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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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GST Council to set up grievance redressal mechanism for taxpayers

GST Council to set up grievance redressal mechanism for taxpayers

The GST Council will set up a grievance redressal mechanism for taxpayers.

The decision was taken at the 38th meeting of the GST Council held on December 18.

It has decided that a structured grievance redressal mechanism should be established for the taxpayers under GST to tackle grievances on GST-related issues of specific and general nature, an official statement said on Wednesday.

The council will set up the Grievance Redressal Committee (GRC) at zonal and state levels consisting of both central tax and state tax officers, representatives of trade and industry and other goods and services tax (GST) stakeholders.

The committee will be constituted for a period of 2 years and the term of each member will be for likewise, said the statement.

If any member of the panel would be absent for three consecutive meetings, without adequate reasons, the member will be replaced with a fresh nomination by the principal chief commissioner/chief commissioner of central tax in consultation with the chief commissioner/ commissioner of state tax.

Functions of the committee include examining and resolving all the grievances and issues being faced by the taxpayers, including procedural difficulties and IT-related issues pertaining to GST, both of specific and general nature.

The committee will meet once every quarter or more frequently as decided by the co-chairs.

“For time-bound handling of grievances and accountability, GSTN shall develop a portal for recording all such grievances (including their scanned images) and their disposal.

“It shall be the responsibility of the co-chairs of the grievance redressal committees to ensure timely entry of the grievances and updating the status of their disposal on the portal,” the statement said.

The details of action taken on all issues will be displayed on the portal, which shall be available for viewing to all stakeholders to check the status of the resolution, it added.

Source: Business-Standard.

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Tech limitations cannot be ground to deny input tax credit under GST, says Delhi HC

Tech limitations cannot be ground to deny input tax credit under GST, says Delhi HC

The Delhi High Court has said that the rights of Goods & Services Tax (GST) assessees ‘cannot be subjugated’ to the poor and inefficient software systems adopted by the authorities. The ruling is likely to benefit assessees who suffer due to technical glitches.

“The software systems adopted by the respondents have to be in tune with the law, and not vice-versa. The system limitations cannot be a justification to deny the relief, to which the petitioner is legally entitled,” the court ruled in a matter related to denial of use of unutilised input tax credit (ITC).

Commenting on the ruling, Harpreet Singh, said the order is likely to have far reaching positive domino effect under GST. With increasing dependence on technology, it is a common occurrence that technical glitches impact the statutory filings or reflection of the right balances at the portal. “Post this order, dealers should be able to claim their rightful benefits/ dues without worrying about technological handicaps, so long as other statutory conditions are satisfied,” he said.

After the introduction of Goods & Services Tax, a special provision was made for credit accumulated under VAT, excise duty or service tax to be transited to GST. Barring registered dealer opting for composition scheme, all other assessees were given opportunity to avail themselves of the transitional credit. However, there were some conditions. First, the credit will be available only if the returns for the last six months, that is, from January 2017 to June 2017 were filed in the previous regime (VAT, excise and service tax returns had been filed). Second, Form TRAN 1 (to be filed by registered persons under GST, may be registered or unregistered under old regime) has to be filed by December 27, 2017, to carry forward the input tax credit. Third, Form TRAN 1 can be rectified only once.

Inaction of respondents

In a petition filed with the HC, the grievance of the petitioner was that due to the inaction of the respondents (State GST authority) and their failure to allow smooth migration of the credit standing in the account of unutilised input tax, the petitioner could not use and exploit the ITC while making exports in the months of July and August, 2017. Accordingly it was forced to shell out over ₹1.37 crore which would not have been the case, had it been able to utilise its ITC which had accumulated even prior to the enforcement of the GST regime.

The court heard both the sides and observed that the petitioner cannot be made to suffer on account of failure on the part of the respondents in devising smooth transition to GST regime w.e.f. July 1, 2017 from the erstwhile indirect taxation structure. “The business activity in the country cannot be expected to come to a standstill, only to await the respondents making the Good Services Tax system workable,” it said.

According to the court, the failure of the respondents in first putting a workable system in place, before implementing the GST regime, reflects poorly on the concern that they have shown to the difficulties that the trade faced throughout the length and breadth of the country. “Unfortunately, even after passage of over two years, the respondents have not remedied their omissions and failures by taking corrective steps. They continue to take shelter in the limitations in, and the inability of their software systems to grant refund, despite the same being justified,” the court said.

Source: The-hindu-business-line

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Non-filing of GST returns may lead to attachment of bank a/cs

Non-filing of GST returns may lead to attachment of bank a/cs

CBIC issues Standard Operation Procedure to deal with non-filers Non-filing of GST (Goods & Services Tax) returns may lead to attachment of bank accounts and even cancellation of registrations. This is part of the Standard Operating Procedure (SOP) issued by the Finance Ministry to be followed in case of non-filing of returns.

The GST law makes it mandatory for a registered person to file returns either monthly (normal supplier) or on a quarterly basis (Supplier opting for composition scheme). An ISD (Input Service Distributor) will have to file monthly returns showing details of credit distributed during the particular month.

Persons required to deduct tax (TDS) and persons required to collect tax (TCS or Tax Collected at Source) also have to file monthly returns showing the amount deducted/collected and other specified details. A non-resident taxable person also has to file returns for the period of activity.

Revenue hit
It is estimated that up to 20 percent of assessees do not file returns. This affects revenue collection. Since there is a lack of clarity on how to proceed with non-filers and lack of uniformity in procedures, the Central Board of Indirect Taxes and Custom (CBIC), has come out with an SOP. Under the SOP, after the due date of return, a system-generated message or mail will be immediately shared with GST defaulters. Five days later a notice will be issued asking the GST payer to file the return or make payment within 15 days This notice is to be issued in Form GSTR 3A.

If the defaulter does not file the return within 15 days of the issue of the notice, the proper officer may proceed to assess the tax liability of the person to the best of his judgment taking into account all the material available or which he has gathered and would issue order under Rule 100 of the CGST Rules in Form GST ASMT-13.

If the defaulter files the GST return, then Form GST ASMT 13 will be deemed as withdrawn. If not, the officer may initiate recovery.

Though the above guidelines are to be followed in most cases, the SOP also prescribes that in some cases, based on facts, the Commissioner may resort to the provisional attachment to protect revenue, under Section 83 of the CGST Act before issuance of Form GST ASMT-13.

If the return is not filed within the time prescribed under Section 29 of the CGST Act, then the process of cancellation may be initiated. The relevant section prescribes conditions for cancellation of registration, and the fulfillment of any of these will invite action.

These include a composition scheme assessee not filing returns for three consecutive tax periods, a non-composition assessee not furnishing returns for a continuous period of six months, not commencing business within six months of the voluntary registration, obtaining registration by fraud, and willful misstatement or suppression of facts.

The Act clearly states that registration will not be canceled without giving the person an opportunity of being heard.

Pritam Mahure, Chartered Accountant, felt that after blocking of e-way bill generation for non-filers, issuing Standard Operating Procedure for non-filers is the next step by CBIC to ensure proper collection.

However, “it may be noted that due to the slowdown and cash crunch, taxpayers are already struggling to survive. Thus, the proposed steps will effectively mean halting businesses, with negative consequences for taxpayers and the economy,” he said.

Sources : The Hindu

No possibility of GST rate hike till revenue stabilises: Sushil Modi

No possibility of GST rate hike till revenue stabilises: Sushil Modi

Days after the Goods and Services Tax (GST) Council refrained from hiking the tax rates, Bihar Deputy Chief Minister Sushil Kumar Modi said there was no possibility of any such move till revenue stabilised. He said the Council had decided to consider changes in the rates once a year, and not in each and every meeting.

A hike in GST rates, he said, would have hampered consumption amid the economic slowdown. “I want to assure you that not a single state, as well as the Union government, is ready to raise tax rates,” he said, speaking at FICCI’s 92nd annual convention. Also, there wasn’t scope to cut rates now till GST revenue stabilised, despite falling consumption, he said. “At a time when the economy is in a slowdown, if you cannot cut the tax rate, do not increase the rates, to boost consumption. At these times, you cut duties and tax rates, and not increase them,” he said.

The revenue augmentation panel in the Council meeting last week recommended revisiting and restructuring the GST rate slabs, besides correcting the inverted duty structure. The panel listed 24 items, including mobile phones, footwear, fabrics, LED light, medical equipment, utensils, agri machinery, pharma, and renewable components, which have an inverted duty structure, resulting in refunds of close to Rs 20,000 crore annually. Inverted duty structure refers to higher duties on inputs than those on the final goods and services.

On broadening and rationalising the GST rates, some of the suggestions compiled by the panel included hiking rate on precious metals from 3 per cent to 5 per cent, taxing higher segments of education and health.

Revisiting rates on certain items that went down from 28 per cent to 18 per cent was also on the list.

Compared to the pre-GST period, 99 per cent of the goods and services have less taxes levied on them post-GST, Modi said. However, he added that fake invoicing had become a major issue and the government was looking at ways to check the menace.

The Council meeting on Wednesday had decided to block the input tax credit for fake invoices in certain cases and further restricted the credit for invoices not uploaded in relevant forms to 10 per cent from the current 20 per cent of the eligible credit. Four of the eight months in the current financial year have yielded less than Rs 1 trillion. After plummeting to a 19-month low in September at Rs 91,916 crore, GST collection recovered to Rs 1.03 trillion in November, posting a 6 per cent year-on-year growth rate on the back of festive demand.

Despite that collection was lower than the rate needed to meet the steep target for FY20.The officers’ panel had red-flagged that the Centre may be staring at a compensation cess shortfall of at least Rs 63,200 crore this financial year, which may balloon to Rs 2 trillion by 2021-22. Here, it assumed a revenue growth of 5 per cent, while the actual growth in the April-November period is 3.7 per cent. The department of revenue had earlier this week pegged the target for GST collection at Rs 1.1 trillion a month for December-March 2019-20 with one of the months yielding Rs 1.25 trillion.

Source: Business-Standard

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GST compensation to 9 states put at Rs 70,000 Cr

GST compensation to 9 states put at Rs 70,000 Cr

The Goods and Services Tax compensation requirement of nine major states could be as much as Rs 70,000 crore in fiscal 2020, ratings firm ICRA has estimated.

This would put significant pressure on the central government’s accounts which are already under stress from the cut in corporate tax rate and other stimulus measures.

Considering lower-than-expected GST collections — ICRA estimates this revenue to fall Rs 3.5 lakh crore short at the central level for this fiscal year compared with the July 2019 budget estimate of Rs 24.6 lakh crore — the total shortfall for all states could touch Rs 2.2 lakh crore in FY20.

Apart from this, the timing of the release of GST grants to state governments pose a key risk to the cash flows of the states, considering the size of the amount in question.

“The nine states that we have studied are likely to require a sizeable Rs 60,000-70,000 crore as grants for GST compensation in FY2020, twice as high as the compensation they received in FY2019. The timing of release of such grants by the GoI (Government of India) to the states would critically affect their cash flows and the pattern of fundraising in the rest of this fiscal,” said ICRA’s group head-corporate sector rating, Jayanta Roy.

This further poses a two-part risk for the states. A shortfall in their revenue implies a revenue expenditure side risk on additional outgo towards welfare schemes, drought and flood relief, and salaries. On the other hand, ICRA estimates that states would increase issuances of state development loans to plug the gap, resulting in higher state fiscal deficits.

The nine states that were covered in this study were Karnataka, Kerala, Gujarat, Maharashtra, Punjab, Haryana, Rajasthan, Tamil Nadu and West Bengal. These have budgeted for an aggregate fiscal deficit of Rs 3 lakh crore in their respective FY20 budget estimates.

These figures amount to around 2.5% of their gross state domestic product (GSDP), according to ICRA, which is below the 14th Finance Commission’s threshold state fiscal deficit at 3% of GSDP.

Source: Economic-Times.

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GST network in local lingo: GSTN CEO

GST network in local lingo: GSTN CEO

GST Network will be in all languages present in Schedule 8 of the Constitution in two months — a step that will make it easy for assesses in all states to upload returns and other documents with or without the help of a chartered accountant or advocates. Speaking to TOI, GSTN CEO Prakash Kumar said as of now the GSTN has asked all states to translate the details on the website. “At present, the GSTN is only in English and once the states send details in their local languages, it will be made available in those languages,” he said.

The labels on the website will be in the local language. “We received demands for translating the details in all languages and based on that the website will is being re-jigged. The assesses can ask questions and receive replies in their language,” said Kumar. “Initially we had problems as it was a new tax regime. But as of now more than 30 crore returns are uploaded and Rs 75,000 crore is being paid each time when the deadline for uploading returns end. On the last day of deadline, more than 25 lakh returns are being uploaded. We have a stabilised system compared to what we had when we started. But as in any website, if everyone uploads at the same time, there will be problems,” he said. Terming the GSTN as safe from hackers, he said.

The GSTN is also working on a new type of return to make it easy for traders and businessmen to use the network. “By April 1 next year, a new type of return will be in place and it will be easy for the assesses will find it easy. Already we have released the tools for the new returns for the assesses to practice on,” he said.

Source: Times-of-India

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CBIC enables RESET option for GSTR-3B in GST Portal

CBIC enables RESET option for GSTR-3B in GST Portal

The Central Board of Indirect Taxes and Customs ( CBIC ) has enabled RESET option for GSTR-3B in Goods and Services Tax ( GST ) Portal.

This facility can be used in GST Portal where GST Return submitted but it is not filed.

GSTR-3B is a monthly return. All regular taxpayers need to file this return till March 2019. You can file your return on GST Portal.

The Goods and Service Tax (GST) mandates the filing of GSTR 3B return even by those taxpayers with nil returns. It is a monthly self-declaration form that has to be filed by all taxpayers irrespective of the returns.

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Source: TaxScan.
Govt blocks GST e-way bill generation; move may impact 300,000 firms

Govt blocks GST e-way bill generation; move may impact 300,000 firms

Businesses of roughly 300,000 firms paying goods and services tax (GST) were likely impacted on Monday, as the government had blocked e-way bill generation for non-compliant assessees.

These businesses had not filed their monthly GST Return (GSTR)-3B for two consecutive months. The government had notified the rule last month as an enforcement measure amid subdued revenue collection.

The GST system has been grappling with low levels of compliance. Only 65-68 per cent of eligible GST filers file the GSTR-3B within the due date, the GST Network (GSTN) data shows.

“This month, the taxpayer will be alerted with a cautionary message while generating e-way bills, in case GSTR-3B for the past two successive months of the consignor/consignee GST identification number (GSTIN) has not been filed. From next month onwards, such GSTINs will be blocked,” the note had said.

The same has become operational from December 3.

According to the data by the GSTN, the information technology backbone of the two-year-old indirect tax regime, there are 2 million GSTINs that have not filed GSTR-3B for September and October. Of these 2 million GSTINs, 347,000 GSTINs (or 16.7 per cent) had transactions in the e-way bill system for September and October, which are learnt to have been impacted immediately.

“These firms were given enough warning last month that their e-way bill system would be blocked over non-compliance. Businesses not filing returns should not be allowed to move goods,” said a government official.

Firms in Odisha and West Bengal are learnt to have been severely affected with this move. Experts said this has put these businesses in peril.

“Due to slowdown and cash crunch, taxpayers are already struggling to survive. This measure will effectively mean halting business and will have negative consequences for taxpayers and the economy,” said Pritam Mahure, leader at Pune-based accountancy firm Pritam Mahure and Associates.

“Suppose, the supplier of goods has filed GST returns in time, but the person to whom he is selling goods i.e., purchaser of goods has failed to file GST returns, in that case, the supplier who is compliant will not be able to generate e-way bill as his recipient is non-compliant,” said Vishal Raheja, deputy general manager, Taxmann.

The e-way bill facility will get unblocked within three hours of payment of dues and filing returns.

GSTR-9, GSTR-9C gets simplified further, submission dates extended

GSTR-9, GSTR-9C gets simplified further, submission dates extended

The Government has to extend the due dates of filing of Form GSTR-9 (Annual Return) and Form GSTR-9C (Reconciliation Statement) for Financial Year 2017-18 to December 31, 2019 and for Financial Year 2018-19 to March 31, 2020.

It has also decided to simplify these forms by making various fields of these forms as optional.

The Central Board of Indirect Taxes & Customs (CBIC) on Thursday notified the amendments regarding the simplification of GSTR-9 (Annual Return) and GSTR-9C (Reconciliation Statement) which inter-alia allow the taxpayers to not to provide split of input tax credit availed on inputs, input services and capital goods and to not to provide HSN level information of outputs or inputs, etc. for the financial year 2017-18 and 2018-19.

CBIC expects that with these changes and the extension of deadlines, all the GST taxpayers would be able to file their Annual Returns along with Reconciliation Statement for the financial years 2017-18 and 2018-19 in time.

“Since the returns were not simplified, the extension is not a surprise. However, frequent extensions and delay in non-simplification has been a let down for businesses. Our sense is that businesses are ready to comply with GSTR-9 so they can move on and prepare for the new simplified return filing system,” said Archit Gupta .

Earlier the last date for filing of GSTR-9 and GSTR-9C for Financial Year 2017-18 was November 30, while that for Financial Year 2018-19 was December 31.

Source: Economic-Times

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