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.
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