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Dept suspects GST Software Loopholes liable for Evasion, Likely to approach ICAI to investigate Involvement of CA

Dept suspects GST Software Loopholes liable for Evasion, Likely to approach ICAI to investigate Involvement of CA

The Goods and Services Tax department recently unearthed a scam of Rs 230 crore in Tamil Nadu and suspected that the evasion is due to the loopholes in the GST software.

The State Department is investigating a scam involving Salem-based steel traders Mahendra Kumar Singhi and wife Suman, owners of Steel Hypermart India Pvt Ltd, and chartered accountant Mukesh Surana, who allegedly claimed several crore rupees as an input tax credit by producing fake invoices of steel trading, Times of India reported.

The scam is believed to be one of the biggest GST evasion in the State. The department has sealed the offices and residential premises of the accused in Hosur, Bengaluru, and Salem.

“Around Pongal, we found that the invoices of some companies were suspicious and searched their offices and residences of their promoters in Salem and Bengaluru. The searches revealed that a CA was the mastermind behind the fraud. It was going on since 2017 when the GST was rolled out,” a senior commercial tax official told TOI.

‘Loophole in GST software reason for malpractice’ “The modus operandi is in the form of a circular ‘trade’ of steel and some byproducts using just invoices. It was started by Mahendra Kumar Singhi and his wife Suman Singhi, owners of Steel Hypermart India Pvt Ltd. They were operating in Salem, Hosur, and Bengaluru,” said the official. The Singhi’s were helped by chartered accountant Mukesh Surana, who also owns a company dealing in steel.

“Surana was helping them claim the input tax credit in the name of five companies. Some companies which were actually trading in steel also used fake invoices, our investigation revealed,” the official said. The department has sealed the offices and residential premises of the accused in Hosur, Bengaluru, and Salem. “The Singhis obtained anticipatory bail, fearing arrest. We will take action against the accused as per the GST Act,” he said.

The department is likely to lodge a complaint with the Institute of Chartered Accountants of India (ICAI) against Surana for his involvement in the racket. At present, GST software does not match purchases and sales. “This loophole has been one of the main causes for traders claiming input tax credit using fake invoices.

For every sale, there should be a purchase. But at present, we are not able to ascertain it using the software. We are trying to fix this problem and by June, the new software will be rolled out,” said the official.

The commercial taxes department has also developed its own software to scrutinize returns filed by assessees periodically. “The Statistical Analysis Software helps us analyze the returns and throw up suspicious entries. All assessing officers have been instructed to use this software to detect suspicious returns,” he said.

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Source: Tax Scan
Tax authorities to levy interest on cash, ITC component of GST paid after due date

Tax authorities to levy interest on cash, ITC component of GST paid after due date

Officials to conduct due verification of all cases of late filing of returns
Tax authorities have made it clear that interest will be levied on both cash and input tax credit (ITC) component of GST paid after the prescribed due date.

Although the standing order has been issued by the Principal Commissioner of Hyderabad GST Commissionerate, experts say the same will be applicable for all the regions as it draws an inference from C-GST (Central Goods & Services Tax)/S-GST (State Goods & Services Tax) Act. The order also made it clear that recovery of such interest will be recoverable arrears.

It has also asked the officials to conduct due verification of all the cases of late filing of returns (which obviously involve payment of self-assessed tax after the prescribed due date) and ensure that the interest liability is paid not only on the cash component but also on the credit component.

The order also says that in case the interest was not discharged by any taxpayer, the concerned officer(s) should initiate prompt action for recovery of the same. It also states that a register will be maintained, in the divisions, in order to keep track of the cases and will be updated on a regular basis with proper abstract; and the unpaid interest amount shall be pursued for recovery by treating the same as recoverable arrears.

The order has recorded some irregularities like interest liability not being discharged by some taxpayers. It is possible that some taxpayers are discharging such interest liability, either at the instance of the officers of the department or on their own as convenient to them while filing subsequent returns. It is also possible that some taxpayers are paying such interest only on the cash component of the tax, but not on the ITC component.

On priority
“These irregularities are against the provisions of the GST law and need to be addressed on priority. In fact, the delay in payment of interest is a clear case of financial accommodation; and is absolutely against the interest of the revenue,” the order read while calling for prompt action to recover interest.

The law says, “Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made there under, but fails to pay the tax or any part thereof to the government within the period prescribed, shall, for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the government on the recommendations of the Council.” The provision is the base of this order.

Augmenting revenue
Commenting on the order, Anita Rastogi, Indirect Tax Partner at PwC, said in order to ensure revenue augmentation, the government is focusing on available data to figure out areas where the taxpayers have short paid. “Interesting they have noticed evasion of interest and that will be an area of further investigation,” she said.

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Source: The Hindu Business Line.
CGST Amendment Act – Key changes in the GST made effective from 1 February 2019

CGST Amendment Act – Key changes in the GST made effective from 1 February 2019

  • Out-and-out sales and high sea sales outside the ambit of GST:Transactions, where goods are physically moved from a place outside India to another place outside India, without such goods entering the territory of India (known as out-and-out sales in trade parlance), have been declared neither as supply of goods nor supply of services under as Schedule III of the CGST Act. Transactions of high sea sales are also included under Schedule III.
  • Reverse charge on procurements from unregistered dealers:Rather than a blanket levy of tax on procurements from unregistered dealers under reverse charge mechanism, Section 9(4) has been amended to levy tax only on procurements by notified assessees. It remains to be seen which class of assessees will be notified for this purpose
  • Ambit of input tax credit widened:Section 17 of the CGST Act has been amended to expand the scope of input tax credit to include motor vehicles having a capacity of more than 13 persons. Credit on other motor cars is also available if they are used for the specified purposes. Further, credit on health insurance, outdoor catering, etc. will be available if such services are required to be provided to employees by the assessee in terms of any law for the time being in force (e.g. Factories Act, labor laws, etc.).
  • Multiple registrations in one State:Earlier, separate registrations could be obtained in one State only if the assessee had distinct ‘business verticals’ in that State. This concept has been done away with by amending Section 25 and now, assessees may choose to obtain separate registrations in the same State irrespective of whether they qualify as distinct business verticals or not.
  • Flexibility in issuing debit/credit notes:Earlier, the law, as well as the GSTN portal, accepted a single credit note or debit note against one invoice. However, assessees faced practical difficulties since certain debit/credit notes were to be issued against thousands of invoices. Section 34 has been amended to permit issuance of a single debit/credit note against multiple invoices. This will obviate the difficulty faced by assessees, especially in the cement, steel and automobile industries
  • Simplification of GST returns:The GST Council approved putting in place system of filing a single monthly return in place of the existing 3 monthly returns. However, the existing system of filing GSTR-3B and GSTR-1 will remain in place until such a time the new monthly return is notified. Section 43A has been inserted in the CGST Act to carry out this change. However, this provision will not take effect from 1 February 2019 but will come into force only when the new system of returns is ready
  • Order of set-off: Section 49 of the CGST Act, SGST input tax credit can be set off against IGST liability only if CGST input tax credit balance is insufficient for this purpose. Hence, the order of set-off of input tax credit is strictly laid down under the CGST Act itself. Further, SGST or CGST credit balance can be utilized against IGST liability only after IGST balance has been exhausted. Earlier, while the law was ambiguous on this point, the GSTN portal allowed set-off of SGST only after CGST balance was exhausted
  • Transitional credit to exclude cesses: Section 140 of the CGST Act has been retrospectively amended to exclude cesses such as Krishi Kalyan Cess. This issue was hotly debated with the AAR denying the benefit of such credit in Re Kansai Nerolac Paints Ltd. [2018-VIL-11-AAR]
  • Amendment in place of supply provisions: The place of supply of transactions of transportation of goods to a place outside India will be the destination of goods in terms of the amendment made to Section 13 of the Integrated Goods and Services Tax Act, 2017 (the IGST Act). Consequently, the Indian logistics firm will be able to take advantage of this provision to claim export benefits. Further, the place of supply in case of job work services has been excluded from the performance-based rule. Hence, job workers based in India will be able to claim export benefits

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Telcos seek GST waiver on payments to govt, Rs 35K-cr input credit adjustment

Telcos seek GST waiver on payments to govt, Rs 35K-cr input credit adjustment

Telecom firms, barring Reliance Jio, have asked the government to waive GST on spectrum payments and other levies, while adjusting accumulated tax credits of Rs 35,000 crore in the pending payments.

In a letter to Telecom Minister Manoj Sinha Monday, the Cellular Operators Association of India (COAI) said value-added tax or goods and services tax (GST) is not applicable to government services internationally, as they are considered ‘out of scope’ or regarded as non-economic activities or sovereign functions that are outside the ambit of tax.

“Therefore, in line with the international practices, it is requested that payment of regulatory levies (licence fees (LF), spectrum usages charges (SUC), and spectrum payments) made by telecom operators should be exempted from tax under GST.

“The same could be achieved by issuing exemption notifications as per provisions stipulated under GST Act,” said COAI Director-General Rajan S Mathews in the letter.

COAI members include Bharti Airtel, Vodafone Idea and Reliance Jio. Mathews, however, said Reliance has a dissenting view in the matter.

He said that according to a report of the Telecom Regulatory Authority of India, the industry’s revenue reduced 32 per cent between April-June 2016 and April-June 2018, and it is expected that the revenue in 2018-19 will be lower than that of the revenue in 2013-14 at Rs 1.45 lakh crore.

“Since the industry’s revenues have declined substantially, the output GST on revenue is unable to absorb input GST credits available. Such a situation has led to blocking of approximately Rs 35,000 crore of operator’s capital in the form of excess GST credits,” Mathews said.

Telecom operators adjust input credit in GST that they collect from customers.

Mathews said levy of GST on a reverse-charge basis on both spectrum payout and LF, and SUC-related payments are leading to a cascading cash-flow impact requiring payment of GST, which cannot be set off against a corresponding GST liability.

“We request the government to facilitate greater utilisation of the accumulated GST input tax credit of telecom service providers as it will be of a big relief to the ailing industry… utilise the excess GST credit as payment towards the Telecom operators’ liability towards spectrum auction and licence fees/SUC,” Mathews said.

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Source: Money Control
GSTN Alert: Two New Features added in GST Portal

GSTN Alert: Two New Features added in GST Portal

The Goods and Services Tax Network ( GSTN ) has added two new features in the GST portal including List of Preferred Banks list while making Payment and the Monthly Refund applications by Quarterly GSTR-1 filers.

From now, every time a taxpayer makes GST payment using in the bank, it will be updated in the Preferred Bank list for that taxpayer. As per the statement issued by the GSTN, up to six preferred banks will be shown to the taxpayer while making e-payment on GST portal.

The GSTN further removed the restriction for applying for a refund on a quarterly basis for quarterly GSTR 1 filers. These taxpayers can now file refund application on a monthly basis if Form GSTR1 for the quarter is filed.

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Source: Taxscan
GST revenue shortfall drags down tax revenue estimates

GST revenue shortfall drags down tax revenue estimates

Shortfall in GST revenue of an estimated Rs 1 lakh crore has forced the government to revise downwards its gross tax revenue target by over Rs 23,066 crore in the revised estimates of the current fiscal despite a better-than-expected collection on the direct tax side.

As per the Interim Budget tabled in Parliament on Friday, the government revised the Goods and Services Tax (GST) target from Rs 7.44 lakh crore to Rs 6.44 lakh crore — a gap of Rs 1 lakh crore — due to a shortfall in collections.

However, an upward revision of Rs 50,000 crore in estimates for direct taxes to Rs 12 lakh crore has made up for a significant portion of the shortfall. Total indirect taxes, including Customs and other duties, are estimated to be Rs 10.45 lakh crore, down from Rs 11.18 lakh crore.

For Financial Year 2019-20, the government has set a direct tax collection target of Rs 13.8 lakh crore (up 15 per cent from this year’s revised estimates) and indirect tax collection target of Rs 11.7 lakh crore (up 11.9 per cent).

Last week, the IANS had reported that the government may miss the GST collection target set in the Budget estimates by as much as Rs 1.5 lakh crore based on collection trends till December.

While GST collection showed a marked improvement in January, it may not be enough to restrict the deficit to Rs 1 lakh crore. However, the government is confident of meeting this year’s as well as next years’ targets.

CBIC Chairman Pranab Kumar Das, who assumed charge last month, said with compliance going up and tax net widening, it won’t be difficult to meet the revenue targets.

“The very first month after assuming charge on January 1, I have already achieved the target of Rs 1 lakh crore that I promised before taking over… I have shown this is possible,” he said.

“And with compliance going up, and a number of taxpayers going up, it is not difficult for us to get this revenue,” he added.

Das added that transparency was the key to improve compliance which would play a key role in achieving targets.

“People are interested to take advantage of this compliance level, this transparent system because they benefit if they become a part of the supply chain. So even though they are below the threshold, many of these entities are registering themselves,” he said.

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Source: Economic Times
Budget 2019: Govt disappoints two-wheeler companies with no GST relief

Budget 2019: Govt disappoints two-wheeler companies with no GST relief

Finance Minister Piyush Goyal provided no relief on goods and services tax (GST) to automobile companies, disappointing two-wheeler companies categorised under the luxury and sin goods segment.

In January, two of India’s top four two-wheeler makers sought relief from the government to move two-wheelers to the 18 percent GST slab from 28 percent.

Hero Motocorp Chairman Pawan Munjal and TVS Motor Company Venu Srinivasan had suggested two-wheelers be moved to the more affordable tax bracket. Rajiv Bajaj, MD, Bajaj Auto who had supported the call for a tax cut said it was important to time the tax cut as well.

Their comments were based on the fear of an expected slowdown in demand for motorcycle and scooters in the coming months with the implementation of new regulations and upgradation of vehicle technology as prices will shoot up substantially.

Two-wheelers are taxed in the same bracket (labelled as luxury and sin goods segment by the government) as mini cars, even though the consumer base is significantly larger with sales of more than 21 million units a year.

The Hero MotoCorp chairman argued the cost-sensitive buyer depends on the two-wheeler as a lifeline and a sharp increase in the prices of two-wheelers following the new set of safety and emission regulations will be detrimental to the industry.

“With new safety norms and BS-VI integration also around the corner, both of which will increase two-wheeler prices, it has become imperative to relook at the GST rates for two-wheelers to ensure social inclusion that is sustainable in the long run,” said Srinivasan.

The two-wheeler industry will brace for more than one upward revision in price over the next 15 months. These will be as a result of the new safety norms from April 1 this year and the new emission standard norms from April 1, 2020. A combination of these will likely result in an increase of a minimum of Rs 8,000 (almost 20 percent jump) in prices of budget (100cc) two-wheelers.

Currently, more than half of TVS’ sales come from scooters, which is where it has cemented its place as India’s second-largest scooter manufacturer. In the same price band, Hero sells its largest-selling motorcycle Splendor. Though both segments cater to different buyers, they fall in budget-buy segments, making them vulnerable to any hikes.

The two-wheeler segment has grown by nearly 10 percent to 16.53 million units during the April-December period, as per data provided by the Society of Indian Automobile Manufacturers. The segment has bucked the broader trend of a slowdown that has reduced the growth of the auto industry significantly.

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Source: Money Control.
Reduction in GST rate on property will propel demand

Reduction in GST rate on property will propel demand

The interim budget to be presented on February 1 holds much significance, especially with this year being the electoral year. While the real estate industry has its expectations from the interim budget, as with the previous union budgets, it remains to be seen whether the budget would lend extensive focus on the industry given other priorities of the government.

There are a host of industry matters that need timely attention from the government in order to accelerate the growth, which has slackened in the past two years owing to several regulatory changes.

While the wish list of the real estate sector has remained almost similar in the past few years, it is pertinent to note that the fulfilment of a long-standing demand – that of allocation of infrastructure status to affordable housing, has only given rise to newer expectations from the government. Promotion of affordable housing has been a key focus area of the government and the previous budget had accordingly announced comprehensive measures to provide an impetus to the sector. Some of the key issues on the wish list for the interim budget for the year are:

Single window clearance – Post the implementation of the RERA reform, there have been improvements observed in approvals and redressals regarding real estate projects, however, there still exists a need for a structured single window clearance system to avoid delays in clearance certificates, construction work, possessions, investor complaints etc.

Tax reductions – Another major subject in the wish list is regarding the reduction of 12% GST on under-construction projects. The GST council was expected to bring down the prevailing GST rates on under construction projects in the latest meet, but it has kept them same as of now. A reduced GST rate on a property would propel prospective home buyers to accelerate their purchase decisions, thereby leading the residential market to pick up pace. Meanwhile, there are also expectations regarding reduction in income tax slabs as well as higher relief on housing loan rates from the budget.

Stamp duty should be brought under the purview of GST

Incentivise Rental Housing – Promotion of rental housing through tax incentives such as offering to increase the deduction from rental income under Section 24(a) can be provided in the budget. It is also expected that a boost to rental housing through various incentives would eventually lead to a promotion of the government’s ‘Housing For All’ scheme.

Increase the limit of interest deduction paid on home loan from Rs 2 lakh to Rs 3 lakh.

Provide further impetus to the development of physical infrastructure in the country which will boost Real Estate.
Thus, it is evident that despite this budget being an interim one, the real estate industry has a number of expectations from it. The market is banking on positivity to emanate from the budget in order to create an environment conducive to the growth of the industry, generate new business opportunities and lead the economy to new heights.

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Source: Money Control.
GST collections cross Rs 1 lakh crore in January: Finance Ministry

GST collections cross Rs 1 lakh crore in January: Finance Ministry

GST collections have jumped to Rs 1 lakh crore in January this year from the Rs 94,726 crore collected in December last year, Finance Ministry said today. This has been a significant improvement over a collection of Rs 94,725 crore during last month and Rs 89,825 crore during the same month last year. Final figures and details of collections for the entire month will be intimated on February 2, the ministry said in a statement.

“This increase has been achieved despite various Tax Relief measures implemented by the GST Council to lower the tax burden on the consumers,” the finance ministry said in a tweet.

This is only the second time when the collections have crossed Rs 1 lakh crore in this fiscal. GST collection stood at Rs 1.03 lakh crore in April, Rs 94,016 crore in May, Rs 95,610 crore in June, Rs 96,483 crore in July, Rs 93,960 crore in August, Rs 94,442 crore in September, Rs 1,00,710 crore in October and Rs 97,637 crore in November.

The government has set a budgetary target of over Rs 1 lakh crore monthly average collection in FY 2019.

GST Collection

GST Council in its December 22 meeting decided to cut the tax on 17 items and six services including computer monitors, TV screens, video games, lithium-ion power banks, retreaded tyres, wheelchairs, and cinema tickets.

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Source: Economic Times
New system of filing returns under GST

New system of filing returns under GST

An ordinance issued to amend SGST Act, The State government has decided to amend the State Goods and Services Tax Act to provide a new system of filing returns and availing input tax credit under the GST.

It has been decided to provide an option for taxpayers to obtain multiple registrations for multiple places of business located within the same State. Separate registration would be provided for units in the special economic zones or developers.

Following the relaxations mooted by the GST Council during its recent meeting, the State government promulgated an Ordinance The Telangana Goods and Services Tax (Amendment) Ordinance 2019 on Wednesday. The Ordinance paves the way to insert a provision for temporary suspension of registration while the cancellation of the registration is under progress. It will allow enhancement of the limit of composition levy from ₹ 1 crore to ₹ 1.5 crores. In addition, composition taxpayers would be allowed to supply services (other than restaurant services) for value exceeding 10 % of the turnover in the preceding financial year or ₹ 5 lakh whichever is higher.

In respect of the reverse charge, the government would be empowered to notify classes of registered persons to pay the tax on reverse charge basis in respect of receipt of supplies of certain specified categories of goods or services or both from unregistered suppliers. The Ordinance also paves the way to increase the period of detention or seizure of goods and conveyance in transit from seven days to fourteen days. Further, it caps the pre-deposit amount payable for the filing of appeal at ₹ 25 crores.

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Source: The Hindu