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FinMin considers steps to prevent composition dealers from charging GST from buyers 

FinMin considers steps to prevent composition dealers from charging GST from buyers 

In a consumer-friendly measure, the revenue department is planning to make it mandatory for composition dealers and service providers to declare their GST registration status in invoices to ensure that they do not charge any tax from buyers. The measure, once implemented, would check the widespread practice of composition dealers of charging GST from purchasers and not depositing it with the exchequer, an official said.

The revenue department is also planning to launch a campaign to educate consumers that the dealers opting for composition scheme are not required to charge the goods and servicesNSE -0.75 % tax (GST) from purchasers, the official said.

Under the GST composition scheme, traders and manufacturers are required to pay only 1 percent GST on goods which otherwise attract a higher levy of either 5, 12 or 18 percent. Such dealers are also not permitted to charge GST from the purchaser.

Of the 1.17 crore businesses registered under GST, about 20 lakh have opted for composition scheme.

“It has come to the notice of the government that a large number of composition dealers are levying GST at higher rates and not depositing it with the government,” the official told.

According to the proposal being considered by the Central Board of Indirect Taxes and Customs (CBIC), businesses will have to mandatorily mention in the invoice generated by them that they are composition dealers and, hence, are not required to charge GST.

“Simultaneously, we will educate consumers that they should not pay GST while buying goods from composition scheme dealers,” the official said.

To ease compliance burden for small businesses, the GST law provides for composition scheme under which traders and manufacturers with an annual turnover of up to Rs 1 crore can pay 1 percent GST. This threshold will increase to Rs 1.5 crore from April 1.

Also the GST Council, headed by Arun Jaitley and comprising state ministers, in its meeting on January 10 permitted service provider and those dealing in both goods and services with a turnover of Rs 50 lakh to opt for composition scheme.

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Source: Economic Times
Companies may soon be able to rectify GST returns for Non-IT errors

Companies may soon be able to rectify GST returns for Non-IT errors

Indian businesses may soon be able to amend goods and services tax (GST) return mandated for carrying forward tax credit from the previous regime for non-IT related errors as well. The GST Council has directed a committee for IT grievance redressal to quickly draw up a solution that will give relief to the industry.

Thousands of crores of tax credit claimed by businesses have been denied because of errors in the filing of returns, prompting many to approach judiciary. The move will be a reprieve for businesses that had lost credit due to minor, non-technical errors.

“The council has approved changes in cases where the error is not IT related,” a government official aware of deliberations told ET. It was felt that in some areas where errors are apparent or high courts have issued directions, those should be settled, he said.

A standard operating procedure will be developed by the grievance committee for all the cases where high courts have given a direction, the amount has been wrongly entered or the concerned jurisdictional commissioner has made a recommendation. The forms TRAN1 and TRAN2, specified for claiming past credits, can now be amended to allow for this.

The GST law does not provide for any appeal on issues related to TRAN1 or TRAN2 and thus many taxpayers filed writs in high court and also secured favorable orders holding the view that bona fide errors should be considered by the government. A number of taxpayers had lobbied the government and the GST Council to allow amendments.


“Lot of companies could not claim the entire eligible opening credit under TRAN1 due to inadvertent errors,” said Pratik Jain, national indirect taxes leader, PwC. “This move will help them to claim the additional amount, without going to courts, which some of them have already opted for.”

Businesses looking to claim tax credit of the pre-GST period under GST could file TRAN1. The government had allowed revision of TRAN1 until December 27, 2017. Many businesses missed doing so and ended up losing large transitional credits, even for typographical errors.

The GST Council had allowed a liberal scheme for claiming credit in lieu of taxes paid under the previous regime against GST liabilities. Businesses could claim credit even if they did not have proof of payment under the deemed benefit provision. However, large transition credit claims, which pulled down overall GST collections, made authorities wary, leading to the increased vigil. Any changes to the TRAN1 were thus not allowed on non-IT related issues.

Reports of fraudulent credit claims also led to inquiries into transitional credit claimed by businesses to ascertain if they were genuine.

“Transition credits have been challenging for all businesses and the IT grievance redressal committee should ideally be considering all issues for the entire period instead of a sunset period and clarify that all genuine errors, whether arising from the GSTN portal issues or committed by the taxpayers would be condoned unless there is mala fide intent,” said MS Mani, partner, at Deloitte India.

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Source: Economic Times
Major Decisions taken by the GST Council in its 32nd Meeting

Major Decisions taken by the GST Council in its 32nd Meeting

The GST Council in its 32nd Meeting held today under the Chairmanship of the Union Minister of Finance & Corporate Affairs, Shri Arun Jaitley in New Delhi took the following major decisions to give relief to MSME (including Small Traders) among others –

1.   Increase in Turnover Limit for the existing Composition Scheme: The limit of Annual Turnover in the preceding Financial Year for availing Composition Scheme for Goods shall be increased to Rs 1.5 crore. Special category States would decide, within one week, about the Composition Limit in their respective States.

1.1    Compliance Simplification: The compliance under Composition Scheme shall be simplified as now they would need to file one Annual Return but Payment of Taxes would remain Quarterly (along with a simple declaration).

2.    Higher Exemption Threshold Limit for Supplier of Goods: There would be two Threshold Limits for exemption from Registration and Payment of GST for the suppliers of Goods i.e. Rs 40 lakhs and Rs 20 lakhs. States would have an option to decide about one of the limits within a weeks’ time. The Threshold for Registration for Service Providers would continue to be Rs 20 lakh and in case of Special Category States at Rs 10 lakhs.

3.   Composition   Scheme for Services: A Composition Scheme shall be made available for Suppliers of Services (or Mixed Suppliers) with a Tax Rate of 6% (3% CGST +3% SGST) having an Annual Turnover in the preceding Financial Year up to Rs 50 lakhs.

3.1  The said Scheme Shall be applicable to both Service Providers as well as Suppliers of Goods and Services, who are not eligible for the presently available Composition Scheme for Goods.

3.2  They would be liable to file one Annual Return with Quarterly Payment of Taxes (along with a Simple Declaration).

4.     Effective date: The decisions at Sl. No. 1 to 3 above shall be made operational from the 1st of April, 2019.

5.    Free Accounting and Billing Software shall be provided to Small Taxpayers by GSTN.

6.   Matters referred to Group of Ministers:

i.   A seven Member Group of Ministers shall be constituted to examine the proposal of giving a Composition Scheme to Boost the Residential Segment of the Real Estate Sector.

ii.    A Group of Ministers shall be constituted to examine the GST Rate Structure on Lotteries.

7.  Revenue Mobilization for Natural Calamities: GST Council approved Levy of Cess on Intra-State Supply of Goods and Services within the State of Kerala at a rate not exceeding 1% for a period not exceeding 2 years.

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Source: Narendra Modi
60% may escape GST net if turnover threshold doubled

60% may escape GST net if turnover threshold doubled

The move to double the threshold for goods and services tax (GST) registration to an annual turnover of Rs 40 lakh may result in up to 60% of the registered dealers falling out of the net, but will have only a negligible impact on revenue.

At the end of last March, there were over 87 lakh registered dealers with nearly 45 lakh reporting around Rs 20-lakh turnover. Another 10 lakh had a turnover of up to Rs 40 lakh, data accessed by TOI showed. Officials said that the trend is largely similar although the base of registered GST payers is now close to 1.2 crores.

Officials said that not all the registered dealers would opt out as several of the companies that they sell to would want them to be part of the net to avail of credit paid in various stages of production.

The GST Council is scheduled to discuss a plan to increase the registration threshold, which the law committee had proposed should be Rs 40 lakh, although states such as Bihar had suggested that it should be raised to Rs 50 lakh. The move was discussed at the last meeting as part of a plan to ease the compliance burden on small businesses.

Officials are, however, not fully convinced about the need to increase the threshold, especially for smaller states, where the turnover is lower. In fact, before the launch of GST, the hill states had opted for a lower threshold of Rs 10 lakh to ensure that the tax base does not shrink, impacting their revenue. While Bihar has floated a proposal for presumptive tax for those with a turnover of Rs 50-75 lakh, some of the states are seeking a facility for smaller taxpayers, arguing that they are the ones who need it the most.

Besides, officials said, it will do away with the need to increase the threshold, something that was backed by a ministerial panel headed by junior minister for finance Shiv Prakash Shukla on Sunday. The other worry is regarding allowing The other worry is regarding allowing a composition scheme for service sector — where only quarterly tax payments based on turnover will have to be made. Officials fear that this will result in widespread misuse and yield little revenue.

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Source: The Times of India
GST Council meet today: PM Modi wants exemption limit raised to Rs 75 lakh

GST Council meet today: PM Modi wants exemption limit raised to Rs 75 lakh

A day ahead of a meeting of the Goods and Services Tax Council, Prime Minister Narendra Modi on Wednesday revealed that he had urged the Council to raise the threshold for exemption from the levy’s registration, to Rs 75 lakh annual turnover from the current Rs 20 lakh.

“Besides, I have urged the Council to club houses meant for the middle class in the 5 percent GST slab. The Council has all the state governments on board,” the PM said at a public meeting in Agra on Wednesday.

A group of ministers (GoM) from the Council, headed by Union Minister of State for Finance Shiv Pratap Shukla, discussed on Sunday the issue of increasing the threshold. Views differed. While the Union finance ministry pushed Modi’s idea, Bihar recommended Rs 50 lakh and Delhi Rs 40 lakh, for instance.

The GoM also discussed whether to levy a flat GST of Rs 5,000 a year for businesses with turnover between Rs 50 lakh and Rs 60 lakh and above Rs 10,000 a year for those with turnover between Rs 60 lakh and Rs 75 lakh. This benefit is meant only for business-to-consumer entities and is not meant for business-to-business entities or those doing inter-state trade. The aim is to help small and medium-sized enterprises (SMEs).

Modi said the Centre was taking various steps to help the SME sector, including easing of credit flow. “We are formulating policies so that they do not face cash flow squeeze and that they get easy credit from banks, while the environmental and other clearances come faster,” he said, adding that businesses flourish when rules are simpler.

He said the GST was being progressively simplified and liberalized, based on the complaints and suggestions from traders and businesses. “But there are people who are creating doubts through misinformation that the GST is an additional tax, apart from existing taxes. This is completely wrong. Earlier, taxes were hidden and clubbed under different heads in the slab ranging from 20 to 40 percent, which had all been subsumed under the GST,” he said.

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Source: Business-Standard
GST returns non-filers grow faster than tax base

GST returns non-filers grow faster than tax base

The number of tax filers failing to file their returns has been increasing in the 17 months of GST implementation until November 2018, according to an answer submitted by the Finance Ministry in the Lok Sabha.


While the number of people required to file monthly returns has grown 32% from July 2017 to about 98.5 lakh in November 2018, the number of people not filing these returns has grown 167% during that time, the latest Goods and Services Tax filing data showed.

The data also shows that this is not just the case for monthly filers, but also for those under the composition scheme, which allows for quarterly return filing.

While the number of people required to file quarterly returns increased about 55% from July 2017 to 17.74 lakh in November 2018, the number of people who have not filed returns increased about 162% during this period.

In other words, the number of people failing to file returns has grown faster than the tax base itself for both regular and composition filers.

Tax analysts say the reasons are varied, including some taxpayers having too low a turnover, and others getting registered onto GST only due to the insistence of their large clients, and yet others simply daunted by the filing process.

“While the increase in the proportion of non-filers is a matter of concern, it must be borne in mind that several GST registrants may be having nil or low turnover and some others may have taken registration on their customers’ insistence,” M.S. Mani, a partner at Deloitte India, said. “Some of the initial challenges faced by smaller business on the GST portal may also have deterred some of them from attempting to file online returns.”

However, other tax analysts point towards a more serious situation where small businesses are systematically and fraudulently evading tax in the hope that they are too small for the taxman to notice.

“What happens is that a lot of small vendors get onto the system because their large clients force them because the client can avail of input tax credits only if their supplies are from a GST-registered vendor,” a tax analyst with a large consultancy told The Hindu on the condition of anonymity.

“However, these small vendors try to fly below the tax radar. They charge the GST rate on their supplies, but then keep this as their own profit margin instead of paying tax to the government.”

These vendors base these activities on the fact that the taxman will take 2-3 years to notice this activity since invoice matching is still not activated on the GST portal, the analyst added.

“By the time they are noticed, the vendor has already changed their name and GST number and is carrying on their business,” the analyst said.

‘Government loses’

“They have been doing this for 15 years under VAT and are simply transferring that practice to GST. The government loses because it has to pay ITC to the big corporate and doesn’t even get its tax revenue from the small vendors.”

Another analyst explained that, in reality, there are a relatively small number of taxpayers that fall below the ₹20 lakh threshold for filing returns.

“A ₹20 lakh income per year works out to about ₹5,500 a day,” the analyst explained. “Even your corner grocery store or Kirana store would do more business than this in a day. They just don’t file their returns because they are scared to draw the attention of the taxman.”

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Source: The Hindu
GST rules: No e-way bill if returns not filed for two months

GST rules: No e-way bill if returns not filed for two months

In a bid to force non-compliant businesses to file returns regularly, the finance ministry has barred e-way bill generation while transporting consignment if the supplier or recipient of the cargo has not furnished returns for two consecutive tax periods under Goods and Services Tax (GST).

The e-way bill is required to be generated from a common portal by a business for movement of consignment worth more than `50,000. For this, the supplier/recipient furnishes part A of the form with details of GST identification number, the value of goods and invoice number among others. Further, part B of the e-way bill form is furnished by the transporter with details of vehicle used.

“This effectively means that businesses who fail to file returns cannot transport goods at all,” Rajat Mohan, a partner at AMRG & Associates, said.

The tax department has not been able to improve compliance in a significant manner since GST was launched in July 2017. Nearly 30% of eligible taxpayers continue to fail to file the summary return GSTR-3B by the deadline, which is set on the 20th of every month.

For instance, nearly 29% of the eligible 98.4 lakh taxpayers had not filed returns for November by the end of December. Similarly, for composition scheme taxpayers who are required to file quarterly returns, over 25% of nearly 18 lakh eligible taxpayers had not filed returns for the July-September quarter till December 27.

Combined with low compliance and truncated return-filing system, the tax department has found it difficult to rein in tax evasion as the flow of intelligence data is fragmented. The GST Council has announced that the new simplified return system would become operational from July this year. The cases of evasion has increased in the second year of GST.

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Source: Financial Express
GST cut likely for incomplete realty projects

GST cut likely for incomplete realty projects

The New Year has opened on a positive note for homebuyers with the government extending the benefit of Credit Linked Subsidy Scheme (CLSS) for mid-segment home buyers up to March 2020. More cheers are awaited, however, since the Goods and Services Tax (GST) Council in its meeting on January 10 is likely to announce a reduction in GST to 5 percent on an under-construction property. Currently, 12 percent GST is levied only on under-construction real estate projects.

While residential real estate projects with an occupancy certificate are not subjected to GST at the time of purchase, developers claim that this structure has tilted the market in favour of completed projects since buyers avoid under-construction projects where they have to shell out an additional 12 percent GST.
According to sources, as indicated by both the Finance Minister and Prime minister, a cut on GST in real estate would be announced in the next GST Council meeting to be held on January 10.

Sources say that the fitment committee, which has already received many proposals on tax reductions across sectors, have zeroed in on the one which seeks to levy a flat 5 percent GST on under-construction properties, provided the builder purchases at least 80 percent of the raw material going into the project is sourced from GST-registered  and compliant suppliers.

Developers claim that the reduction of rates will provide a much needed shot in the arm for the sector.
“Lowering of the GST rate would aid real estate developers and all allied industries, with the expected increase in housing demand leading to a surge in construction activities as well. The overall monetary effect of the reduction is likely to be revenue positive with enhanced output in the industry too,” said Jaxay Shah, President, CREDAI National.

The biggest beneficiary of this move will be the homebuyer who would be able to buy real estate properties at a lower price, say industry experts.“If a flat 5 percent GST is levied, a homebuyer will save Rs 3 lakh on a property with a super built-up area of 1,000 square feet (carpet area 780 sq ft) and priced at Rs 6,000 per square feet,” Anuj Puri, chairman of Anarock Property Consultants, said.

Earlier, in his New Year’s day interview to news agency ANI, Prime Minister Narendra Modi also indicated that the government wanted to bring under-construction and finished houses under 5 per cent GST slab.

“We wanted to do that. But, there were reservations. So, the GST Council could not do it. It has now gone to the committee. We will try to ensure that the committee report is expedited,” Modi had said.

Taxes on incomplete projects

Currently, taxes on under-construction properties broadly include stamp duty, registration and GST. Stamp duty varies from state to state ranging between 5-7 per cent of total property acquisition cost. Many states offer a rebate of 1-2 per cent to women if a property is registered in their name. Apart from this, registration charges come to a fee of 1 per cent of the total cost for home-buyers. Then, there is GST at 12 per cent on the base cost of the property. For properties priced below Rs 50 lakh, tax deducted at source is 1 per cent and is deducted by the buyer at the time of payment to the seller.

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Source: New Indian Express
Ministerial Panel Approves Disaster Cess For Kerala Under GST

Ministerial Panel Approves Disaster Cess For Kerala Under GST

A ministerial panel allowed Kerala to levy an additional 1 percent calamity cess on the value of goods and services under the new indirect tax regime.

“Kerala will be permitted to have 1 percent cess on the value of goods and services across all or select items for two years,” state’s Finance Minister Thomas Isaac told reporters after the meeting of group of ministers in Delhi today.

The items on which the additional cess will be levied will be selected by the state, Bihar’s Deputy Chief Minister Sushil Modi, also the panel’s head, said. “If other states urge the Goods and Services Tax Council to allow them to levy this additional cess in case of a calamity, it will decide if the state should be allowed or not.”

If the GST Council gives its approval, Kerala would be the first state to levy a calamity cess and set a precedent for other states, Issac, a member of the Modi-led panel, said.

The 32nd GST Council meeting is scheduled to held on Jan. 10.

The move to seek the council’s approval comes after Kerala sought permission for a state-specific cess to raise additional revenues for the flood-ravaged state. While the central government was not in favour of a state-specific cess, it said a time-bound national disaster cess can not only help Kerala but also be an institutionalized fundraising mechanism for such disasters in any part of the country. The Modi-led panel had in October last year decided to seek states’ views on whether a state-specific or a nationwide “disaster tax” should be levied under the GST.

The council had earlier said the cess will be structured in such a way that only a pre-determined amount will be collected within a specific time limit. If approved, it may see a minor increase in the prices of one or two specifically identified goods, it said.

Relief For Small Businesses

Another panel, headed by Minister of State for Finance Shiv Pratap Shukla, recommended the council to allow dealers under the composition schemes to file GST returns annually but pay tax quarterly.

It also suggested that the composition scheme be extended to all service providers with an annual turnover of up to Rs 50 lakh. Currently, the composition scheme can be availed by manufacturers, traders and restaurant service providers.

The service providers will have to pay a flat GST of 5 percent, Modi said, adding the panel was also of the view that the threshold for registering under the GST regime should be increased from Rs 20 lakh.

Modi, however, said that the committee could not finalise the new threshold. The council will now decide the new exemption threshold for registering under the GST regime.

Delhi suggested that the exemption threshold should be kept at Rs 40 lakh, while Bihar recommended the limit at Rs 50 lakh, Modi said.

The states had suggested the panel to allow taxpayers with an annual turnover of more than Rs 50-60 lakh to pay a fixed tax of Rs 5,000 a year, and businesses with annual turnover between Rs 60 lakh and Rs 75 lakh to pay a fixed tax of Rs 10,000-15,000 per annum.

Also, the group of ministers suggested that 1.5 crore dealers will be given free accounting software, Modi said.

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Source: Bloomberg Quint
Not just lower taxes, evasion too a factor in the GST shortfall

Not just lower taxes, evasion too a factor in the GST shortfall

It’s fairly clear by now that goods and services tax (GST) collections are falling way short of the government’s initial expectations. The monthly run rate of collections until November was less than ₹90,000 crore, far lower than the monthly average of ₹1.05 trillion required to meet the annual target.

Graphic: Paras Jain/Mint

One reason, of course, is the downward revision of tax rates on various products. But another, and more worrying cause is widespread tax evasion despite measures such as e-way bills.

Shiv Pratap Shukla, minister of state for finance, provided data in Parliament on Friday that showed the percentage of eligible taxpayers who are not filing returns has risen sharply. A year ago, 84.4 million hadn’t filed returns; this has risen to a whopping 283.1 million.

“Our understanding is that people are still gaming the system and this has to do with input credit,” said an expert in indirect taxation, who did not want to be named.

“Basically these companies are claiming input credit by showing estimates of their sales in the GSTR-1 form, as you just have to give details of your sales in this form and not show the actual invoices based on which the input credit is being availed. Later, they avoid paying GST, as payment of taxes happens when you file the GSTR-3B form. So, in many cases, registrations are made, and initial GST payments are missed. By the time the tax authorities figure it out, many of them have deregistered or shut shop,” he added.

The data presented by Shukla showed that until December, 499 cases of fake invoices, which were used for claiming input tax credit worth ₹3,895 crore, were detected. In contrast, in the July 2017-March 2018 period, only four such cases had been detected, cumulatively worth ₹9.75 crore.

“Many companies, which have not been paying income tax, continue to remain outside the GST net as well. They have simply decided to not get registered,” said another tax expert requesting anonymity. “Frankly, the government doesn’t have the bandwidth to detect all such cases, ” added the tax expert.

The dice seems loaded against the government, which also may not want to be seen as being too tough on small businesses ahead of the general elections.

Leakages are especially high in industries where the market share of unorganized companies is high.

Analysts at JM Financial Institutional Equities recently visited Haryana’s Yamunanagar, a region where 550-600 plywood manufacturing units are located. According to their interactions, while invoicing levels have increased, e-way bill implementation is still not strict at most places and companies are able to get away with under-invoicing, it said in a report on 12 December.

“Reconciliation of GSTR-1 and e-way bills generated by taxpayers need to be implemented at the earliest for e-way bills to be a more effective anti-evasion measure,” says Abhishek Jain, tax partner, EY.

After the implementation of e-way bills in April 2018, revenues were expected to rise. It was expected that lower effective taxes, along with increased compliance, would accelerate formalization, and organized businesses would gain share and tax collections would surge. But it seems the mechanism has failed to yield the desired results so far.

“The government is committed to increase the percentage of compliance by taxpayers under GST,” Shukla told Parliament. “In this regard, an extensive outreach programme has been carried out across the country to create awareness among traders, industry bodies and other stakeholders. Further, effective enforcement measures are being undertaken to check cases of tax evasion and fake invoices.” It’s another matter that the numbers he provided don’t hint at any reduction in evasion.

In fact, the way things stand, shoring up GST revenue collections meaningfully could be a long row to hoe.

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Source: Live Mint