proceeds of anti-profiteering are transferred.

To plug leakages in GST revenue, the government is considering various options in business-to-consumer deals, including lotteries and incentivising QR Code-based transactions.

The government has constituted a committee of officers to suggest measures to augment GST revenue collections.

The panel has been tasked to suggest systemic changes in GST, including checks and balances, to prevent misuse and measures to improve voluntary compliance.

Also, it has been tasked to give inputs on measures for the expansion of the tax base.

The committee, which made presentation before the GST Council on December 18, suggested pruning of exempt list for raising resources.

Source: Economic-Times

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GSTN glitches: Finance Ministry summons Infosys Executives

GSTN glitches: Finance Ministry summons Infosys Executives

The Ministry of Finance has reportedly summoned the Infosys executives for over the Goods and Services Tax Network (GSTN) glitches.

Senior executives of Infosys has been summoned following continued glitches being faced by taxpayers and professionals while filing returns on the GST Network.

Infosys senior vice president C N Raghupati and vice president V Ranganathan will meet top finance ministry officials to explain why technical glitches have not been resolved, despite repeated requests from the ministry.

“There have been repeated complaints from businesses and industry that the taxpayers have been facing technical glitches on the GSTN portal while filing returns… The ministry has repeatedly brought it to the knowledge of Infosys,” the official added.

The Taxpayers are facing issues on Portal slow down, Login Error, Auto Logout, Non-delivery of OTP, Delayed OTP, Network Error, Gateway timeout, OTP issues on email or on a few domains, Open file error, issues relating to uploading documents etc.

Source: Tax-Scan.

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GST returns can now be filed in a staggered manner

GST returns can now be filed in a staggered manner

In a moved aimed at de-stressing the GST system, the finance ministry on Wednesday staggered last dates of filling GSTR-3B, a monthly return form, and has provided three dates for different categories of taxpayers.

Currently, the last date for filing GSTR-3B is 20th of every month. With the changes, there will three dates — 20th, 22nd and 24th — of every month for different categories of tax payers.

In the past, glitches in the return filing system of GST Network were reported on the last day of filing of returns and trade and industry had to face problems.

It may be noted here that about one-fifth of the total GSTR-3B returns were filing on the last day (January 20).

“From now on, the last date for filing of GSTR-3B for the taxpayers having annual turnover of Rs 5 crore and above in the previous financial year would be 20th of the month. Thus, around 8 lakh regular taxpayers would have the last date of GSTR-3B filing as 20th of every month without late fees,” the ministry said in a statement.

The taxpayers having annual turnover below Rs 5 crore in previous financial year will be divided further in two categories.

The tax filers from 15 states/UTs — Chhattisgarh, Madhya Pradesh, Gujarat, Daman and Diu, Dadra and Nagar Haveli, Maharashtra, Karnataka, Goa, Lakshadweep, Kerala, Tamil Nadu, Puducherry, Andaman and Nicobar Islands, Telangana and Andhra Pradesh — will now be having the last date of filing GSTR-3B returns as 22nd of the month without late fees.

This category would have around 49 lakh GSTR-3B filers who would now have 22nd of every month as their last date for filing GSTR-3B returns.

For the remaining 46 lakh taxpayers from the 22 States/UTs of Jammu and Kashmir, Ladakh, Himachal Pradesh, Punjab, Chandigarh, Uttarakhand, Haryana, Delhi, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand and Odisha having annual turnover below Rs 5 crore in previous financial year the last date will be 24th.

The ministry further said it has also taken a note of difficulties and concerns expressed by the taxpayers regarding filing of GSTR-3B and other returns.

“The matter has been discussed by the GSTN with Infosys, the Managed Service Provider, which has come out with above solution to de-stress the process as a temporary but immediate measure,” it added.

For further improving the performance of GSTN filing portal on permanent basis, several technological measures are being worked out with Infosys and will be in place by April 2020.

A total of 65.65 lakh GSTR-3B forms for the tax month of December were filed by January 20.

Source: Economic-Times

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931 GST fraud cases identified through Data Analytics

931 GST fraud cases identified through Data Analytics

Department of Revenue through data analysis has identified 931 cases of fraudulent GST.The maximum numbers of such cases for Input Tax Credit frauds have been booked in Kolkata zone followed by Delhi, Jaipur and Punchkula (Haryana).

Refunds of over Rs. 28,000 crore are said to have been filed by over 27,000 taxpayers so far on account of inverted duty structure in the current year. Finance Ministry sources confirmed that such identified taxpayers who have purchased goods from tax evading non-filers would face verification and scrutiny as necessary.

This is being weekly reviewed and monitored by the Union Revenue Secretary, Dr Ajay Bhushan Pandey.

GST formations have booked 6641 cases involving 7164 entities till November last year and have so far recovered around Rs.1057 crore.

Sources added that investigators in Delhi have busted through data analytics a significant fraud case, where fraudsters created a network of over 500 entities comprising of fake billers, intermediary dealers, distributors and bogus manufacturers of hawai chappals for availing and encashing fake ITC credits. The bogus “manufacturers” created in Uttarakhand were making supplies to other fictitious entities & retailers in Gujarat, Maharashtra and Tamil Nadu. The raw materials for the chappals, known as EVA compound, are chargeable to 18% duty whereas chappals are chargeable to GST of 5%. As a result, the law allows the manufacturers to claim refunds of the inverted duty structure in cash.

Another important case was that of IGST fraud from Surat in which preliminary investigations revealed that 19 firms fraudulently claimed ITC to the tune of 55 crore against the fake invoices received by these firms valued at Rs. 679 crore. In this case during the search at the premises of two kingpin firms M/s Satyam Impex and M/s Aatif Fashion, it was revealed that 17 other firms were registered with GST by misusing the identity/documents of daily wagers, casual workers, etc.

Data Analytics wing of GST has been able to identify all such cases involve fake invoicing and fraudulent tax credits, which have been encashed through the facility of IGST refunds.

Source: India-Today.

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CBIC extends waiver of GSTR-1 late fee

CBIC extends waiver of GSTR-1 late fee

The Central Board of Excise and Customs (CBIC) extended the last date for waiving late fee on filing of output supplies statements through Form GSTR 1 for the period between July 2017 and November 2019, by a week to January 17.

More than 54 lakh filings under goods and services tax (GST) were received by authorities, the finance ministry said through its Twitter handle Friday, more than double from the monthly average of 25 lakh filings, prompting the move.

The government had initially decided to provide the waiver for filings for the period – if done till January 10 – on the recommendations of the GST Council that met last month.

Source: Economic-Times

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Fin Min clarifies why Sushil Modi replaces FM Nirmala Sitharaman as head of IGST Group of Ministers

Fin Min clarifies why Sushil Modi replaces FM Nirmala Sitharaman as head of IGST Group of Ministers

The Finance Ministry has clarified the reason why Sushil Modi, the deputy chief minister of Bihar, has replaced Finance Minister Nirmala Sitharaman as the convener of a Group of Ministers on Integrated Goods and Services Tax (IGST), as per CNBC-TV18.

The finance minister cannot head the panel since she is the chairperson of the GST Council, it said.

Sources earlier revealed on December 11 that the finance minister was ‘inadvertently’ named as the convenor of the panel. It happened after Sitharaman had had a meeting with deputy chief ministers of Puducherry and Delhi, and finance ministers from Rajasthan, Madhya Pradesh and Punjab on December 4.

The GoM will deliberate on IGST issues of the states and submit its recommendations to Sitharaman.

A modification has been made late Tuesday evening to the constitution of GoM on IGST making Sushil Modi its convener, they said.

Last week, finance ministers and representatives of opposition-ruled states met Sitharaman and expressed their concern over delay in release of GST compensation which has put them in an acute financial position.

The finance ministers of Delhi, Punjab, Puducherry and Madhya Pradesh and representatives of Kerala, Rajasthan and Chhattisgarh attended the meeting over the delay in payment of compensation.

Source: Money-Control.

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Commerce Ministry raises issue of notices to exporters for GST ‘violation’

Commerce Ministry raises issue of notices to exporters for GST ‘violation’

The commerce ministry has taken up the issue of Directorate of Revenue Intelligence (DRI) notices being sent to 1,000 exporters for alleged violation of Goods and Services Tax with its finance counterpart, an official said.

The commerce ministry has stated that the “overzealous revenue collection” move by DRI (Directorate of Revenue Intelligence) was against exporters.

The ministry has demanded integrated goods and services tax (IGST) exemption for inputs used in exports between October 2017 and January 2019, the official said.

In a letter to the Department of Revenue, the commerce ministry said that the demand of giving retrospective IGST exemption to exporters could be taken up by the GST Council, chaired by the finance minister and comprising state ministers.

“This department is of the view that enthusiasm of exporters should not be killed by overzealous revenue collection based on technicalities where revenue does not accrue in principle. You may consider placing these concerns before the GST Council for early resolution,” the ministry has said.

It has also stated that as on date, imports made under the advance authorisation scheme on both pre and post export basis are exempted from payment of IGST.

Exporters have raised concerns regarding litigation and penal action by DRI with regard to pre-import condition under the scheme.

DRI had sent notices to exporters for claiming post import IGST exemption between October 2017 and January 2019. During the period, this exemption was allowed only for pre-import of inputs.

But the exemption was allowed both for pre and post import from January 15 this year. The commerce ministry is seeking implementation of this notification from October 2017 itself.

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Source: Business-Standard.
Customs, GST relief to give Rs 60,000-cr boost to defence

Customs, GST relief to give Rs 60,000-cr boost to defence

India’s defence budget will be augmented by more than Rs 60,000 crore over the next five years owing to exemptions from customs duty and goods and services tax (GST) that kicked in on October 1, said people aware of the matter.

They said estimates by the Rajnath Singh-led defence ministry show that the twin exemptions will significantly impact its budget and free up resources for modernisation and replenishment of equipment.

The defence ministry had been hit by the imposition of customs duty in 2016 on all imports of military equipment, followed by the GST the next year. Although the two levies were aimed at promoting indigenous production of defence equipment, it soon became evident that there was a lack of capability to produce certain items locally.

With the ministry forced to spend a significant chunk of its budget on imports, the twin taxes reduced the availability of modernisation budget, leading to the armed forces cutting back on plans to acquire new systems.

“A case was taken up with the finance ministry to reinstate the exemption on customs duty and exempt GST as well for imported defence items for which there is currently no domestic production capability,” said one of the persons, who spoke on condition of anonymity.

A key factor in the exemption is that it has been provided for a select number of defence items and for a limited period of five years, during which it is estimated that domestic production will not be available. This would safeguard interests of the Indian industry and allow it to provide alternatives after the fiveyear window, said the person.

Officials said that around Rs 25,000 crore will be saved over the next five years on account of the rollback of customs duty on the import of defence equipment that is not manufactured in India while GST exemptions will augment the defence budget by Rs 35,000 crore.

As reported by ET, the withdrawal of customs duty on imported defence items that are not manufactured in India will improve cash flow, but the services are still short of resources to take forward their modernisation plans.

The defence allocation this year is pegged at Rs 3.18 lakh crore, with capital expenditure of Rs 1.08 lakh crore. The inadequate capital acquisition means that the three armed forces will fall short of almost Rs 18,000 crore on their committed liabilities to pay for equipment already purchased.

This gap could mean delayed payments to public sector units and a further delay in purchasing equipment.

Source: Economic-Times

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