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Businesses with monthly turnover of over Rs 50 lakh to pay at least 1% GST liability in cash

Businesses with monthly turnover of over Rs 50 lakh to pay at least 1% GST liability in cash

Businesses with monthly turnover of over Rs 50 lakh will have to mandatorily pay at least 1 per cent of their GST liability in cash, the Finance Ministry said as it moved to curb evasion by fake invoicing.

The Central Board of Indirect Taxes and Customs (CBIC) has introduced Rule 86B in Goods and Services Tax (GST) rules which restricts use of input tax credit (ITC) for discharging GST liability to 99 per cent.

“… The registered person shall not use the amount available in electronic credit ledger to discharge his liability towards output tax in excess of 99 per cent of tax liability, in cases where the value of taxable supply … in a month exceeds Rs 50 lakh,” the CBIC said.

While calculating the turnover threshold, sales from GST exempt goods and zero rates supply would not be included.

However, this restriction will not apply where the managing director or any partner have paid more than Rs 1 lakh as income tax or the registered person has received a refund amount of more than Rs 1 lakh in the preceding financial year on account of unutilised input tax credit.

Tax Partner Abhishek Jain said the government has put restrictions on seamless input credit utilisation with introduction of Rule 89B, which blocks utilisation of ITC beyond 99 per cent of the output liability, for businesses having taxable turnover of more than Rs 50 lakh per month.

“With the government providing reasonable exceptions to this rule, the idea remains to prevent misutilisation of credit by businesses taking fake credits,” Jain added.

Further, the CBIC has amended GST rules restricting filing of outward supply details in GSTR-1 for business that have not paid tax for the past periods by filing GSTR 3B.

So far, until now, non-filing of GSTR 3B resulted in blockage of e-way bill but will now result in GSTR 1 blockage as well.

Abhishek Jain, Tax Partner, said, “The government has now restricted filing of outward supply details in GSTR 1 return for businesses who have not paid tax for the past periods by filing GSTR 3B.

“The government’s idea here seems to be to curb input tax credit passing by businesses which have otherwise not paid their GST liability,” Jain added.
AMRG & Associates Senior Partner Rajat Mohan said, “These changes indicate that government is grappling with lower tax collections and high tax evasions, burden of which will again be on honest taxpayers”.

The CBIC has also notified authentication of Aadhaar number or physical verification of business premises for the purposes of obtaining GST registration.

“This amendment has likely been introduced to prevent fraudulent registrations,” Jain added.

Also, the validity of electronic way bill provisions has been amended by the CBIC according to which the e-way bill will be valid for 1 day for every 200 km of travel, as against 100 km earlier.

Source: Times-Of-India.


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Govt collects Rs 1,04,963 crore GST in November, crosses Rs 1 lakh crore mark second time since April

Govt collects Rs 1,04,963 crore GST in November, crosses Rs 1 lakh crore mark second time since April

Goods and service tax (GST) collections for November stood at Rs 1.04 lakh crore, marginally lower than Rs 1.05 lakh crore collected in October this year, but higher than Rs 1.03 lakh crore collected in the same month last year.

The numbers showed the second consecutive month of collections clocking up more than Rs 1 lakh crore, indicating continued economic recovery, said experts.

“In line with the recent trend of recovery in the GST revenues, the revenues for the month of November 2020 are 1.4% higher than the GST revenues in the same month last year,” the finance ministry said in a statement Tuesday.

During the month, revenues from import of goods was 4.9% higher and the revenues from domestic transaction (including import of services) are 0.5% higher that the revenues from these sources during the same month last year, the ministry added.

“Second straight month of Rs 1 lakh plus collection is certainly indicative of continued economic recovery and the collections being slightly more same month last year is quite encouraging. This should also help in containing the shortfall of GST collections caused due to the pandemic,” said Abhishek Jain, tax partner.

Of the gross collections in November, Central GST stood at Rs 19,189 crore, State GST at Rs 25,540 crore, integrated GST at Rs 51,992 crore which included Rs 22,078 crore collected on import of goods, and cess was at Rs 8,242 crore, which included Rs 809 crore collected on import of goods.
The total number of GSTR-3B Returns filed for the month of November up to 30th November 2020 was 82 lakhs, the ministry added.

The government settled Rs 22,293 crore to CGST and Rs 16,286 crore to SGST from IGST as regular settlement. The total revenue earned by central government and the state governments after regular settlement in the month of November 2020 is Rs 41,482 crore for CGST and Rs 41,826 crore for the SGST.

A majority of states have shown an increase in GST collections, data from the ministry revealed, while nearly 15 states showing a dip in collections.

Source: Economic-Times.

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Govt set to release Rs 20,000 cr pending GST compensation to states soon

Govt set to release Rs 20,000 cr pending GST compensation to states soon

The finance ministry is set to release Rs 20,000 crore in pending goods and service tax (GST) compensation to states soon, Business Standard has learnt. This will not be from the compensation cess, but from the Consolidated Fund of India, and comes days after the Centre disbursed Rs 17,287 crore to states as devolution and disaster funds.

The finance ministry and the Prime Minister’s Office are also working on another stimulus package, which is expected to be announced soon. There is no definitive number yet on the quantum of the package, which will again be aimed at the urban and rural poor, micro, small and medium enterprises and the sectors most affected by the coronavirus disease (Covid-19) pandemic and the subsequent 21-day nationwide lockdown.

Officials working on the stimulus package say that a lot of ever-changing factors are still under consideration. These include active cases of Covid-19, hotspots, and the status of the lockdown after April 14.

“The revenue department has been authorised to clear Rs 20,000 crore in GST compensation dues to states,” said a top government official.

“We can only disburse compensation to states from the compensation cess fund. Since it is not available, approval has been given for releasing it from the Consolidated Fund,” said a second official.

Even with the Rs 20,000 crore distributed among states, it will still be a fraction of what they have been demanding in financial support and clearance of pending dues. Central government officials say there is a resource crunch, but more will be given. States have also been allowed to borrow 50 per cent of their total 2020-21 limit in April itself.

Maharashtra had sought a special package worth Rs 25,000 crore from the central government and asked it to release pending dues worth Rs 16,654 crore under various heads by March 31, to fight the economic crisis. Tamil Nadu has sought a special assistance of Rs 4,000 crore and a slew of other financial support measures. West Bengal has sought a package of Rs 25,000 crore and clearance of dues worth Rs 36,000 crore. Additionally, all states have sought relaxation of their borrowing limits.

With only 65 per cent of compensation due for October and November at Rs 19,950 released last month, the total disbursal has been Rs 1.2 trillion as against full-year collection of just Rs 95,000 crore. It is, in fact, Rs 3,000 crore short of the revised estimate of Rs 98,327 crore.

Compensation cess, to be released on a bi-monthly basis, has been pending for about five months. With compensation of over Rs 60,000 crore still pending, some states are even planning to drag the Centre to the Supreme Court.

“Never in the history of India has there been such a callous attitude of the Centre towards the states. There is no option other than the states approaching the Supreme Court,” Kerala Finance Minister Thomas Isaac told Business Standard.

The central government was of the view that it would only release compensation out of collections through levy of cess on luxury and sin items like automobiles, tobacco, and aerated drinks.

In her Budget speech, Finance Minister Nirmala Sitharaman said it was decided to transfer to the GST Compensation Fund balances due out of collection in 2016-17 and 2018-19 in two instalments.

Source: Business-Standard.

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Nirmala Sitharaman hints at status quo on GST rates

Nirmala Sitharaman hints at status quo on GST rates

Union finance minister Nirmala Sitharaman on Sunday said she had sought an assessment of the full year collection of goods and services tax (GST) before rationalising rates, indicating that a proposal by a panel of officers to increase levies may wait until April.

The minister also advised against frequent change in rates, which had become the norm at every meeting of the GST Council, which is headed by the union finance minister, with states being members of the panel. The GST Council is the final decision-making body on rates and rules and has to meet at least once in three months.

There is a proposal for reworking the slab and increase rates on several items — ranging from branded food items to mobile phones and economy class air travel. But a decision was deferred as states wanted an assessment of the impact of the new indirect tax regime on various products. Besides, many states, including those ruled by BJP, were not in favour of increasing rates under various slabs.
At the Palkhiwala Centenary Celebration here, Sitharaman raised concerns over assessment of GST collections. “Ideally, everybody keeps telling that we must aim for one rate (GST), one tax, and one nation and so on. However, before we make such revisions, have we studied what the current rates have given us (collection) steadily for one full year?”

The minister indicated that there were suggestions for an annual revision. “We did consider if the revision of rates could be a yearly exercise, which will be done after due consideration. However, if the technical, law, and fitment committees come back saying that such reduction would lead to an inversion, then all of us must have the largeness of heart to say — sorry, this (rate revision) cannot happen.”

The FM raised complaints that every GST Council meeting, there is a big list of rate reduction on items, which even leads to discussions on changes in inverted duty structure.

‘Laws mustn’t look at biz with suspicion’

Sitharaman said the government is moving towards a direction where the law does not look at business enterprises with suspicion. She also said the industry and the government should work together to take the country’s economy to $5 trillion.

The FM said her earnest attempt is to decriminalise matters concerning the Companies Act or other related laws, and also cited Tata Group head N Chandrasekharan’s speech in Mumbai on Monday, where he had said the government should trust its own citizens.

Stressing further on the trust factor, Sitharaman said the government’s intention is not to distrust business houses and the road to $5-trillion economy will be much easier with mutual trust.

Source: Times-Of-India

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Non-compliance in GST payments may be burning a Rs 5 tn hole in revenues

Non-compliance in GST payments may be burning a Rs 5 tn hole in revenues

The government may be losing Rs 5 trillion in indirect tax revenue a year, amounting to 40% of its goods and services tax (GST) collection target, because of defaults and evasion, according to the Fifteenth Finance Commission’s (FFC), confirming policymakers’ fears that businesses are not paying their fair share of taxes.

In a recent presentation made to the GST Council, FFC has assessed that the revenue loss was equivalent to 2.4% of gross domestic product. This works out to Rs 5 trillion if one goes by the first advance estimate of nominal GDP for FY20 released earlier this month. This is as much as 40% of the GST revenue centre and states together may collect this year, going by the trend of an average Rs 1 trillion a month GST revenue in the first nine months of the current fiscal.
In the nine months to 31 December, central and state governments have collected more than Rs 9 trillion in GST and hope to collect an additional Rs 3.55 trillion by end of March.

FFC’s estimate of revenue loss from non-compliance is giving a strong backing to the tax administration’s bid to tighten enforcement at a time they are struggling to meet the revenue targets for the year. According to the FFC, India’s overall tax-to-GDP ratio is about 17.2%, which as per its calculations, should be about 22.6%.

There is a gap of about 5.4%, of which, GST compliance gap accounts for about 2.4% of the GDP, according to the FFC presentation, the highlights of which are now available in public domain from minutes of the meeting.

Source: Hindustan-Times

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GST fraud: 1,200 exporters seeking Rs 350 crore GST refund untraceable

GST fraud: 1,200 exporters seeking Rs 350 crore GST refund untraceable

Even after two years of implementation of the Goods and Services Tax (GST), the government is struggling to plug leakages in the system. A probe by the GST authorities has revealed that nearly 1,200 exporters, who made GST refund claims of Rs 350 crore, were untraceable, the Times of India reported. 

Citing sources, the daily said that over 800 entities have been prevented from exporting overvalued merchandise of Rs 1,500 crore to claim fake IGST with refunds over the last five months.

GST authorities also suspect the involvement of few custom brokers in these frauds, involving fictitious entities, existing only in virtual space, through identity thefts with fake and morphed documents. The role of 50-odd brokers is under the scanner as they were found to have dealt with exporters who are now untraceable. As part of the licensing conditions, the Central Board of Indirect Taxes and Customs (CBIC) has allowed these brokers to independently verify the KYC of exporters, the publication mentioned.

Initial scrutiny of the Integrated GST claims had revealed that eight star trading houses, which are entitled to several benefits, were also not traceable, prompting the revenue department to keep close tabs on these entities. Tax officials said that the entire exercise has been undertaken through the analysis of data, which is also shared with other government agencies including CBDT.

The publication citing sources said, newer modus operandi are now surfacing. An investigation related to a Delhi-based company revealed fraudulent refund claim of close to Rs 10 crore. The firm was ostensibly exporting readymade garments to a special economic zone. The taxpayer was selected for physical scrutiny and found non-existent at his declared address. It was also found that the owners of the firm were dummy persons.

Using a web of fake invoicing of over Rs 847 crore, the company is accused of creating a fraudulent tax credit of Rs 195 crore. Investigations showed that even the suppliers were untraceable. The documents showing deemed exports to the SEZ were also found to be fake.

Source: Times-now-news

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AI, data analytics to track GST evaders, boost compliance

AI, data analytics to track GST evaders, boost compliance

The government plans to increase the use of artificial intelligence and data analytics to track down tax evaders, and improve compliance with the Goods and Service Tax in order to augment revenue.

Top tax officials are scheduled to participate in a brainstorming session to be chaired by revenue secretary Ajay Bhushan Pandey next week to firm up this plan.

“The revenue secretary will hold a day-long meeting on January 7 with tax commissioners to discuss ways to streamline the GST system and plug leakages due to fraud,” said a person aware of the development.

The discussions will include assessing the wider use of data analytics and AI in the process of enforcement and red-flagging tax evaders and fake refund claimants without overreach or harassment to genuine taxpayers.

The meeting comes on the heels of the government notifying changes to GST rules to prevent frauds and fake invoicing, besides setting up grievance cells to ensure that genuine taxpayers are not harassed and the overall tax base increases. The government last week reduced input tax credit to 10% from 20% of eligible credit if invoices or debit notes were not reflected in filings.

Last month, the Central Board of Indirect Taxes and Customs instructed field officers to expeditiously create GST grievance redressal committees at zonal and state levels.

Tax officials have been directed to identify cases of suppression of personal income, wilful tax evasion, fake invoicing or inflated or fake e-way bills, and take stern action.

Those attending the session will include state tax commissioners and chief tax commissioners from the Centre, senior officials of various tax bodies along with officers of the enforcement wings. Their goal is to develop a targeted approach to stop tax and duty evasion while making sure that no taxpayer is troubled.

There’s growing concern over revenue shortfall, with slowing consumption demand adversely impacting GST collections. The corporate tax cut amounting to a loss of revenue of Rs 1.45 lakh crore, along with recent GST compensation of over Rs 35,000 crore to states, have increased the stress on the Centre’s fiscal position.

Source: Economic-Times.

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GST revenue crosses Rs 1-lakh crore mark in December 2019

GST revenue crosses Rs 1-lakh crore mark in December 2019

The gross GST (Goods and Services Tax) revenue collection for December 2019 has crossed Rs 1-lakh crore mark, showing a 16 per cent rise in revenue YoY. It is for the ninth time since the inception of GST in July 2017 that monthly collection has crossed the mark of Rs 1 lakh crore. The GST collection for December stood at Rs 1.03 lakh crore, of which CGST (Central GST) amounts to Rs 19, 962 crore, while SGST and IGST have been recorded at Rs 26,792 crore and 48,099 crore, respectively. Cess for the month stands at Rs 8,331 crore (including Rs 847 crore collected on imports).

A government statement said the total number of GSTR 3B Returns filed for November up to December 31 was 81.21 lakh. The GST revenue from domestic transactions for December has shown an impressive growth of 16 per cent over the revenue during December 2018, the statement said. “If we consider IGST collected from imports, the total revenue during December 2019 increased by 9 per cent in comparison to the revenue during December 2018. During this month, the IGST on import of goods has seen a negative growth of (-) 10 per cent, but is an improvement over (-) 13 per cent last month and (-) 20 per cent in October,” the statement said.

The government has settled Rs 21,814 crore to CGST and Rs 15,366 crore to SGST from the IGST as regular settlement. The total revenue earned by the Centre and the State governments after regular settlement in December stands at Rs 41,776 crore for CGST and Rs 42,158 crore for the SGST.

State-wise, Maharashtra recorded the highest GST collection for December at Rs 16,530 crore, followed by Karnataka (Rs 6,886 crore) and Tamil Nadu (Rs 6,422 crore). In November, the GST revenue stood at Rs 1.03-lakh crore, witnessing a 9 per cent growth. The gross GST revenue collected in October stood at Rs 95,380 crore. In September, it was Rs 91,916 crore, while the tax collection in August stood at Rs 98,202 crore.

Source: Business-Today.

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Finance panel wants three-tier GST structure: Report

Finance panel wants three-tier GST structure: Report

The Fifteenth Finance Commission (FFC) has recommended simplifying the GST structure into three slabs, according to a report in Hindustan Times.

The Finance Commission has suggested a uniform rate of 17 percent, sources told the publication. GST, introduced in July 2017, currently has four rates – 5 percent, 12 percent, 18 percent and 28 percent.

Other suggestions by the panel include a lower merit rate for items of common consumption and a higher rate on luxury and sin goods, the report said.

Moneycontrol could not independently verify the story.

The Finance Commission has forwarded the suggestions to the GST Council, which makes the final decision on the rates, Hindustan Times reports.

Some policymakers are in favour of rationalising the slabs to simplify the GST structure and boost revenue collections, which have recently seen a slump.

GST collection had crossed the Rs 1 lakh crore mark in November 2019 after three months of lower collections.

Finance Minister Nirmala Sitharaman also recently said there was a need to rationalise GST rates.

“Eventually, we will of course have to rationalise (the rates). Do we want so many slabs? Do we want to have just two or three slabs? Original intent was that we have just the three —merit, sin and the standard; just the three rates,” Sitharaman had said.

In another report in The Economic Times, the government is considering allowing companies to clear current GST dues without first clearing past pending payments.

Officials from the Ministry of Corporate Affairs (MCA) and Department of Revenue (DoR) have begun discussing the matter, the report said.

Source: Money-Control.

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FinMin notifies norm limiting ITC to 10% in case of GST details mismatch

FinMin notifies norm limiting ITC to 10% in case of GST details mismatch

In an effort to curb the menace of fake invoices and tax evasion, the Finance Ministry has notified a new norm of limiting the input tax credit to 10 per cent in case of GST details mismatch.

Experts feel that this will force businesses to restrict themselves to matched details and ignore the mismatched ones and thus incur losses, which could go into crores for big companies, due to complexities involved.

The change in the norm, the second in three months, has been initiated following a decision by the GST Council. Earlier, in October, the government limited ITC in case of details not uploaded by suppliers to 20 per cent which has now been halved. According to a new notification to be effective from January 1, ITC to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers, shall not exceed 10 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers.

Two return forms

Businesses take advantage of facilities provided under existing system to generate fake invoices that cause loss to the Government. The existing system prescribes assessees to file two return forms — GSTR 1 (outward sales with tax liability) and GSTR 3B (summary returns with final tax payment). Since both are not auto linked, this could result in showing higher liability, claiming higher input tax credit and paying less tax in cash.

In other words, irrespective of the credit being visible in GSTR 2A (auto generated return for purchases), the service recipient used to claim credit without any restriction subject to having the invoice copy and satisfying other conditions laid down under the law. There is feeling that one of the reasons for availing higher input tax credit on the basis of fake invoices was the mismatch between the two — GSTR 1 and GSTR 3B.

This was affecting the government’s revenue. This has forced it to limit the ITC in case of details not matched and encourages the companies to monitor whether the suppliers are uploading their returns on a regular basis. However, experts feel that such a mechanism will lead to compliance cost for companies. Also, the companies might not prefer to go behind suppliers to see whether they have filed returns or not. Hence, they would focus only on matched details and incur loss on account of others.

Electronic Credit Ledger

The government has introduced additional conditions for use of amount available in Electronic Credit Ledger. It has given the right to the tax authority to restrict the use of balance in electronic credit ledger by recording the reasons to believe in writing. The key reasons for restricting credit are: invoice issued by registered person not in existence and recipient is not in procession of goods/services /invoice on which credit is claimed. Post restriction, the tax authority, upon being satisfied that conditions for disallowing debit of electronic credit ledger as above, no longer exist, can allow such credit in the electronic credit ledger.

Controlling tax evasion

According to Harpreet Singh, Partner, one hopes that automatic blocking of credit is resorted to only where fraudulent intention is proved beyond doubt and the same is not used on a regular basis, as casual resort to the said provision may lead to harsh consequences for many innocent defaulters.

Rajat Mohan, Senior Partner, said GST frauds are on the rise and so is the fiscal deficit which is forcing the government to introduce new methods to control tax evasion and take punitive action against the accused.

Source: The-Hindu-Business-Line

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