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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

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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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Finance panel wants three-tier GST structure: Report

Finance panel wants three-tier GST structure: Report

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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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