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Latest GST circular puts an end to confusion over new input tax credit rules

Latest GST circular puts an end to confusion over new input tax credit rules

In a big relief for GST taxpayers, the Union government on Monday clarified the new rules related to availing input tax credit under the GST. It said that a certain category of Input Tax Credit claims such as ITC in respect of the IGST paid on imports and GST paid under the reverse charge mechanism have been kept out of the scope of the new rules introduced last month. The new rules implemented by the CBIC limited input tax credit claims to 20% of the eligible amount where invoice matching has been done. However, the notification issued by the CBIC on October 9 caused a lot of confusion over the method of calculating this 20% amount, the cut-off date and also whether it was to be calculated supplier-wise or on a consolidated basis. These concerns prompted the CBIC’s GST policy wing to issue a new circular today clarifying all these aspects.

“This circular clarifies a few points and will be of help to GST payers,” said Pritam Mahure, a Pune based chartered accountant.

The circular issued by the Central Board of Indirect Taxes (CBIC) also clarified that this 20% cap on the eligible Input Tax Credit will not be calculated supplier-wise and GST payers can avail the input tax credit on a consolidated basis.

The Modi government had received complaints that some businesses were availing input tax credit by using fake GST invoices. In order to check the problem of misuse of input tax credit system, the CBEC, the nodal body to implement indirect taxes in the country, had last month made it compulsory to match the invoices uploaded by the suppliers in their GSTR1 forms before buyers can avail Input Tax Credit in their GSTR-3 returns. However, it also allowed the buyers to claim 20% more input tax credit over and above the eligible amount where invoice matching was done but the lack of clarity over the method of calculation created confusion among GST payers.

The CBIC’s latest circular is intended at clarifying all these aspects. For example, if a buyer is entitled to avail input tax credit of Rs 10 lakh on inward supplies (purchases) in a month but if his suppliers have only uploaded the correct invoices in respect of supplies of Rs 6 lakh only in the GSTR1 forms uploaded by them, then the buyer can avail ITC of Rs 6 lakh plus 20% of the eligible amount that is Rs 1.2 lakh. Therefore the buyer could claim a total ITC of Rs 7.2 lakh in the month.

It also clarified that the total amount of ITC, even after the addition of 20% input tax credit over and above the eligible amount where invoice matching has been done, cannot exceed the total amount of input tax credit that can be claimed.

For example, if a buyer is entitled to ITC of Rs 10 lakh on inward supplies and invoice matching is done in case of Rs 9 lakh then as per the 20% cap rule, he is also entitled to avail 20% over and above the eligible amount of Rs 9 lakh, which is 1.8 lakh in this case. However, this can take the total amount of ITC to be availed by him in the month to Rs 10.8 lakh, Rs 80,000 more than the total ITC amount that can be claimed. The new circular has clarified that in any case ITC claims will be restricted to the total amount due.

For example, if a buyer is entitled to ITC of Rs 10 lakh on inward supplies and invoice matching is done in case of Rs 9 lakh then as per the 20% cap rule, he is also entitled to avail 20% over and above the eligible amount of Rs 9 lakh, which is 1.8 lakh in this case. However, this can take the total amount of ITC to be availed by him in the month to Rs 10.8 lakh, Rs 80,000 more than the total ITC amount that can be claimed. The new circular has clarified that in any case ITC claims will be restricted to the total amount due.

The latest GST circular also clarified three distinct cases where the newly introduced rule to cap ITC to 20% over and above the eligible amount will not be applicable.

Where new GST Input Tax Credit rule will not be applicable
The cap of 20% on availing input tax credit under the GST rule 36, sub-rule (4) introduced on October 9 will not be applicable on three cases:

1. ITC in respect of the IGST paid on imports and these importers can directly avail the input tax credit;

2. The cap of 20% will also not apply to those cases where GST has been paid under the Reverse Charge Mechanism (RCM) and;

3. The ceiling of 20% on availing ITC will also not apply on Input Service Distributors (ISD), these are those businesses that receive invoices on behalf of the services used by their branches and subordinate offices.

Source: Financial-Express.

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Commerce Ministry raises issue of notices to exporters for GST ‘violation’

Commerce Ministry raises issue of notices to exporters for GST ‘violation’

The commerce ministry has taken up the issue of Directorate of Revenue Intelligence (DRI) notices being sent to 1,000 exporters for alleged violation of Goods and Services Tax with its finance counterpart, an official said.

The commerce ministry has stated that the “overzealous revenue collection” move by DRI (Directorate of Revenue Intelligence) was against exporters.

The ministry has demanded integrated goods and services tax (IGST) exemption for inputs used in exports between October 2017 and January 2019, the official said.

In a letter to the Department of Revenue, the commerce ministry said that the demand of giving retrospective IGST exemption to exporters could be taken up by the GST Council, chaired by the finance minister and comprising state ministers.

“This department is of the view that enthusiasm of exporters should not be killed by overzealous revenue collection based on technicalities where revenue does not accrue in principle. You may consider placing these concerns before the GST Council for early resolution,” the ministry has said.

It has also stated that as on date, imports made under the advance authorisation scheme on both pre and post export basis are exempted from payment of IGST.

Exporters have raised concerns regarding litigation and penal action by DRI with regard to pre-import condition under the scheme.

DRI had sent notices to exporters for claiming post import IGST exemption between October 2017 and January 2019. During the period, this exemption was allowed only for pre-import of inputs.

But the exemption was allowed both for pre and post import from January 15 this year. The commerce ministry is seeking implementation of this notification from October 2017 itself.

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Source: Business-Standard.
GST collections remain subdued at Rs 95,380 crore in October

GST collections remain subdued at Rs 95,380 crore in October

The Goods and Services Tax (GST) collection in October declined to Rs 95,380 crore, as against Rs 1,00,710 crore in the same month a year ago, as per government data released on Friday.

This is the third consecutive month when GST mop-up remained below the Rs 1 lakh crore mark, despite October being a festive month.

The revenue collection in September stood at Rs 91,916 crore.

“The gross GST revenue collected in the month of October, 2019 is Rs 95,380 crore of which CGST is Rs 17,582 crore, SGST is Rs 23,674 crore, IGST is Rs 46,517 crore (including Rs 21,446 crore collected on imports) and Cess is Rs 7,607 crore (including Rs 774 crore collected on imports),” the finance ministry said in a statement.

It further said the total number of GSTR 3B returns (summary of self-assessed return) filed for the month of September (up to October 30) was 73.83 lakh.

Source: Times-Of-India.

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Exporters draw DRI wrath for alleged GST violations

Exporters draw DRI wrath for alleged GST violations

The country’s primary anti-smuggling intelligence agency has begun resending notices to exporters for availing GST exemptions where exports preceded imports. The Directorate of Revenue Intelligence (DRI) move followed a Supreme Court stay on a Gujarat High Court order favouring the exporters. The high court had quashed a revenue department notification allowing DRI to penalise exporters for allegedly not following “pre-import condition” and availing wrongful Goods and Services Tax (GST) exemptions.

Many exporters will now have to cough up Integrated Goods and Services Tax (IGST) and penalties as these notices mean that the tax department will not wait for another apex court directive. These companies had first exported goods and then imported raw materials but still claimed export benefits in the form of tax leeway.

About 1,000 exporters have been issued such notices. “The exporters will have to opt for the legal remedy of moving to the respective high courts for obtaining a stay on such show-cause notices,” said Abhishek A Rastogi, partner at Khaitan & Co, who is representing some of the exporters in the case.

The exporters have been asked to pay IGST first as the foreign trade policy has been amended and several notifications were issued in the last few months. ET has seen a notice issued to an exporter on October 10, while the Supreme Court stay was ordered on October 4. The IGST rate in these cases is 18% on the average, while for some products it is 12% and 5% for very few. Industry trackers say that under the earlier tax regime and foreign trade policy (FTP), there was no duty if imported raw materials were used for exports, even when exports
preceded imports.

The current GST framework has laid down certain conditions for exporters to avail certain benefits. A revenue department notification said raw materials cannot be imported after export of the final product. The government introduced an amendment in the GST framework that led to DRI chasing down the exporters.

The amendment spoke mainly of a “pre-import condition” that every exporter needs to follow to avail duty exemptions on imports. “In cases where exports preceded imports, availment of exemption does not seem legal and proper.

This office has initiated an inquiry in wrongful availment of exemption,” a notice read. “While the stay has been granted by the Supreme Court, it does not mean that the other exporters must pay the amount towards pre-import,” Rastogi said.

Source: Economic-Times

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GST collection slips below Rs 1 lakh crore mark to Rs 91,916 crore in September

GST collection slips below Rs 1 lakh crore mark to Rs 91,916 crore in September

In another indicator of economic slowdown, GST collection has dropped below Rs 1 lakh crore mark to Rs 91,916 crore for September. The September collection is believed to be the lowest in nineteen months.

The revenue during September, 2019 has declined by 2.67% in comparison to the revenue during September, 2018. During April-September, 2019 vis-à-vis 2018, the domestic component has grown by 7.82% while the GST on imports has shown negative growth and the total collection has grown by 4.90%

CGST is Rs 16,630 crore and SGST is Rs 22,598 crore. IGST is Rs 45,069 crore (including Rs 22,097 crore collected on imports) and Cess is Rs 7,620 crore (including Rs 728 crore collected on imports). The total number of GSTR 3B Returns filed for the month of August up to 30th September, 2019 is 75.94lakh.

The government needs over Rs 1 lakh crore GST in order to meet its fiscal target and also to not compensate states for losses. It compensates states once in every two months for the losses they incur in the first five years of the implementation of GST.

The government has already transferred Rs 27,955 crore to the states in the form of compensation in June-July this year and Rs 17,789 crore in April-May.

Source: Economic-Times

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GST Council Meet highlights: Cuts rates on various items

GST Council Meet highlights: Cuts rates on various items

Finance Minister Nirmala Sitharaman on Friday announced the reduction of GST rates on a slew of items. All rate changes would be effective from 1 October

Higlights:

  • A uniform GST rate of 12 % will be levied on woven/non-woven polyethylene bags
  • GST council cuts tax rates on job work in diamond industry to 1.5% from 5%
  • In a major boost to gems and jewellery sector, the Council recommended to reduce GST on cut and polished semi-precious items to 0.25 per cent from 3 per cent now
  • GST Council cuts tax on hotel room tariffs of ₹1,000 to ₹7,500/night to 12%; those above ₹7,500 to 18%
  • The GST on caffeinated beverages has been hiked to 28% plus additional cess of 12% as against the current rate of 18 per cent.
    GST council cuts tax rates for outdoor catering to 5% from 18%
    GST Council recommends lower 12% cess on 1,500 cc diesel, 1,200 cc petrol vehicles with capacity to carry up to 13 people
  • A uniform GST rate of 12% will be levied on woven/non-woven polyethylene bags
  • Uniform GST rate of 12% to be levied on polypropylene bags and sacks used for packing of goods
  • the Council has reduced rates for cups and plates made from leaves and hides to nil.
  • The tax on almond milk has been set at 18%
  • GST rate hiked on railway wagon, coaches from 5% to 12%
  • Exemption from GST/IGST is being given on import of specified defence goods not being manufactured indigenously, it’s being extended only up to 2024
  • Supply of goods & services to FIFA & other specified persons also exempted for U17 Women’s World Cup in India
  • GST rate on slide fasteners has been reduced from 18% to 12%,
    Marine fuel from 18% to 5%
  • 12% to 5% on wet grinders consisting of stone as a grinder,
    5% to nil on dried tamarind.
  • The GST Council on Friday cut tax rate on hotel room tariffs, a move aimed at giving a boost to the hospitality sector.

The GST (goods and services tax) rate on hotel rooms with tariffs of up to ₹7,500 per night has been cut to 12%from the existing 18%, officials attending the GST Council meet here said.

Similarly, the tax on room tariff of above ₹7,500 has been slashed to 18% from the existing 28%.

There will be no GST on room tariffs of below ₹1,000 per night.

Commenting on the decision, Sanjay Sethi, CEO, Chalet Hotels said the reduction would give a major fillip to the hospitality and tourism industry and make hotels more competitive globally.

“For companies like Chalet, reduced taxation helps us focus our efforts on key aspects like fresh investments in portfolio expansion, job creation and creating sustainable green hotels,” he said.

With most engines of growth stuttering and GDP declining to six-year low of 5% in the April-June quarter, pressure has been mounting on the government to revive the economy. Some external factors like US-China trade war has added to the woes.

In the wake of domestic and external headwinds, the Reserve Bank of India recently lowered its GDP forecast and pegged it at 6.9 per cent in 2019-20. Several rating agencies and research firms expect the growth to be in the range of 6.5-7 per cent.

The poor show in the first quarter of the current fiscal has prompted the Modi government to take measures to boost growth and lift business sentiment. Starting August 23, Finance Minister Sitharaman has announced four set of measures to put economy on fast track.

Source: Live-Mint

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Raids unearth Rs 470 crore fraudulent GST claims

Raids unearth Rs 470 crore fraudulent GST claims

In a massive nationwide search operation carried out on exporters and their suppliers covering 336 locations on Wednesday, nearly 1,200 officers from the Directorate of Revenue Intelligence and Directorate General of GST Intelligence unearthed fraudulent claims of over Rs 470 crore of Integrated Goods and Services Tax (IGST) and seized fake invoices of Rs 3,500 crore.

The searches showed that some exporters were exporting goods on payment of IGST, using credit for taxes paid on inputs. While there is no harm in using input tax credit (ITC) to settle your tax liability, data analytics and intelligence gathered by the authorities showed that the credits were based on fake supplies. The IGST payments on exports are claimed back as refunds.

The agencies are investigating IGST refunds of around Rs 450 crore.

After detailed analysis of the data provided by the Directorate General of Analytics and Risk Management (DGARM), it was also noticed that there was no or negligible payment of tax through cash by the exporters as well as their suppliers.

Major crackdown: Raids against GST violators held across 15 states

In a few cases, even the tax paid through ITC was more than the ITC availed by these firms. This resulted in one of the biggest search operations across 15 states including Delhi, Haryana, UP, Gujarat, Maharashtra, Tamil Nadu, West Bengal, Karnataka, MP, Telangana, Punjab, Rajasthan, Himachal Pradesh, Uttarakhand and Chhattisgarh.

Over the last few months, the government has gone after entities which have made bogus sales or export claims and use of data, which involved matching the GST and income tax returns, has thrown up several cases where the entities involved were sham companies.

“Some live export consignments of these exporters have been intercepted at Vadodara Rail Container Terminal, Mundra port and Nhava Sheva port for examination in order to ascertain mis-declaration,” DRI said in a statement.

Source: Times-of-India.

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At Sept 20 Goa meet, GST Council to look into inverted duty structure issue

At Sept 20 Goa meet, GST Council to look into inverted duty structure issue

The Goods & Services (GST) Council is expected to resolve issues related with inverted duty structure for various sectors in its 37th meeting scheduled to take place in Goa on September 20.

The inverted duty structure, where there is higher duty on input(s) and lower duty on output, has caused two problems. First is the refund in the GST regime, and second such a structure encourages imports hurting the domestic industry. There are at least seven industries including textiles and railway wagon facing difficulties on account of inverted duty structure.

Senior Finance Ministry officials confirmed that efforts are on to resolves the problems especially related with refund and therefore rates related with inverted duty structure are being restructured under GST.

According to MS Mani, Partner with Deloitte India, there is a need to correct inverted duty situations in a few sectors to assist both suppliers of inputs and their buyers from a working capital standpoint. “In a situation where growth has tapered, all elements of cost, especially indirect taxes would be an area of focus,” he said.

Any registered assesee can claim a refund of unutilised input tax credit on account of inverted duty structure at the end of any tax period where the credit has accumulated on account of higher tax on input and lower tax on the output.

Exceptions to this are in four categories — if output supplies are NIL rated or fully exempt supplies except supplies of goods or services or both as notified; if the goods exported from India are subject to export duty; if the supplier claims refund of output tax paid under IGST (integrated Goods & Services Tax); or avails duty drawback or refund of IGST on such supplies.

The issue of refund came up before the Council at least twice — once during the 31st meeting held on December 22, 2018 and the second, during the 35th meeting held on June 21.

In the December meeting it was decided that clarifications will be issued on certain refund related matters like refund of ITC accumulated on account of inverted duty structure, disbursal of refunds within the stipulated time, time allowed for availment of ITC on invoices, refund of accumulated ITC of compensation cess etc.

The Central Board of Indirect Taxes and Custom (CBIC) issued a circular on December 31, 2018. It was clarified that refund of unutilised ITC in case of inverted tax structure is available where ITC remains unutilised even after setting off of available ITC for the payment of output tax liability.

Where there are multiple inputs attracting different rates of tax, the concept of ‘Net ITC’ as mentioned in the formulae prescribed under the CGST rules will be applicable.

This term covers the ITC availed on all inputs in the relevant period, irrespective of their rate of tax. However, industries complain that this circular has not resolved their issues completely.

The minutes of the 35th meeting said West Bengal Finance Minister Amit Mitra had written a letter to Finance Minister Nirmala Sitharaman regarding the inverted duty structure of ‘wagon industry’ and he had requested that it might be sent to the Fitment Committee.

Sithraman assured that it would be sent to the Fitment Committee.

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Source: The-Hindu-Business-Line.
GST collections drop to six-month low of ₹98,202 crore in August

GST collections drop to six-month low of ₹98,202 crore in August

The Goods and Services Tax (GST) revenues slid to a six-month low of ₹98,202 crore in August 2019. Average collections this financial year are still above ₹1.02 lakh crore, however.

“The total gross GST revenue collected in August, 2019 is ₹98,202 crore of which CGST is ₹17,733crore, SGST is ₹24,239crore, IGST is ₹48,958 crore and cess is ₹7,273 crore,” the government said in a release. “The total number of GSTR 3B Returns filed for July up to August 31, 2019 is 75.80 lakh.”

The revenue collected in August 2019 was 4.51% higher than what was collected in the same month of the previous year.

“During April-August 2019 vis-à-vis 2018, the domestic component has grown by 9.11% while the GST on imports has come down by 1.43% and the total collection has grown by 6.38%.”

“Slowdown in GST collections perhaps reflects the economic realities on the ground,” Pratik Jain, Partner & Leader, Indirect Tax, PwC India said. “While it’s 4.5% higher than the corresponding period of last year, it’s much below the target, despite the reduction in the estimates in the Union Budget.

“During April-August 2019 vis-à-vis 2018, the domestic component has grown by 9.11% while the GST on imports has come down by 1.43% and the total collection has grown by 6.38%,” the government release said.

“With virtually no room for rate increases, the government would hope that efforts to plug tax leakages would yield results soon,” Mr. Jain said. “Given the slowdown in collections, it would be interesting to see if the GST Council would consider rate cuts in its meeting, later this month, for the automobile sector as the industry has been pushing for.”

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Source: The-Hindu.
GST collection grows 5.8% in July to ₹1.02 trillion

GST collection grows 5.8% in July to ₹1.02 trillion

Central and state governments have collected Rs. 1,02,083 crore from Goods and Services Tax (GST) in July, 5.8% more than what they mopped up in the same month a year ago, an official statement said here.

This is the third time the combined central and state GST receipts crosses ₹1 trillion mark so far this fiscal. The union government is bound to compensate states for any shortfall in their revenue collection below an agreed 14% annual growth every year in the first five years of GST regime. Tax collected in July pertain to the transactions in June. After showing a 10% annual growth in April GST receipts, collections remained rangebound between 6.6 and 5.8% in subsequent months.

The statement said the union government collected ₹17,912 crore, while states collected ₹25,008 crore. Receipts from integrated GST (IGST) on inter-state sales stood at ₹50,612 crore and from GST cess at ₹8,551 crore. On account of the revenue shortfall in FY19 and the growth rate remaining below 14% so far in FY20, the central government’s requirement to compensate states continues and raises questions about states revenue position after the first five years of GST if the current trend continues. Central and states collected and average RS 93,114 crore a month last fiscal against a ₹1 trillion combined monthly target.

The GST shortfall could make the union government more dependent on cesses and surcharges on various taxes to find resources for compensating states for their revenue shortfall.

The Controller General of Accounts (CGA), the government’s internal auditor, said on Wednesday the central government’s gross tax revenue in the June quarter grew at a slow pace of 2.7% to ₹1.86 trillion from the year ago period. (ends)

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Source: Live-Mint.
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