Amid the pandemic situation in India, the Central Board of Indirect Taxes and Customs (CBIC) has enabled the facility to file GSTR-3B through Electronic Verification Code (EVC) and Short Message Service (SMS). The move aims at easing the compliance procedure under the Goods and Services Tax (GST) regime.
The notification issued by the Board today said that a registered person registered under the provisions of the Companies Act, 2013 (18 of 2013) shall, during the period from the 21st day of April, 2020 to the 30th day of June, 2020, also be allowed to furnish the return under section 39 in FORM GSTR-3B verified through electronic verification code (EVC).
Further, the CGST Rule 67 was also amended and inserted a new clause 67A where the Board provided the manner of furnishing of return by short messaging service facility. As per the said provision, a registered person who is required to furnish a Nil return under section 39 in FORM GSTR-3B for a tax period, any reference to electronic furnishing shall include the furnishing of the said return through a short messaging service using the registered mobile number and the said return shall be verified by a registered mobile number based One Time Password facility.
Many large taxpayers, those with annual turnover of Rs 5 crore or more, are not availing the extension for paying GST and filing returns as many of them find the 9 per cent per annum interest from the due date too exorbitant.
The government has, in order to lessen the compliance burden on businesses given the outbreak of coronavirus, extended the dates of filing GSTR 3B returns due in March, April and May 2020 to last week of June 2020. Usually, the date for filing returns for a particular month is 20th of the next month. So, for March, the date of filing returns in 20 April, and that for April is 20 May.
Those having aggregate annual turnover less than Rs 5 crore, no interest but late fee and penalty will be charged. But for those with turnover of Rs 5 crore or more, an interest at the reduced rate of 9 per annum from due date (against the current rate of 18 per cent) will be charged.
For businesses with large tax liabilities, delaying the tax payment by three months would mean a large interest outgo, and hence those taxpayers, who have sufficient cash-in-hand are planning to pay the taxes and file returns on time.
“The industry has taken a mixed approach on the delayed return filing, depending upon the cash flow situation. The comparison which is done is the 9 per cent interest (on late payment of GST) and the interest on bank loan. However, filings have slowed down on an overall basis,” says Ritesh Kanodia, partner.
But not all businesses are weighing options between paying interest on late payment of GST and interest on bank loan. For many SMEs with turnover of Rs 5 crore or more, the question is whether to pay the salaries or file GST returns.
Nidhi Goyal, managing partner, says: “Those SMEs which have enough cash flow to pay salaries would like to pay GST liabilities on time and save on the 9 per cent interest cost that they otherwise would incur.
Some businesses are also taking advantage of the fact that the load on GST Network, the IT backbone of the GST regime, will be somewhat less, and are finishing some of the compliances despite the extension of dates.
Rajat Mohan, partner in chartered accountancy, says unlike in normal times around the due dates, one invariably face problems in filing returns, right now the GST Network is working smoothly.
Rajesh Gupta, Co-Founder & Director, says: “Due to lockdown, business transactions have been reduced and left with only 10-20 per cent in total, so accordingly, the load on the network is less as compared to normal. So the network is working smoothly and helping taxpayers to work at home. It has enabled almost more than 20,000 registrations with 10-13 days of the first phase of lockdown.”
GST Council, the federal indirect tax body, is set to make changes in tax rates of goods and services a yearly affair, moving away from frequent rate revisions to remove ‘uncertainty’ for businesses and the government, finance minister Nirmala Sitharaman said on Sunday.
Sitharaman said that frequent changes in GST rates have led to an inverted duty structure, where the raw materials ended up becoming costlier than the finished product, in some cases which also created problems with tax refunds.
“Therefore, when the rate of tax of one item is brought down, a whole lot of other ripple effects are created. With that ripple effect, refund is affected,” Sitharaman said at a post budget interaction with reporters in Kolkata.
As a result, businesses claimed that they are not able to plan how much they need to keep aside for taxation in a whole year. Similarly, governments (states and Centre) are not able to make an assessment of what they will earn from GST in the whole year, she said.
“Rate revision every three months brings in uncertainty…We have also discussed it in the GST Council. We have proposed to the GST Council—can we consider a situation, where once in a year alone, we would do any rate rationalization and not every three months,” she said.
This is the first time that the Centre has spoken about going slow with the frequency of GST rate cuts. There have been more than half a dozen rounds of rate cuts since the implementation of GST from 1 July 2017, which also impacted the Centre’s revenue. Besides, being a sensitive issue, rate cuts would often snowball into a political issue, putting pressure on government to revise rate, ahead of the elections.
“Yearly revision of rates is a great approach as rates will be stable for at least a year and as a result it will be less cumbersome for businesses as they will not have to track rates after every GST Council meeting. However, there could be problem in case there is any urgent need to revise rate or fix anomalies,” said Abhishek Jain, partner . In December, Sitharaman who also heads the GST Council said the government is working on streamlining the GST regime to eventually have three slabs. Currently, there are four key tax slabs—5%, 12%, 18% and 28%. Besides, there have also been discussions on increasing tax rates on some items. However, in the last meeting in December, the Council abstained from raising rates, after official data showed that consumer goods output had shrunk 18% in October, its fifth straight month of contraction. Several state ministers also said the time was not right for raising GST rates.
Sitharaman urged industry to present their concerns pertaining to rate revisions to the states who can in turn take it up at the Council meetings.
“The Centre alone cannot say rates will be cut as it leads to the impression that when the businesses are located in the states, then why are states not talking about it…It will also be healthier if states through ministers voice their concern (at the Council meetings),” Sitharaman said.
The Delhi High Court has said that the rights of Goods & Services Tax (GST) assessees ‘cannot be subjugated’ to the poor and inefficient software systems adopted by the authorities. The ruling is likely to benefit assessees who suffer due to technical glitches.
“The software systems adopted by the respondents have to be in tune with the law, and not vice-versa. The system limitations cannot be a justification to deny the relief, to which the petitioner is legally entitled,” the court ruled in a matter related to denial of use of unutilised input tax credit (ITC).
Commenting on the ruling, Harpreet Singh, said the order is likely to have far reaching positive domino effect under GST. With increasing dependence on technology, it is a common occurrence that technical glitches impact the statutory filings or reflection of the right balances at the portal. “Post this order, dealers should be able to claim their rightful benefits/ dues without worrying about technological handicaps, so long as other statutory conditions are satisfied,” he said.
After the introduction of Goods & Services Tax, a special provision was made for credit accumulated under VAT, excise duty or service tax to be transited to GST. Barring registered dealer opting for composition scheme, all other assessees were given opportunity to avail themselves of the transitional credit. However, there were some conditions. First, the credit will be available only if the returns for the last six months, that is, from January 2017 to June 2017 were filed in the previous regime (VAT, excise and service tax returns had been filed). Second, Form TRAN 1 (to be filed by registered persons under GST, may be registered or unregistered under old regime) has to be filed by December 27, 2017, to carry forward the input tax credit. Third, Form TRAN 1 can be rectified only once.
Inaction of respondents
In a petition filed with the HC, the grievance of the petitioner was that due to the inaction of the respondents (State GST authority) and their failure to allow smooth migration of the credit standing in the account of unutilised input tax, the petitioner could not use and exploit the ITC while making exports in the months of July and August, 2017. Accordingly it was forced to shell out over ₹1.37 crore which would not have been the case, had it been able to utilise its ITC which had accumulated even prior to the enforcement of the GST regime.
The court heard both the sides and observed that the petitioner cannot be made to suffer on account of failure on the part of the respondents in devising smooth transition to GST regime w.e.f. July 1, 2017 from the erstwhile indirect taxation structure. “The business activity in the country cannot be expected to come to a standstill, only to await the respondents making the Good Services Tax system workable,” it said.
According to the court, the failure of the respondents in first putting a workable system in place, before implementing the GST regime, reflects poorly on the concern that they have shown to the difficulties that the trade faced throughout the length and breadth of the country. “Unfortunately, even after passage of over two years, the respondents have not remedied their omissions and failures by taking corrective steps. They continue to take shelter in the limitations in, and the inability of their software systems to grant refund, despite the same being justified,” the court said.
Finance Minister Nirmala Sitharaman on Saturday said the government is working on streamlining the goods and services tax (GST) regime to eventually have three slabs.
Though any decision related to tax rate cut will be taken by the federal indirect tax body GST Council , the minister said “eventually we need to rationalise (rates). Do we want more slabs? Do we want to have just two or three slabs. Original intent was that there will be three slabs—merit, sin and the standard”.
Currently, there are four key tax slabs—5%,12%,18% and 28%—under the new indirect tax regime that was rolled out on 1 July 2017.
The council will meet later this month to discuss various revenue improving measures including changes to GST rates and cess levied on select goods. It will be the first meeting ever in which tax rate increases will be considered. At the last GST Council meeting in September in Goa, there was a token increase in the tax rate on one product, signaling that the era of GST rate reductions was over.
The government’s plan to review tax rates, exemptions and cess comes amid a shortfall in revenue receipts of the central and the state governments, where the latter has accused the Centre of delays in compensating states for their GST revenue shortfalls. The proposed meeting will also consider ways to improve tax compliance.
The minister further said the government will remove any distortions pertaining to the issue of inverted duty structure as far as rates are concerned and will simplify the system of filing returns under GST.
Sitharaman also said the government is committed towards paying compensation to the states for their revenue shortfall. Finance ministers of four states and officials from four other states urged the Centre to clear dues towards compensation from the implementation of the GST as they are facing financial difficulty.
“Unfortunately, in the last collection the cess component has not been so adequate… That’s not to the level of saying that oh, the compact has been broken,” she said.
“The cess fund if it is there, we are going to give it. If it is not there, we are also makig clear to ourselves as to how we can do it. We are not going to touch the compact… Let there be no doubt. We will honour compact, there is no question about it, she said, adding that states’ issue is genuine.
The Gujarat High Court has issued notices to the union government and the GST Council over the alleged breach of refund norms by field officers under the goods and services tax (GST) regime.
Under the Rule 92 of the Central GST (CGST) Act, the claim of the refund has to be made in the RFD 04 form. Thereafter, the officer concerned can accept or reject the claim after his investigations.
If the claim is accepted, he would issue refund in the form RFD 06. In case the refund is required to be adjusted, the officer would withhold it in the form RFD 07. If the refund is not admissible, partly or wholly, this would be communicated through the form RFD 08.
If the amount is rejected, it would be credited to the government account under the Rule 93 of the
Gujarat HC serves notices on govt, GST council for breach of refund norms CGST Act, but for that, due process of RFD forms has to be followed.
A petitioner moved the high court, saying the field officer concerned rejected his claim of refunds without resorting to RFD forms. He reversed it under the Rule 93, which, he argued, could not be done without following the due process.
Abhishek Rastogi, counselor of the petitioner and partner at Khaitan & Co, said many petitioners were keen to move the court over the lapses. “The law provides that the denial of the refund has to happen only after compliance with the procedure laid down. We have challenged the rejection order, which has not followed the due process of law,” he said.
Businesses will have to pursue their vendors on a monthly basis to upload their invoices to enable them to take the entire input tax credit (ITC) after the indirect tax board came out with a notification to restrict these credits to 20 per cent of the claims.
Concerned at dwindling revenues, the Central Board of Indirect Taxes and Customs (CBIC) put this condition on the claims where vendors have not uploaded their invoices within a month.
Experts said it would block cash flow of businesses and increase their compliance burden.
Though theoretically, businesses have to reconcile their ITC within 60 days, this clause was never implemented since the auto-populated form of purchases by suppliers — GSTR2 — has been suspended.
As such, businesses are supposed to reconcile their input tax credit at the time of annual returns. However, the deadline of annual returns even for the first year of the GST rollout — 2017-18 — have been deferred a number of times. This means that there was no restriction on the businesses to claim their input tax credit, provided they have the invoices to support their claims.
Now, businesses have to follow-up with non-compliant vendors on a monthly basis to upload their invoices in the form GSTR 2A.
Harpreet Singh, partner at KPMG, said, “Restriction of mismatched ITC by 20 per cent would necessitate undertaking monthly reconciliation of purchase, credit register with GSTR 2A, and hence may increase the monthly compliance burden.”
He said the move would also restrict credit, which was rightly availed of but did not get reflected in the GSTR 2A form, on account of default by vendors may result in adverse cash flow impact.
The GST collections fell to a 19-month low of Rs 91,916 crore in September, pointing towards deepening economic slowdown. It was the second straight month of revenue collections falling below the Rs 1-trillion mark, compounding the government’s revenue woes amid steep collection target for the fiscal. The target is over Rs 1.1 trillion a month.
In the first six months till September, GST grew by 4.9 per cent year-on-year.
The government in August had extended the date for filing annual GST returns for 2017-18 and 20018-19 by three months to November 30, as taxpayers were facing technical problems in furnishing returns. In fact, the government postponed the deadline a number of times. The original deadline of filing these returns were December 31, 2018.
GSTR-9 is an annual return to be filed yearly by taxpayers registered under the GST. It consists of details regarding the outward and inward supplies made or received under different tax heads.
The form GSTR-9C is filed by those with an annual turnover of above Rs 2 crore. It is a statement of reconciliation between GSTR-9 and the audited annual financial statement, while GSTR-9A is the annual return to be filed those who have opted for the Composition Scheme under GST.
The deadlines were extended after the businesses and experts complained about the complex nature of filing these returns and reconciliation of audited accounts with these returns. For instance, tax and legal consultants had said hundreds of amendments, notifications and circulars have made the GST Act very complex.
Officials of the Tax Bar Association, a body of over 400 members of chartered accountants, company secretaries, cost advocates and tax consultants, had said that the government has made the entire GST procedure and filing of returns very “confusing with hundreds of changes in the rules and taxes”.
Tourism ministry plans promotions around GST rate cut for hotels
The tourism ministry is planning to highlight the recent tax cut on room tariffs in promotional campaigns overseas to lure travellers ahead of the peak winter holiday season.
The India Convention Promotion Bureau (ICPB), which works closely with the tourism ministry on promoting India as a MICE (meetings, incentives, conferences and exhibitions) destination, said it will also look at raising awareness around the announcement of lower GST (goods and services tax) rates last month.
On September 20, the GST Council tweaked taxes on several products and services, including hospitality. The GST rate for room tariffs of Rs 7,500 and above was reduced to 18% from 28%, while those between Rs 1,000 and Rs 7,500 would have to pay 12%. Hotels with tariffs of less than Rs 1,000 do not attract tax as per an earlier decision. Earlier, the slab of Rs 2,500-7,500 attracted 18% tax.
“We were waiting for the official notification which has come now. We will be launching marketing campaigns across markets on the move. It’s a very big step for boosting tourist numbers and we will provide this widespread publicity,” said Rupinder Brar, additional director general at the tourism ministry. “This was one of the main demands of the industry. We are very sure that this will boost tourist numbers,” she added.
Chander Mansharamani, vice-chairman of ICPB, said, “When an international conference comes to India, the accommodation is booked by overseas agencies. We have sent a circular to all our clients saying GST on hotel accommodation has (been) reduced to 18%. We are looking to work out something where we can convey this message further.”
Online travel aggregators (OTAs) said bookings for the coming quarter are looking up as hotels have begun factoring in the tax benefits for bookings done for stay after October 1.
“We started displaying hotel bookings with revised taxes from September 27 onwards. Over the past few days, we have seen an uptick in bookings for four- and five-star properties where the impact is fairly significant,” said Sharat Dhall, COO, B2C at Yatra.com. “The reduction of GST of 10% has definitely had an impact in terms of driving growth. We are witnessing an uptick in bookings for leisure destinations such as Goa and Rajasthan for the months of October, November and December.”
A spokesperson from MakeMyTrip said that with the revision in tax rates coming around the peak festive season, the company hopes to see a boost in tourist arrivals in Goa, Darjeeling, Jaipur and Gangtok—destinations that continue to remain favourites among domestic travellers.
Dipak Haksar, chief executive for ITC Hotels and WelcomHotel said ITC Hotels has implemented the new GST rates with effect from October 1, 2019 and has passed on all benefits to the consumers. “The rate reduction of GST will definitely result in an uptick in arrivals and hotel stays,” he said.
Sanjeev K Nayar, general manager at ITC WelcomHeritage Hotels said there has been an increase in the queries and also the bookings are getting materialised as well and that he is optimistic that this trend will now continue.
“We are very happy that a reasonable GST regime for hospitality comes at an opportune time as we are just getting into the high season and we would definitely see more traction and demand,” said Ankur Bhatia, executive director, Bird Group which runs Roseate Hotels & Resorts.
Balu Ramachandran, senior vice president at Cleartrip said any deduction in GST will be passed on and will ultimately benefit customers.
One in five GST payer will get away without having to file monthly or quarterly returns from April. Instead of filling up the form online, all that those with ‘Nil’ returns will have to do is to send an SMS to a specified number and confirm it using a one-time password.
The move is part of the overall exercise to simplify compliance as many of the ‘Nil’ return filers, who account for almost 23% of the 1.2 crore GST base, had registered to be eligible for contracts from government and other agencies but do not undertake any business.
Once the new returns kick in from April, over 70% of those registered for GST can make do with quarterly filing of returns as their turnover is less than the specified level of Rs 5 crore. “Only 7% of the taxpayers with annual turnover of over Rs 5 crore will have to file monthly returns,” said Prakash Kumar, chief executive of GST Network that provides the IT backbone for the indirect tax regime and has developed the new forms.
More than 51% of the taxpayers can use the SMS-based compliance tool or opt for Sahaj, the form meant for those entities with B2C transactions and have an annual turnover of less than Rs 5 crore.
GST, which was launched over two years ago, had faced severe criticism as businesses, especially the smaller ones, complained of stiff compliance burden that required three-stage filing. Through the new forms, the government has sought to reduce the compliance burden with smaller businesses required to file quarterly returns, although taxes will have to be paid on a monthly basis.
There are numerous concerns on the functioning of the GST regime, launched two years ago. But the e-Way bill’s system is displaying good traction. While there are a few glitches, users mostly agree that e-Way bills have brought down under-reporting and increased transparency.
The system was rolled out for inter-State consignments in April 2018, and for intra-State consignments two months later, in a phased manner. e-Way bills generation for the period April-June 2019 was almost 40 per cent higher at about 15.65 crore, compared to 11.19 crore in the same period last year.
For transport companies, the system has saved considerable time, removing check-posts and facilitating the shift from a ‘departmental policing model’ to a ‘self-declaration model’. It has also helped in curbing tax evasion.
According to chartered accountant Chirag Chauhan, e-Way bills have reduced tax evasion by almost 80 per cent. He also points out that the drop in GST collections of just 2-5 per cent in the first quarter of FY20, against a sales decrease of 15-20 per cent, is proof that tax malpractices have come down.
Under the norms, every consignment worth above ₹50,000 (raised to ₹1 lakh in a few States as a temporary relief) should begin with the generation of an e-Way bill. The bill must be raised before the goods are shipped and should include details of the products, their consignor, recipient and transporter. Though check-posts have been abolished under GST, a consignment can be intercepted at any point for the verification of its e-Way bill. If found without one, or with invoice discrepancies, a penalty of ₹10,000, or tax sought to be evaded, or, in some cases, 200 per cent of the GST amount, can be levied. These provisions are helping in reducing the disparities between the actual value of the sale and that reported in e-Way bills. Every e-Way bill generated has to be matched at the invoice level with the entries uploaded by the manufacturers or traders in their monthly GSTR-1 returns for outward supplies. Also, the GSTR-1 of the manufacturer or trader gets auto- populated in the GSTR-2A of the purchaser, based on which the latter claims the input tax credit (ITC).
Due to such matching of invoices at multiple levels, there’s hardly any scope for the supplier to under-report sales.
Once the e-Way bill portal is linked to the centralised VAHAN portal, which contains vehicles details, generation of fake e-Way bills gets checked. Further, the system helps in increasing the overall GST compliance, as a recent notification bars a supplier or a recipient from generating an e-Way bill if the GST returns are not filed for two consecutive months.
Some challenges do remain. Complaints have been raised that the time limits prescribed for the validity of an e-Way bill are not in consonance with ground realities.
“Genuine reasons for delays should be taken into account while fixing the time limits,” Bal Malkit Singh, former President of the All India Motor Transport Congress, told BusinessLine.
On consignment verification issues, he said: “State borders have paved the way for flying squads and, the vehicles are being stopped randomly on the pretext of checking for collateral extortion.” Another issue, he said, is the lack of flexibility in rectifying errors and changing the destination address.