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GSTR 9 – Annual GST Returns Riddle

GSTR 9 – Annual GST Returns Riddle

Every registered entity is required to file annual return for goods and services tax (GST) by December of the next year. Since the form was not ready in time, the original due date of December 2018 is now extended up to 30 June 2019.

Registered persons, with more than Rs2 crore turnover, have to file GST reconciliation statement and certification (GSTR 9C) as well as annual returns or GSTR9 and audited financial statements. GSTR 9C is required to be certified by a chartered accountant (CA).

GST annual returns or (GSTR9) is a summary of details already reported in GSTR1 (sales returns) and GSTR3B (monthly/ quarterly), i.e., summary of sales and purchases along with tax payments. This, in theory, looks very simple as one-nation-one-tax GST; but when we try to actually fill the returns, there are multiple issues for which no clarifications are available or there are different interpretations by professionals. A few examples are given below:

1. In GSTR9, adjustments or amendments up to September 2018 are asked to be reported. However, the Central Board of Indirect Taxes and Customs (CBIC) has already extended this date up to March 2019. Consequent changes in the form are yet to be made.

2. Table 4 of GSTR9 asks for details of advances, inward and outward supplies made during the financial year on which tax is payable. This data is auto-populated as per GSTR1 filed. However, if some sales are not reported in GSTR1 but tax is already paid through GSTR3B then where to report it is not clarified.
3. The FAQs on this matter issued by CBIC read as under:

“In Form GSTR-9, can additional liability not reported earlier in Form GSTR-3B be declared? Yes, additional liability not reported earlier at the time of filing Form GSTR-3B can be declared in Form GSTR-9. The additional liability so declared in Form GSTR-3B is required to be paid through Form GST DRC-03.”

First of all, it should be GSTR9 and not GSTR3B in line 3. Further, it just information NOT info known but does not say which table and where to declare this liability.

4. Input reversals done in GSTR3B are shown as utilisation of input tax credit (ITC) in auto-populated table 9. Further, this field in not editable.

5. Headings of table 11 and 12 say that “Details of the previous financial year’s transactions reported in next financial year” are to be shown there. However, there is difference in language used in the help file and line item. The help file says, “Particulars for the previous FY transactions declared in returns of April to September of next FY or up to date of filing of annual returns for 2017-18, whichever is earlier.” Whereas individual line item for table 11 and 12 talks only about GSTR1. Now there is confusion as to whether changes made in GSTR3B in the next financial year can be reported here. There is no other table to report these changes either.

6. For those who are not supposed to file audit report in 9C, there is confusion about whether GSTR9 should be based only on returns filed or books of accounts. There is no mention of books of accounts anywhere in GSTR9 frequently asked questions (FAQs).

7. On tax paid on reverse-charge basis, in subsequent financial year through GSTR3B, where does one report in GSTR9? There are no final answers to this. If reported along with normal turnover, it will not match with books of accounts.

8. Table 7 of GSTR9 says, ITC reversed for the financial year is to be disclosed. However, it does not specify in which returns. If reversed during 2018-19 for 2017-18 then it may lead to double reduction while filing next year’s GSTR9.

9. Table 8 of GSTR9 about ITC related information has no column for IGST on import paid but goods still in bonded warehouse, hence credit not taken. Many persons have not taken this credit till goods are cleared. If we follow as per GSTR9 schema, this credit will lapse.

10. The harmonised system of nomenclature (HSN) wise summary of inward supplies where 10% or more of total inward supply is to be given. However, if the supplier has not provided the exact HSN code, it would be very difficult for the taxpayer to now search for it.

These are some of the issues that taxpayers are facing while filing GSTR9 annual return. There are many such issues in GSTR9C audit report form as well. The main issue is that the government has been very slow in giving clarifications and, since returns filed cannot be revised, people are waiting till the last date to file. We all know what happens to GSTN in the last few days of any due date.

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Source: Money Life.
(CA Nikhil Vadia has over 20 years of experience in direct and indirect taxation, internal audit, systems review and management consultancy.)
GST anti-profiteering body may get fresh lease of life

GST anti-profiteering body may get fresh lease of life

India’s anti-profiteering framework may remain in place for another two years as the country eyes more changes to the goods and services tax (GST) structure. Aimed at protecting consumer interest under GST, it was initially meant to be in place for two years.

Discussions have begun and a decision is expected soon after a new government is in place at the Centre, a senior official aware of the development told ET. At the top of the watchdog framework is the National Anti-profiteering Authority (NAA).

“There is a thinking that the National Anti-profiteering Authority’s tenure be extended,” the official said, adding that there are a number of cases that need to be resolved. Besides, another official said, complaints keep pouring in and need to be decided. Votes in the ongoing general election will be counted on May 23.

Key sectors such as petroleum are still outside GST and more changes are expected in the rate structure, making the NAA’s role critical. GST now has four slabs — 5%, 12%, 18% and 28% — and it’s widely expected that middle two may be merged to reduce complexity.

The NAA has passed orders against several companies following profiteering complaints. These include Hindustan Unilever for profiteering estimated at Rs 535 crore, Domino’s franchisee Jubilant FoodWorks (Rs 41.42 crore), Abbott Healthcare (Rs 96 lakh) and McDonald’s franchisee Hardcastle Restaurants (Rs 7.49 crore).

The authority needs to have clear guidelines on determining profiteering, said Pratik Jain, national leader, indirect taxes, PwC. “It seems likely that the authority will get an extension, not only because of a significant number of pending cases but also in view of possible rate rationalisation and expansion of the GST net in the next year or so,” Jain said.

The system was meant to shield consumers against any sudden spike in prices after GST was rolled out in July 2017 and to ensure that companies passed on savings from lower taxes to buyers.

India Adopted 3-tier Structure
Several countries that implemented GST had faced a spike in inflation soon after doing so. India had looked at the mechanisms that Malaysia and Australia had put in place as part of their GST framework.

The Union Cabinet approved constitution of the NAA on November 16, 2017.

India adopted a three-tier structure for the investigation of anti-profiteering complaints from consumers. At the first level are state-level screening committees and a standing committee at the national level to examine complaints. These committees refer complaints to the director general of safeguards, mandated to conduct a thorough investigation by seeking information from the companies concerned. The third and final level is the National Anti-profiteering Authority that examines the investigation report and hears from the company and the complainant before pronouncing a final decision.

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Source: Economic Times
GST: Homebuyers To Pay 12% GST On Balance Due If Completion Certificate Issued By March 31

GST: Homebuyers To Pay 12% GST On Balance Due If Completion Certificate Issued By March 31

Homebuyers will have to pay 12 percent Goods and Services Tax on balance amount due to the builder if the housing project has been granted completion certificate by March 31, 2019, the Central Board of Indirect Taxes and Customs has said.

Builders who have received a completion certificate for an ongoing project before April 1, 2019, will have to charge 12 percent GST from buyers on the balance amount due towards the purchase of the flat.

Issuing the second set of FAQs for real estate sector, the CBIC said that builders will not be able to adjust the accumulated credits in ongoing projects in case they opt for lower new GST rate of 5 percent for normal and 1 percent for affordable housing.

The first set of FAQs for real estate sector was issued last week to clarify doubts with regard to migration of real estate developers to new GST rates for the sector which has come into force from April 1, 2019.

The GST Council, headed by Finance Minister Arun Jaitley and comprising state counterparts, had in March allowed real estate players to shift to 5 percent GST rate for residential units and 1 percent for affordable housing without the benefit of the input tax credit from April 1, 2019.

For the ongoing projects, builders have been given the option to either continue in 12 per cent Goods and Services Tax slab with ITC (8 percent for affordable housing), or opt for 5 percent GST rate (1 percent for affordable housing) without ITC and communicate to their respective jurisdictional officers the same by May 20.

To a query on what shall be the rate of GST applicable on projects in respect of which occupation certificate has been issued prior to April 1 but the balance demands are pending, the FAQ said: “Time of supply of the service by way of construction of apartments in such projects falls prior to April 1, 2019, and accordingly the rates as existed prior to April 1, 2019, would apply to such balance demands.”

AMRG & Associates Partner Rajat Mohan said, “This clarification has tightened the grip on taxpayers who intended to take benefit of lower taxes rates with the aid of deferred invoicing.”

On whether accumulated ITC can be adjusted against new tax liability of 5 percent and 1 percent, the FAQ said: “No. GST on services of construction of an apartment by a promoter at the rate of 1 percent/ 5 percent is to be discharged in cash only. ITC, if any, may be used for discharging any other supply of service.”

“Developers opting for new tax regime for ongoing projects now has another reason to refrain from new scheme,” Mohan said.

The CBIC further clarified that exempted goods procured by a builder under the new tax regime would not be counted within the 80 percent limit set for procurement from registered dealers.

“This could entail an additional tax of 18 percent on value of exempt supplies, credit of which would not be available to developers,” Mohan added.

While deciding on lower GST rates for real estate sector, the Council had said that at least 80 percent of the inputs should be procured from registered dealer.

The CBIC has also clarified that developer and not the land owner will have the right to decide whether to opt for new GST rates or stick to old rates for ongoing projects.

EY Tax Partner Abhishek Jain said: “Clarifications on some technical ambiguities like non-applicability of new rates for projects completed before April, 2019, valuation of TDR, etc should help resolve some involved issues for this sector.”

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Source: Bloomberg Quint.
Quicker one-form GST filing process ready for roll-out

Quicker one-form GST filing process ready for roll-out

The Union finance ministry is finally ready to move ahead with the single monthly return system for the Goods and Services Tax (GST), a move that will simplify the process of filing returns and also getting input tax credit.

The three-phase plan was announced last May to address complaints about the difficulties in filing multiple returns (and the higher cost of compliance). According to that plan, for six months, in a transition phase, businesses would continue to file two returns, GSTR1 (for sales) and GSTR 3B , a summarised return form. After six months, they would move to a single filing on a to-be-introduced form. For consumer-facing businesses, the simplified form would be about total sales while for business-facing businesses, the form would incorporate invoice details.

That move was delayed while the back-end, the GST network (GSTN), was being made ready for this. Now, government officials directly familiar with the matter say the simplified form is ready, and could be launched by July, soon after the new government takes over.

No further clearances are required because the GST Council already cleared the three-phase plan last May.

The third phase will involve invoice matching.

The introduction of the new forms will reduce the annual compliance burden of traders from 24 GST returns (GSTRs) to just 12, apart from one return for the entire financial year, the officials said requesting anonymity. Technically, they would have had to file 36, but the second form GSTR 2 is not filed by most .

July will see a trial run of the second phase, the officials cited above said.

One of the major criticisms of GST was the compliance burden of filing returns. This was one of the reasons for the principal Opposition, the Congress party, to criticise the new tax regime. Traders, too, have been demanding a reduction in the number of returns to be filed.

“The new return mechanism should help the industry as multiplicity of filings is avoided, with a single monthly return in place. However, it also means that greater control would need to be exercised on vendor’s compliances as [after a transition period] input credit will be limited to the extent of GST amount reflected on the portal,” said Pratik Jain, partner and leader-indirect tax, PwC.

“The reconciliation between the company’s purchase records and that reported by the vendors would need to be performed on a regular basis and can’t be the year-end exercise. Government, on the other hand, would expect significant reduction in tax leakage once the new mechanism is fully implemented,” he added.

Parag Mehta, partner, NA Shah Associates LLP, said that the single return would allow the trader to verify before filing the returns whether the vendor has uploaded the invoices. “Hence Input Tax Credit (ITC) will be allowed based on the same. It will also ease the compliance as various reporting tables of GSTR 1, 2 & 3 will be combined in one single form. Number of returns will come down from originally proposed 36 to 12 per year. Will benefit small and medium enterprises to be GST compliant,” he said.

Rahul Dhuparh, DGM – GST, Taxmann said: “We can hope that single GSTR will reduce the compliance burden and there will be less cases of mismatch in the data reported to the authorities. However, whether it will be helpful or not will depend on the information sought by the government in the new form from the taxpayers. If this will happen, the biggest issue of credit mismatch will be resolved as the data is getting auto populated to the supplier and recipient. This will eventually reduce the time of a supplier to file his statement of output supplies and returns for making payment of taxes.”

#GSTSoftware #GSTR #EwayBillSoftware #GSTReconcilitationsoftware

XaTTaX: Cloud and On-Premises Based GST Filing Software For India

Source: Hindustan Times.
Documents & compliances that every exporter needs to keep in mind

Documents & compliances that every exporter needs to keep in mind

Exports have been granted a beneficial treatment even under the Goods and Services Tax (GST) legislation. In terms of the GST legislation, exports are ‘zero rated supplies’ i.e. supplies on which the GST rate is fixed as ‘zero’. While exporting goods/ services, an exporter has the following options:

  • Export goods/ services or both under a bond or letter of undertaking (LUT) without payment of tax
  • Export goods/ services or both with payment of GST.

For Export of Goods

In terms of the GST legislation, export of ‘goods’ means taking goods out of India to a place outside India. An exporter of goods is required to undertake export of goods in terms of export procedure as prescribed under the Customs law and is required to ensure that following documentation and compliances are undertaken :

  • Obtain an Import Export Code (IEC);
  • Obtain an Import Export Code (IEC);
  • Furnish a LUT or Bond in case exports are intended to be made without payment of taxes;
  • Ensure that a robust Agreement/ Purchase Order is entered into with the recipient of goods for export of goods;
  • Issue a tax invoice, typically containing the following details:
  • Endorsement stating “supply meant for export on payment of integrated tax” or “supply meant for export without payment of integrated tax”;
  • Name, address and GSTIN of the supplier;
  • Invoice No. and date;
  • Name and address of the recipient, address of delivery and country destination;
  • HSN code of the goods along with description;
  • Quantity of goods and unit;
  • The total value of goods; and
  • Signature of the supplier of the authorised signatory. File the shipping bill. It should be ensured that accurate details of the tax invoice are mentioned in the shipping bill;
  • Details of export invoices are also required to be accurately furnished in the GST returns.

Further, exporters of notified goods to notified markets are also entitled for Duty Credit Scrip under the Merchandise Exports from India Scheme at notified rates (2% to 7%) on realized Free on Board (‘FOB’) value of exports in free foreign exchange or on FOB value of exports as given in the Shipping Bills in freely convertible foreign currencies, whichever is less. In addition, the benefit of refund under GST may also be explored.

For Export of Services

  1. In terms of the GST law services qualify as ‘export’ where:
  2. Supplier of service is located in India;
  3. Recipient of service is located outside India;
  4. Place of Supply (‘POS’) of service is outside India;
    Payment for such service has been received by the supplier of service in convertible foreign exchange; and
  5. Supplier of service and the recipient of service are not merely establishments of a distinct person

For cross-border transactions, unless specifically mentioned the default POS for services is the location of the recipient of service i.e. outside India. For specified services, POS is as follows:

  • For services in relation to immovable property (eg. renting, construction, designing etc.) – POS is the location of such immovable property;
  • For performance based services (eg. training programs, repair maintenance of goods or tour and travel) – POS is the place where such services are performed;
  • For events – POS is where the event is conducted
    It is relevant to note that in case of points a, b and c above in case the POS is in India, GST would be attracted even if the recipient of service is located outside India.

Another specified service is that where the supplier acts as an ‘intermediary’/ agent. POS in such cases is the location of the ‘intermediary’/ agent i.e. in India, accordingly same would also be eligible to GST. The concept of intermediary has opened a Pandoras box where most of the captive units exporting services have to face the wrath of litigations.

Accordingly, a service exporter should ensure documentation and compliance with respect to the following:

  1. Furnish a LUT or Bond in case exports are intended to be made without payment of taxes
  2. Ensure that a robust Agreement/ Purchase Order is entered into with the recipient of services for export of services;
  3. Issue a tax invoice typically containing the following details:
  4. Endorsement stating “supply meant for export on payment of integrated tax ” or “supply meant for export without payment of integrated tax”;
  5. Name, address and GSTIN of the supplier
  6. Invoice No. and date;
  7. Name and address of the recipient;
  8. HSN code of the services along with description
  9. The total value of services
  10. Signature of the supplier of the authorised signatory.
    It must be ensured that the payments are received in convertible foreign exchange within the prescribed time period (typically one year from the date of export), else GST would be payable on the transaction. Further, robust documentation to prove the receipt of such payment (such as Foreign Inward Remittance Certificate, Bank Realisation Certificate etc.) should be maintained.

Further, exporters of notified services are also entitled for Duty Credit Scrip under the Services Exports from India Scheme (‘SEIS’) at a prescribed percentage (3%/5%/7%) of Net Foreign Exchange [i.e. Gross Earnings of Foreign Exchange minus Total expenses / payment / remittances of Foreign Exchange]. In addition, the benefit of refund under GST may also be explored. Further, although IEC is not a pre-condition for service exporters, however IEC is a pre-condition in case the exporter intends to claim benefit under SEIS.

It is therefore recommended that an exporter of goods/ services should ensure that complete and robust trail of documentation should be maintained to ensure that benefit of tax incentives granted by the Government for exports from India can be claimed.

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Source: Economic Times.
(The writer, is Director, Nangia Advisors (Andersen Global). With inputs from Arjun Sobti.)
I-T dept again defers GST, GAAR reporting in tax audit report till March 2020

I-T dept again defers GST, GAAR reporting in tax audit report till March 2020

The income tax department May 14 deferred for the second time the requirement for companies to include in their tax audit report the details of Goods and Services Tax (GST) and GAAR.

The reporting requirement of these details in income tax audit form has been kept in abeyance till March 31, 2020 — meaning that all income tax audit reports need not include details on GST and General Anti-Avoidance Rules (GAAR) till March 2020.

Business entities having a turnover of more than Rs 1 crore (or Rs 2 crore if they have opted for presumptive taxation) and professionals with gross receipts of more than Rs 50 lakh have to comply with the tax audit requirements.

The due date for its filing is September 30 and if the taxpayer is covered by transfer pricing provisions, the due date is November 30.

The Central Board of Direct Taxes (CBDT) in an order issued Tuesday, said the Board has received representations that implementation of reporting requirements under clause 30C (pertaining to GAAR) and clause 44 (pertaining to GST compliance) of the Form No 3CD may be deferred further.

“The matter has been examined and it has been decided by the Board that the reporting under clause 30C and clause 44 of the Tax Audit Report shall be kept in abeyance till March 31, 2020,” the CBDT said.

In July 2018, the I-T department had changed the tax audit form – 3CD, seeking details under GST as well as GAAR, which seeks to prevent companies from routing transactions through other countries to avoid taxes. The changes were to come into effect from August 20, 2018.

With stakeholders complaining that the change is onerous and a burden on companies, the CBDT had then deferred the implementation of the change in I-T audit form till March 31, 2019.

With Tuesday’s order, its implementation has been further deferred till March 31, 2020.

Nangia Advisors (Andersen Global) said Managing Partner Rakesh Nangia said: “It is anticipated that there would be a fair and detailed guidance on aspects such as no GAAR certification – an area devoid of precedence and largely characterised by interpretational issues, before the reporting requirement is made operative post March 31, 2020″.

Ashok Maheshwary & Associates LLP Partner Amit Maheshwari said this deferment comes as a relief to the auditors.

“Currently, the requirements are difficult to comply with and the practitioners are not properly prepared. The lack of clarity in these clauses has made it very difficult to comply with,” Maheshwari added.

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Source: Money Control.
In relief to buyers, realtor told to refund ‘excess’ GST

In relief to buyers, realtor told to refund ‘excess’ GST

In what will signal a relief to home buyers across real estate projects, the National Anti-Profiteering Authority (NAPA) has ordered Puri Constructions to refund “excess” GST collected from the buyers, and dismissed the builder’s plea that the benefit could only be calculated on completion of the project. Several builders have not been passing on the benefit on tax credit on inputs such as cement, steel, paints and sanitary-ware, arguing that it will be done at the time of possession.

NAPA has also held that the withdrawal of a complaint would not stop the directorate general of anti-profiteering from conducting probes as there is no provision in the GST Act to withdraw the complaint once it has been made. “Such rulings, should help homebuyer’s understand that under GST looking at only the rate charged by developer, does not give the complete and clear picture. What is equally important is the benefit accrued to the developer on account of reduction in the taxes paid by him on his purchases. One needs to look at both the GST rate and the input tax credit to understand the overall impact on the price,” said Harpreet Singh, partner at consulting firm KPMG.

The case involved Pallavi Gulati and Abhimanyu Gulati, who had purchased a flat in the Anand Vilas project in Faridabad before GST was launched in July 2017. Puri Constructions argued that the buyer had withdrawn the complaint, which showed that he was satisfied with the explanation given. It contended that, ITC which had been taken into account for computation of the profiteering amount was based on all the credit availed by him, assuming that he would be able to sell all the flats before completion.

VIP distributor rapped for not passing on GST benefits:

The National Anti-Profiteering Authority has asked VTWO Ventures, a distributor of VIP luggage, to deposit the excess GST charged by it as it did not pass on the benefit of a reduction in rates from 28% to 18%.
The agency held that the distributor raised the base price of the product to neutralise the effect of reduction in GST rates. It also said commented that since the entity had issued incorrect invoices, they were also liable for penalty.

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Source: Times of india.
Automated GST refund for exporters by next month

Automated GST refund for exporters by next month

Exporters of goods and services, as well as suppliers to SEZ units, are likely to get GST refunds automatically from June as the revenue department plans to introduce faceless scrutiny of refunds and faster claim settlement, an official said.

Under GST, every person making a claim of refund on account of ‘zero-rated’ supplies has two options. Either he can export without payment of integrated tax under Bond/ LUT and claim a refund of accumulated Input Tax Credit (ITC) or he may export on payment of integrated tax and claim refund thereof.

Currently, the facility of automatic refund is available only for those exporters who have paid Integrated Goods and Services Tax (IGST) while exporting goods. Since the GST Network (GSTN) systems are integrated with Customs, hence, refunds are generally transferred to the bank accounts of such exporters within a fortnight.

However, manufacturing exporters and suppliers to SEZ, who want to claim a refund of ITC, have to file an application in Form GST RFD-01A on the common portal and thereafter manually submit a print out of the form along with other documents to the jurisdictional officer.

Once implemented, the time period for such refunds will come down to about a fortnight from months at present.

“The revenue department and GSTN is working to make the process of seeking tax refund by all exporters faceless by next month. It would make the process faster and also help in eliminating fake refunds,” an official told PTI.

GST refunds of exporters run into thousands of crores and any delay in the processing of refund claims blocks working capital of exporters.

AMRG & Associates Partner Rajat Mohan said fully computerized tax refund in case of export of services would be based on a comprehensively integrated GSTN system which connects with RBI servers to track the receipt of payments and link them automatically with invoice level information.

“Tax refunds for inverted duty structure could also be copiously automated in future, however, it would require GSTN system to be loaded with HSN-enabled invoice level information by every vendor, so that only eligible tax credits could be processed without any human intercession, he added.

XaTTaX: Cloud and On-Premises Based GST Filing Software For India

Source: Business-Standard.
Deadline for filing April GST sales returns extended by a month for 14 districts in Odisha

Deadline for filing April GST sales returns extended by a month for 14 districts in Odisha

The Finance Ministry has extended the deadline for filing summary sales return for April in 14 districts of Odisha affected by cyclone Fani by a month till June 20.

Similarly, the due date for filing final sales return or GSTR-1 for April for taxpayers having aggregate turnover more than Rs 1.5 crore too has been extended by a month till June 10.

In two separate notifications, the Central Board of Indirect Taxes and Customs (CBIC) said that these extended deadlines for filing April returns would be for registered taxpayers whose principal place of business is in the districts of Angul, Balasore, Bhadrak, Cuttack, Dhenkanal, Ganjam, Jagatsinghpur, Jajpur, Kendrapara, Keonjhar, Khordha, Mayurbhanj, Nayagarh and Puri in the state of Odisha.

The due date for filing summary sales return GSTR-3B and GSTR-1 for April was earlier notified as May 20 and May 11, respectively.

However, the CBIC notification extends this deadline of GSTR-3B and GSTR-1 for the specified 14 districts in Odisha to June 20 and June 10, respectively.

Odisha was hit by “extremely severe” cyclonic storm Fani earlier this month, which has left 64 dead and at least 241 people injured in the state.

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Source: Business-Standard.
GST will not reduce deficits of Indian state governments significantly: Report

GST will not reduce deficits of Indian state governments significantly: Report

Goods and Services Tax (GST) regime in India is not likely to reduce the deficits of state governments significantly, amid large and growing expenditure mandates for the social sector as well as capital spending, says a report.

According to S&P Global Ratings the institutional framework for Indian states is evolving, but there is structural deficits due to persistent revenue expenditure mismatch.

S&P Global Ratings credit analyst YeeFarn Phua in the report titled “Public Finance System Overview: Indian States” noted that the passage of the GST bill in 2017 is a major overhaul of tax structure and will help to widen the tax base and improve revenues of state governments.

“However, states will continue to run large deficits because a significant part of this imbalance is from the expenditure side. States are unable to cut expenditures because of large and growing expenditure mandates for the social sector as well as capital spending. Therefore, the revenue-expenditure gap will remain large,” said Phua.

Further, policy implementation remains sub-par in India, the report noted.

Another significant development in recent years has been the adoption of an amended Fiscal Responsibility Management (FRBM) Act, which forms the fiscal framework, in March 2018, the report noted.

Under the amended FRBM Act, the government will target a debt-to-GDP ratio of 60 per cent with the split being 40:20 for central government and states.

Further, the government will use fiscal deficit as the key operational target, the report said but added that the FRBM committee lacks the authority to mandate its core recommendations.

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Source: Business-Today