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GST: Evasion, returns and revenue boosting measures to feature at officers’ meet Monday

GST: Evasion, returns and revenue boosting measures to feature at officers’ meet Monday

Tax officers from the states and the Centre will get together for a day-long meeting on Monday to discuss administrative, legal, revenue and implementation-related issues under the indirect tax regime.

This will mark a first of its kind interaction between central and state tax officers, delinked from the agenda of the Goods and Services Tax (GST) Council meeting. Usually, officer-level meetings have always taken place a day before the GST Council meetings, mainly to discuss measures outlined in the Council’s meeting agenda.

As slowing revenues under the GST have become a concern, officials from the states and the Centre will discuss measures for anti-evasion, revenue augmentation, compliance, returns filing and online system, officials said. The rates of goods and services will, however, not be discussed since those pertain to the GST Council, they said.

Officials said this meeting would be more broad-based, wherein states and the Centre would have a common platform to discuss measures to streamline and regularise many pending issues under the GST. The tax officials are expected to take up issues related to e-way bills, delay in filing returns, IT matters, pending legislative changes, and methods to ensure greater coordination between states and Centre under GST, they said.

“This method to have a common platform for discussion between states and Centre is being tried for the first time. The idea was not to club it with a GST Council meeting and have an open agenda meeting. This was felt necessary so as to develop a mechanism for similar discussions going ahead. The officer-level meetings before Council meetings, otherwise, have too many agenda items and not everything gets discussed in detail,” one of the officials said.

Apart from the administrative- and implementation-related issues, pending legal changes would also be discussed. Another official said many states have not followed up on the amendments in the Central GST (CGST) Act with changes in their respective State GST (SGST) Acts, so much so that in some places there is a time lag of six months. “Such issues need to be prioritised since they are creating a hurdle in proper implementation of GST and would be raised in the meeting,” the official said.

The plan to hold this meeting comes even though the Council last month constituted a committee of officials from states and the Centre for revenue augmentation and looking into wider range of reforms such as systemic changes in the GST, including checks and balances to prevent misuse, measures to improve voluntary compliance, improved compliance monitoring and anti-evasion measures. The committee, which was earlier supposed to submit its report within 15 days, has so far met only once and is now likely to be given an extension of 1-2 months, officials said.”The committee has a wide range of topics in its terms of reference, so it would take time,” an official said.

GST collections in October contracted by 5.29 per cent to Rs 95,380 crore from Rs 1,00,710 crore in the year-ago month, marking the third instance of a contraction since the July 2017 roll-out of the indirect tax regime.

Source: indian-Express

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Central GST busts fake invoice racket worth R14cr

Central GST busts fake invoice racket worth R14cr

A fake Goods and Services Tax (GST) invoice scam of Rs 14 crore was unearthed by the Central GST commisionerate where the suspects used it for fraudulently claiming input tax credit (ITC).

The scam came to surface during the course of action by the squads of the Central GST where a Chandwad-based firm M/s Gonglu Agro Pvt Ltd had received fake GST invoices worth Rs 5.58 crore.

Later, the Central GST commisionerate found that this firm was also involved in issuance of fake GST invoices. “During investigation we found that this Chandwad-based firm was involved in issuance of fake GST invoices. The firm has issued fake GST invoices of around Rs 70 crore to facilitate passing on bogus ITC of Rs 8.4 crore,” an official from the Central GST department said.

The Central GST department has arrested the managing director of the company, Rahoul Jain, and is investigating the case to find whether other firms are also involved in such practices of providing fake GST invoice to facilitate bogus claims of the ITC.

The Nashik divisional office of the Central GST (erstwhile office of Central excise, service tax and customs) has jurisdiction across five districts — Nashik, Ahmednagar, Dhule, Jalgaon and Nandurbar.
There are over 1.10 lakh businesses registered in the district of which 60,000 businesses are registered with the Nashik divisional office of the state GST, while remaining 53,591 are registered with the divisional office of the Central GST.

The new tax regime GST came into effect from July 1, 2017 replacing the multiple indirect taxes and traders with turnover of below Rs 20 lakh were exempted from GST, while those with annual business turnover up to Rs 1 crore are eligible for composition scheme.

The GST council made several changes in the past following introduction of GST and the exemption limit had was increased from Rs 20 lakh to Rs 40 lakh and only those businesses with turnover of above Rs 40 lakh are under the tax net.

Source: Times-Of-India.

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Government orders biggest review of GST since its launch

Government orders biggest review of GST since its launch

Two years after its launch, the government has begun the biggest review of GST – including a possible resetting of rates along with a scrutiny of the slabs-to tone up collections and plug leakages.

The task has been assigned to a 12-member committee of state and central government officials to “augment GST collection and administration”, set up a day before the PMO leads consultations with state chief secretaries on Friday, where it is expected to urge them to push for improved collections.

The terms of reference indicate the panel should suggest systemic changes to prevent misuse, improve voluntary compliance, boost overall compliance monitoring and suggest anti-evasion measures. With inverted duty structure proving to be a source of leakage in sectors like restaurants, sources told TOI that the rates may be reviewed.

The GST review committee can co-opt other state government representatives to look at fitting some of the products in other slabs.

There are several sectors where the problem persists. In case of restaurants, for instance, the withdrawal of tax credit on payment for goods and services such as rent has prompted many players to rework the lease agreement in a way that tax payment is avoided and the rent is lowered.

GST collections have slowed down in recent months and have grown at a shade under 5% during the first half of the current financial year, against the target of 13%. While a part of the slowdown is attributed to the state of the economy, especially the sharp fall in auto sales and floods, officials are also worried over weak enforcement in the states, who have been assured compensation by the Centre in case collections grow at under 14% during the year.

In recent weeks, Opposition-ruled states have attacked the Centre on GST collections and said that tax collections have been hit due to a faulty design and not necessarily due to a slowdown. They have blamed the tax cuts for lower collections, a charge that has been rubbished by the Centre, which has said that states were party to all the “unanimous decisions” taken by the GST Council.

At last month’s meeting of the GST Council, Finance Commission chairman NK Singh had flagged the need to review the slabs, which currently stand at 5%, 12%, 18% and 28%. When GST was launched in July 2017, the idea was to merge the 12% and 18% slabs and reduce the number of items in the top bracket. While there are fewer items facing 28% levy than two years ago, officials have said that given the poor revenue realisation the revenue-neutral rate will be 16-17% if the 12% and 18% brackets are merged, which may be politically difficult since there will be a larger number of items where the tax burden will go up.

States have petitioned the Finance Commission to increase the compensation period by another three years, which many believe makes the system leaky as states are assured of revenue. For instance, often states are accused of not following up on leads that are generated every month through a system of data analytics.

Source: Times-Of-India

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Exporters draw DRI wrath for alleged GST violations

Exporters draw DRI wrath for alleged GST violations

The country’s primary anti-smuggling intelligence agency has begun resending notices to exporters for availing GST exemptions where exports preceded imports. The Directorate of Revenue Intelligence (DRI) move followed a Supreme Court stay on a Gujarat High Court order favouring the exporters. The high court had quashed a revenue department notification allowing DRI to penalise exporters for allegedly not following “pre-import condition” and availing wrongful Goods and Services Tax (GST) exemptions.

Many exporters will now have to cough up Integrated Goods and Services Tax (IGST) and penalties as these notices mean that the tax department will not wait for another apex court directive. These companies had first exported goods and then imported raw materials but still claimed export benefits in the form of tax leeway.

About 1,000 exporters have been issued such notices. “The exporters will have to opt for the legal remedy of moving to the respective high courts for obtaining a stay on such show-cause notices,” said Abhishek A Rastogi, partner at Khaitan & Co, who is representing some of the exporters in the case.

The exporters have been asked to pay IGST first as the foreign trade policy has been amended and several notifications were issued in the last few months. ET has seen a notice issued to an exporter on October 10, while the Supreme Court stay was ordered on October 4. The IGST rate in these cases is 18% on the average, while for some products it is 12% and 5% for very few. Industry trackers say that under the earlier tax regime and foreign trade policy (FTP), there was no duty if imported raw materials were used for exports, even when exports
preceded imports.

The current GST framework has laid down certain conditions for exporters to avail certain benefits. A revenue department notification said raw materials cannot be imported after export of the final product. The government introduced an amendment in the GST framework that led to DRI chasing down the exporters.

The amendment spoke mainly of a “pre-import condition” that every exporter needs to follow to avail duty exemptions on imports. “In cases where exports preceded imports, availment of exemption does not seem legal and proper.

This office has initiated an inquiry in wrongful availment of exemption,” a notice read. “While the stay has been granted by the Supreme Court, it does not mean that the other exporters must pay the amount towards pre-import,” Rastogi said.

Source: Economic-Times

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CAIT says e-commerce portals avoiding GST during festival sales; seeks probe

CAIT says e-commerce portals avoiding GST during festival sales; seeks probe

Traders body CAIT on Sunday alleged that e-commerce portals during the festive sales are causing huge loss of revenue to the government by levying GST on the discounted price rather than on the actual market price of the commodity. The Confederation of All India Traders (CAIT) in a communication sent to Finance Minister Nirmala Sitharaman on Sunday charged that the e-commerce companies particularly Amazon and Flipkart through their festive sales are depriving the government with huge amount of GST revenue, a CAIT statement said.

CAIT has urged the Finance Minister to order an investigation into the business model of these companies. “Its irony that if a trader makes even a slight mistake during the course of his business, he is subjected to several penalties and even prosecution. However, these e-commerce companies which are authorised to do only Business to Business (B2B) activities are conducting Business to Consumers (B2C) sales right under the eyes and nose of the government and no action has been taken so far against them for such a blatant violation of FDI Policy,” it said.

CAIT National President B C Bhartia said during festive sales of e-commerce companies a large number of commodities are being sold at a much lesser price than the actual price thanks to deep discounts from 10 to 80 per cent which is nothing but a “predatory pricing”.

Moreover, the GST which is supposed to be charged on the actual market price of the commodity in normal case is now being charged on the price after deducting the discounts offered and this is nothing but underpricing of the commodity by these e-commerce portals thereby causing huge loss of GST revenue to the government, he added.

Bhartia said that its an open fact that deep discounts offered by these e-commerce companies are funded by their investors and in actual terms they are not the losers, the ultimate looser is the government in shape of revenue which it ought to have received on actual market price but due to open manipulations of these e-commerce companies, the government is denied of its due revenue.

It is very astonishing that these companies are running into losses since last so many years but still they are continuing with their business operations and holding festival sales and other sales round the year from time to time, he added.
Bhartia clarified that traders are not against e-commerce business and have a firm view that e-commerce is future mode of business in the country. But there has to be a level-playing field where there should not be any element of predatory pricing or deep discounting. 

Source: Times-Now-News

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The GST’s initial premise should be revisited

The GST’s initial premise should be revisited

When the GST was launched in July 1, 2017 with the promise to simplify our incredibly complex indirect tax system and unify the country through a single indirect tax, the nation supported the new disruptive tax regime the way it had supported demonetisation, setting aside the creeping doubts that were upsetting many businesses. The GST system was built on the simple premise of automatic matching of the invoices submitted by suppliers and buyers, enabling automatic processing of input tax credits (ITC) and refunds by the Infosys-built GST Network (GSTN) portal, the IT architecture that is the backbone of implementation. The GSTN was supposed to minimise frauds, curtail evasion, end harassment of taxpayers and corruption, and bring in transparency, leading to an increase in revenues, which would enable the government to lower rates and converge slabs, finally culminating in a single rate, one nation-one tax system, making it truly a “good and simple tax”.

Two years down the line, most of the promises, however, still remain only on paper. The GSTN has turned out to be miserably inadequate to fulfil its role due to the inefficiencies of the software. The automatic matching of invoices was junked only after a few months, when the returns for outward supplies (GSTR-1) and inward supplies (GSTR-2) could not be matched by the GSTN, and hence the refund of the ITC could not be processed, blocking scarce capital for millions of taxpayers. For easier transition to the new regime, a simple return — the GSTR 3B — was introduced only as a temporary measure while the GSTR-2 was suspended, so that the ITC refund could be made by using only the GSTR-1 and GSTR-3B.

The 3B return, however, has no validation whatsoever in the system, making it open to frauds and evasion that the automatic and complete matching between the GSTR-1 and GSTR-2 was supposed to have eliminated. In fact, the CAG, citing numerous instances of false ITC claims in his Report No, 11 of 2019 has said as much, emphasising that the rollback of invoice matching without any safeguards had rendered it prone to frauds. The self-correcting mechanism of complete invoice matching is a critical requirement of the system, in the absence of which the ITC is claimed by the taxpayer purely on a self-assessment basis without any system validation.

Curbing tax evasion

There have even been efforts to rationalise the incompetence of the system and institutionalise its inefficiencies. A former member of the Central Board of Indirect Taxes & Customs (CBIC) has argued that no country in the world has a complete invoice-matching system which is impractical. It is further asserted that major taxpayers such as public enterprises and private players like the Tata group, the Birla group, Mahindra & Mahindra, Hero, Infosys etc, who together pay 80 per cent of the GST, are not tax-evaders; hence, instead of wasting system resources on universal invoice matching, an intensive audit of their accounts equally serves the purpose.

Besides, it is claimed that in sectors like automobiles, steel or services, there is no scope for evasion since components and final products, or contracts and purchases, match perfectly. It is only in the sectors that sell products piecemeal, like soaps or toothpastes, that universal matching should be made mandatory; for all others, an intelligence-based checking, along with comprehensive auditing, should be far more effective than universal invoice matching. The alleged large-scale falsification of invoices has been dismissed as “absurdly illogical” and “only good English”.

Fake invoices

The arguments are as vicious as they are absurd. If universal invoice matching was impractical in the first place, why was the system designed upon this very premise? The argument that big players are all virtuous and small players are all evaders is dangerous to say the least — it is an inevitable step towards lobbying and patronage distribution, unfettered discretion, harassment and extortion — in fact, it is an insane prescription to institutionalise corruption and perpetuate very aberrations the GST regime was designed to thwart. There is also complete ignorance of the huge frauds and evasion resulting from fake invoices, which tax officials are struggling hard to curb.

In fact, the Minister of State for Finance has himself stated in Parliament that frauds amounting to ₹45,683 crore were unearthed since the launch of the GST. The CBIC Member (Investigation) had admitted that between April 2018 and February 2019, evasion of ₹20,000 crore was detected, of which ₹10,000 crore were recovered. A thriving ecosystem of fake companies using fake invoices has grown luxuriantly for claiming ITC; no sooner are the refunds claimed that these companies disappear into the thin air.

Only last week, ₹470 crore of evasion and fake invoices of ₹3,500 crore were uncovered by the tax authorities. There is something much more serious than “good English” at stake here, and the focus should be on addressing these serious structural deficiencies.

Source: The-Hindu-Business-Line

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Government to fix GST leaks, shore up collections at GST council meeting on Friday

Government to fix GST leaks, shore up collections at GST council meeting on Friday

Goods and Services Tax (GST) council meeting is scheduled for this week in Goa. The centre is planning to tighten the processes that include input tax credit claim and will emphasise on getting the states to approve the plans to plug leaks and evasions. 

It is expected that the government’s effort to brace up collections and improve the revenues is going to be a major area of the discussion during the upcoming GST council. Demand for rate cuts for the stressed sectors such as autos likely to figure but new procedures to prevent evasion and GST provisions are expected to be adopted.

It may be noted that on an average business pay 20 per cent of their tax in cash and rest of the amount using the tax credit accumulated in their accounts. Using the same math, the Ministry of Finance is looking to ask the states to put in place a mechanism under which enhancement in the limit to claim tax credit will require payment of 20 per cent as the margin money, according to a news report in a national daily.
This means that if your turnover is Rs 50 lakh and you wish the limit to be enhanced to Rs 60 lakh, then you will have to pay Rs 2 lakh as the margin money.

“This is like linking your loan to your credit history. If a business has received orders, it will have to convince our officers about a higher limit or talk to banks and get 20 per cent extra. The entire process will be automated to avoid any discretion,” as explained by an officer.

After more than two years of launch of GST, the collections have been around Rs 1 lakh crore due to the leakages, when it comes to claiming input tax credit (ITC) on the tax paid during the entire chain from purchase and transport of raw material to sale of the final product by a retailer, sources told the national publication. 

Therefore, plugging the gaps and finding ways to step up collections are going to be main topics of the discussion at the GST council meeting in Goa on Friday. The Centre and states are looking at a massive shortfall in GST revenue, where collections so far in the year has grown over 6 per cent, which is half the asking rate. The tight fiscal position is also expected to force the council to defer a decision on tax cuts, which is being demanded by certain industry groups.

Source: Times-Now-News.

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CBIC looks for public feedback to curb GST evasion by etailers 

CBIC looks for public feedback to curb GST evasion by etailers 

Before it amends Customslaws, the Central Board of Indirect Taxes and Customs (CBIC) is seeking public feedback on curbing duty and GST evasion allegedly by ecommerce companies located outside the country.

The CBIC is looking for tech-enabled solutions to ensure duties are paid correctly and to make imports through express courier seamless, according to customs officials and others in the know of the matter.

The solution should help customers get deliveries faster and free up from red tape those courier services and overseas ecommerce firms that are willing to do business legally, an official said on the condition of anonymity. “We’re open to suggestions, including changing laws to introduce a flat rate of duty and GST for courier imports, but the system needs to be seamless,” said a senior Customs official.

The CBIC has asked community platform LocalCircles to collect the feedback. In fact, there were 340 comments from the public and other community members in response to a blog post by LocalCircles on the issue. The suggestions included mandatory registration of all overseas ecommerce entities in India and data capture at single source inside the CBIC. A flat rate on imports through express courier and disallowing overseas ecommerce transactions from being classified as B2B transactions through local partners, were the other suggestions.

The government has already sought suggestions internally on how to curb duty evasion, another senior Customs official told ET. A system to deduct customs duty and GST when consumers pay could be one solution to stop evasion, he said.

The government has cracked down on ecommerce imports labelled as duty-free ‘gifts and samples’. It has blocked clearance of all such parcels at express courier ports in Mumbai, Delhi and Bengaluru. After the move, these ports have seen a drastic reduction in the number of incoming gifts, but other ports continue to clear such gifts.

Other methods of duty evasion, too, have been flagged.

In June, customs officials in Mumbai seized over 500 large consignments of Chinese ecommerce firm Shein and sealed a warehouse of its Indian reseller Sino India Etail for undervaluing goods imported through the low-value (under Rs 1 lakh) consignment route. Sino India Etail was just one of a dozen or so firms against which action had been taken. The company conforms to local laws and pays taxes correctly and on time, it said previously.

Imports already make up around 7-8% of India’s overall ecommerce market by value and are growing faster than the overall market pace, an analyst tracking the ecommerce sector at one of the Big Four consulting firms said.

Although Amazon.com is a sizeable player in ecommerce imports, a significant portion of such imports is by Chinese ecommerce firms that allegedly evade taxes and duties.

Sources: Economic-Times

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GST evaders beware: Risky taxpayers to be profiled to pre-empt dodging

GST evaders beware: Risky taxpayers to be profiled to pre-empt dodging

In a bid to pre-empt tax evasion under the Goods and Services Tax (GST), the government is looking at options to deal with taxpayers based on their risk profile. Assessees identified as ‘risky’ could face restrictions on issuing invoices, utilisation of input tax credit and sanctioning of refunds.

The government has been grappling with evasion through fake invoice since the GST was launched two years ago. The indirect tax department has detected such frauds worth over Rs 12,000 crore. A tax official said the rule of the thumb indicated that detected frauds were only about 10% in value of actual frauds being committed, which would take actual evasion to nearly Rs 1.2 lakh crore.

The GST Council, which is the apex decision-making body for the GST, has constituted a committee of officers (CoO) to suggest parameters for risk-based profiling so that a taxpayer could be categorised as risky in an automated manner. Further, the CoO will identify methods for assessing financial credibility of a taxpayer vis-a-vis its GST profile. The committee will submit a report to the GST Council on August 15.

According to the terms of reference (ToR) for the committee, it will also suggest changes in GST law and rules to enable profiling and regulating risky taxpayers, including invocation of penal provisions in case of failure to undertake desired know your customer (KYC) verification. Further, the panel is required to suggest “measures for implementation of suggested risk-based management on immediate basis and any other measures, mechanism and machinery to check and curb multiple type of frauds,” the ToR said.

The official quoted above said recovery of tax evasion after it has happened was onerous and doesn’t yield results as often fly-by-night operators are not found at their addresses. It was important, he added, that pre-emptive mechanisms were employed to detect the likely instance of frauds before they took place.


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Source: Financial-Express
GST officers arrest one person for creating fake firms, issuing bogus invoices 

GST officers arrest one person for creating fake firms, issuing bogus invoices 

GST officers have arrested one person for creating about 90 fake firms for the purpose of issuing bogus invoices without supply of goods thereon, the finance ministry said on Friday. The officers of Directorate General of GST Intelligence (DGGI), Headquarters, arrested one Anupam Singla, a resident of Sirsa, Haryana, on July 18 after searches conducted at his Delhi residence/offices threw up 110 debit/credit cards belonging to different persons, it said.

During the search operation, GST officers also found blank signed cheque books/ blank cheque books pertaining to 173 different bank accounts, blank bilty books belonging to various transporters, identity proofs of different persons, mobile SIM cards and other incriminating documents.

“The firms opened by Singla issued invoices worth Rs 7,672 crore, including the circularly traded value, with a GST component of Rs 660 crore.

“The said firms have passed on fraudulent ITC to some of the well established traders and cotton yarn spinners who have availed of the same to discharge their GST liability with an ulterior motive to defraud the government exchequer,” the ministry said.

During the investigations conducted so far into the fake billing racket in the cotton industry, the DGGI Headquarters has recovered an amount of Rs 32.60 crore towards GST evasion, it added. JD ANU ANU

Source: Economic Times.

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