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

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

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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 council
GST Council votes for a change, shifts lotteries to highest slab

GST Council votes for a change, shifts lotteries to highest slab

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The Goods and Services Tax (GST) Council on Wednesday departed from its practice of consensus-based decision-making, opting the first time for a vote to settle differences among states over the taxation of lotteries.

The council also deliberated upon a presentation made by a committee of officers set up to study revenue augmentation, but refrained from any generalised rate increase or removal of exemptions.

“The council has decided to impose a single rate of 28% on state-run and authorised lottery,” union finance minister Nirmala Sitharaman said after the 38th meeting of the GST Council.

It decided to put the matter to vote following wide divergence over whether there should be a single rate or dual rates.

“Every attempt was made to keep the set tradition alive … Every attempt was made to convince … But, eventually the council was reminded that the rules allow (for voting) and that tradition is not part of the rule book,” Sitharaman said. “I took the sense of the house … and we went ahead with the decision to have a vote. So, it is not enforced by the council, or by me as the chair.”

All decisions in the previous 37 meetings of the GST Council, headed by the union finance minister with state ministers as its members, had been taken unanimously.

Some Steps Against Tax Evasion
These included crucial ones on the finalisation of the GST law as well as the rates for goods and services.

On Wednesday, 21 states voted in favour of the single rate of 28% on lotteries, while seven voted against, an official said. The GST Act had prescribed two rates — 12%, if the lotteries are sold within the same state, and 28%, if a state sells its lottery tickets outside its jurisdiction.

Tax experts said hopefully the council wouldn’t have to resort to voting frequently and Wednesday’s remained an exception.

“For the success of GST, it’s important that the Centre and states work together and take decisions with consensus as they have been doing till now,” said Pratik Jain, leader of indirect taxes at PwC.

REVENUE IN FOCUS
The council gave “necessary guidance” to officers for analysing the impact of tax exemptions and concessions, the tax base and compliance measures needed to keep pace with revenue needs, a government statement said.

The officers’ committee, which made a presentation of GST data before the council, didn’t make any direct or indirect suggestions on tax rates. The minister said it would further analyse the data and come up with a report with its recommendations, which would be taken up at the next council meeting.

Maximising GST revenue has been one of the focus areas for the government. Collections remained below Rs 1 lakh crore for three continuous months, before it crossed the mark in November.

The council, meanwhile, took certain steps against tax evasion. It slashed the input tax credit to 10% from 20% of eligible credit if invoices or debit notes were not reflected in filings. To check fake invoice, it allowed officers to take suitable action to block credits that they believed were fraudulently claimed.

COMPENSATION FOR STATES
States raised the issue of a delay in the release of compensation that they were promised against any revenue loss from the implementation of GST. Some of them were apprehensive about the availability of funds to be distributed in the future.

“The Centre will not have appropriate funds to compensate states after February,” West Bengal finance minister Amit Mitra said. He said the government withheld payment to states despite having Rs 42,000 crore in its kitty.

Asked about the issue, Sitharaman said that during the discussions everyone recognised that an instalment of the compensation was released a few days ago.

The Centre had on Monday released Rs 35,298 crore as compensation to states. “There’s no gap (in communication) within the council. In the council and in the Rajya Sabha, I have explained in detail how we remain committed to cooperative federalism and to honour the promises given on GST,” she said.

CHANGES IN A FEW RATES
Sitharaman said the council decided to tax woven and non-woven bags at 18%, compared with 12% at present.

It exempted from tax the upfront amount payable for long-term lease of industrial and financial infrastructure plots by any entity that is owned 20% or more by the Centre or state governments.

On lotteries, the new unified rate of 28% will be applicable from March 1, 2020, revenue secretary Ajay Bhushan Pandey said.

The tax is levied on the face value of the lottery tickets, inclusive of the prize money to be distributed to the winners, margin of agents, retailers and distributors.

State governments and the lottery industry had represented to the council on the issue and it had set up a group of ministers to examine it. The council, which had considered the issue in its July meeting, then referred it to the attorney general for his view. But, divergences continued among states, prompting the decision by vote.

Source: Economic-Times

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compenstion
Centre releases over Rs 35,000 crore as pending GST compensation to states

Centre releases over Rs 35,000 crore as pending GST compensation to states

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Ahead of the GST Council meeting on Wednesday, the Centre on Monday sought to soothe the frayed nerves of states by releasing over Rs 35,000 crore as pending compensation. “The central government has released GST compensation of Rs 35,298 crore to states and union territories today (Monday),” the Central Board of Indirect Taxes and Customs (CBIC) said in a tweet.

This is likely to give a positive signal to states for the upcoming meeting, which may take up various options to raise funds to compensate states. Earlier in the day, Union Finance Minister Nirmala Sitharaman assured states that the Centre would not “renege” on the promise of GST compensation.

There was, however, some confusion over the period for which the compensation amount was released. States said with this payment they got compensation dues till September.

“Compensation has been released to the states for the months of August and September. We are hopeful that compensation for October and November will be released by the end of the month,” Bihar Deputy Chief Minister Sushil Modi told Business Standard.

Earlier, Parliament’s Standing Committee on Finance had said the Centre had paid Rs 45,745 crore as compensation to states for the first four months of the current financial year. The dues were paid in June and August. However, according to Sitharaman’s statement in the Rajya Sabha, the Centre had released compensation of Rs 65,250 crore till October this year.

This, she said, was Rs 9,783 crore more than what the Centre collected through the compensation cess — Rs 55,467 crore as of October 31 this year. Even BJP-ruled states raised eyebrows over Sitharaman’s response to the compensation cess issue.

“How is it possible? What about the surplus cess of the previous two years? Is the FM (Sitharaman) trying to say the Centre has given extra money to states from the Consolidated Fund of India?” asked the finance minister of a BJP-ruled state.

Under the separate Compensation Act, if states’ GST revenue does not grow by at least 14 per cent over the base year of 2015-16, the Centre pays it the difference, after every two months. Earlier, states were livid since the compensation cess payment issue was not part of the official agenda circulated for the meeting.

On Monday itself, before news of the release of compensation to states came, West Bengal Finance Minister Amit Mitra wrote to Sitharaman, raising the issue of non-payment of these dues.

“I would like to raise the issue of non-payment of GST compensation to the states, which has wreaked havoc on state finances,” he said.

He reminded her about his earlier letter of November in which he had impressed upon her the context in which the constitutional guarantee was given to the states.
“We urge you to honour that so that the current mistrust between the Centre and the states is put to rest for all time to come,” Mitra told Sitharaman.

Earlier this month, finance ministers and representatives of opposition-ruled states had met Sitharaman and expressed their concern over delay in paying compensation. Most of the states rued that the delay in payment put pressure on their finances, affecting development work.

In the GST Council meeting, the revenue augmentation committee will give a presentation suggesting measures to broaden the tax base, additional resource mobilisation, and improved tax compliance. It will likely recommend correcting the inverted tax structure in key items, revising slabs, raising cess on a few items, among others.

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 6 per cent year-on-year growth on the back of festive demand. Despite that, collection is lower than the rate needed to meet the steep target for FY20.

Source: Business-Standard

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GST compensation
FM Sitharaman assures states of releasing GST compensation dues soon

FM Sitharaman assures states of releasing GST compensation dues soon

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Union Finance Minister Nirmala Sitharaman on Wednesday assured states that the goods and services tax (GST) compensation due to them for August and September will be released soon. She, however, did not specify a timeline.

Finance ministers (FMs) of Punjab, Kerala, Delhi, Rajasthan, Chhattisgarh, and Madhya Pradesh had met Sitharaman on Wednesday and urged that funds due for four months since August be released as soon as possible.

The issue could become a major one at the GST Council meeting on December 17-18 in New Delhi.

Punjab FM Manpreet Singh Badal said Sitharaman assured them the money will be released soon. “Compensation for October and November is also due,” he added.

The August and September compensation dues for Rajasthan are Rs 4,400 crore, for Punjab it is Rs 2,100 crore, for Delhi it is Rs 2,355 crore, for Kerala it is Rs 1,600 crore, and for West Bengal it is Rs 1,500 crore.

Delhi’s Deputy Chief Minister Manish Sisodia said Sitharaman did not specify the reason why the compensation was being held up. “The Centre owes Rs 3,600 crore to Delhi for August, September, and October,” he added.

Cess collections under the GST to compensate states for revenue loss have fallen short of requirements in the current fiscal year on account of slowdown in demand. Under the law, if the states’ GST revenue does not grow by at least 14 per cent, the Centre pays them the difference after every two months.

Madhya Pradesh (MP) Commercial Tax Minister Brajendra Singh Rathore said the Centre owes the state Rs 3,000 crore for August to September.

The state has fared the worst in GST collection in 2019-20 (FY20), raking in 30 per cent of the annual target. Kerala, Punjab, and Tamil Nadu have collected about 33 per cent, shows the data on the Comptroller and Auditor General of India website.

In a letter to the state, the Centre has acknowledged that the compensation requirements of states will “unlikely” be met from the cess collected and hence has sought suggestions for revenue augmentation, including review of compensation cess and the GST rates.

Sitharaman on Wednesday said the Centre was duty bound to safeguard the interest of states.

This year, in the first six months, while the Centre collected compensation cess amounting to just above Rs 46,000 crore, the compensation actually released to states has run into Rs 66,000 crore.

On the collection side, while the fall in auto sales reduced the collection, the overall crunch in states’ GST revenue raised the need for compensation to be released.

The letter sent to the state GST commissioners, reviewed by Business Standard, said that “lower GST and compensation cess collections have been a matter of concern in the past few months… the compensation requirements have increased significantly and are unlikely to be met from the compensation cess being collected”.

It further sought suggestions with respect to compliance and rates to help augment revenues. This includes review of items currently on the exemption list. The exemption list covers essential commodities like grains, vegetables, fruit, etc.

States are demanding an extension of the compensation period by another three years, beyond the stipulated 2021-22, propelled by their under-confidence about economic revival and buoyancy in revenue collection. This will lock their annual revenue growth at a minimum of 14 per cent, irrespective of the actual collections till 2024-25.

Source: Business-Standard.

GST
Will soon streamline GST regime for all assessees: Nirmala Sitharaman

Will soon streamline GST regime for all assessees: Nirmala Sitharaman

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Finance Minister Nirmala Sitharaman on Saturday said the government is working on streamlining the goods and services tax (GST) regime to eventually have three slabs.

Though any decision related to tax rate cut will be taken by the federal indirect tax body GST Council , the minister said “eventually we need to rationalise (rates). Do we want more slabs? Do we want to have just two or three slabs. Original intent was that there will be three slabs—merit, sin and the standard”.

Currently, there are four key tax slabs—5%,12%,18% and 28%—under the new indirect tax regime that was rolled out on 1 July 2017.

The council will meet later this month to discuss various revenue improving measures including changes to GST rates and cess levied on select goods. It will be the first meeting ever in which tax rate increases will be considered. At the last GST Council meeting in September in Goa, there was a token increase in the tax rate on one product, signaling that the era of GST rate reductions was over.

The government’s plan to review tax rates, exemptions and cess comes amid a shortfall in revenue receipts of the central and the state governments, where the latter has accused the Centre of delays in compensating states for their GST revenue shortfalls. The proposed meeting will also consider ways to improve tax compliance.

The minister further said the government will remove any distortions pertaining to the issue of inverted duty structure as far as rates are concerned and will simplify the system of filing returns under GST.

Sitharaman also said the government is committed towards paying compensation to the states for their revenue shortfall. Finance ministers of four states and officials from four other states urged the Centre to clear dues towards compensation from the implementation of the GST as they are facing financial difficulty.

“Unfortunately, in the last collection the cess component has not been so adequate… That’s not to the level of saying that oh, the compact has been broken,” she said.

“The cess fund if it is there, we are going to give it. If it is not there, we are also makig clear to ourselves as to how we can do it. We are not going to touch the compact… Let there be no doubt. We will honour compact, there is no question about it, she said, adding that states’ issue is genuine.

Source: Live-Mint

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gst rates
GST council begins review of rates, items to raise revenue

GST council begins review of rates, items to raise revenue

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The government has begun discussions with states for a possible revamp of the goods and services tax (GST), which may include bringing a few exempted items under the levy while reviewing the rates and the cess on all goods and services, as part of an exercise to shore up revenue.

In a letter to states, the GST council has given a full menu of options and suggested their feedback ahead of a meeting of ministers expected before the end of the month. The move comes at a time when tax collections have been hit, which authorities believe is due to a massive reduction in rates. The RBI had recently estimated that the effective GST rate in India has come down from 14.4% in May 2017 to 11.6% now.

Officials said this has robbed the government of potential revenue of around Rs 2 lakh crore annually and also increased compensation payout to states as the Centre had assured them to make good on any “losses” in case collection growth was less than 14% a year. The economic slowdown, along with tax leakage, has added to the government’s woes and the growth has been lower than anticipated despite an expansion in taxpayer base.

“The effective indirect tax rate on many products in the pre-GST era was around 25%, which has reduced to 18% in GST. In the absence of a significant increase in volumes, there would be an impact on revenues,” said M S Mani, a partner at consulting firm India.

gst rates

Another tax consultant said the services sector revenue has not seen a significant expansion in the base as investments have slowed down. As a result, the GST council has asked states to review the list of products that are currently exempted, which includes some of the items that were earlier subject to tax.

With states complaining about the Centre holding up compensation, the government is also seeking a review of the items that can face the levy apart from looking at the possibility of enhancing the levy on existing items like tobacco, soft drinks and cars.

With the compensation cess kitty eroded, states have little choice but to either agree to settle their bills over a longer period than the five years that was provided for or agree to higher cess or expanding its scope, said officials.

Source: Times-of-India

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

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

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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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CAIT demands extension of deadline for GST return
CAIT asks FM to probe biz model of e-tailers, says deep discounts causing GST loss

CAIT asks FM to probe biz model of e-tailers, says deep discounts causing GST loss

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Traders’ body CAIT  urged the government to probe the business model of e-commerce majors like Amazon and Flipkart, alleging that deep discounts on products were causing loss of GST revenue to the Centre and state governments.

In a letter to Union Finance Minister Nirmala Sitharaman, the Confederation of All India Traders ( CAIT) has claimed that e-commerce companies Amazon and Flipkart and others were selling goods much below their market value thus denying the Government of its due legitimate GST revenue.

CAIT Secretary General Praveen Khandelwal has “urged the Finance Minister to institute a probe into this business model which is causing huge GST revenue losses to the government and recover the difference of GST between billed price and market value from the period of implementation of GST”.

According to the traders’ body, under GST Act, the government has a power to determine actual market value of the products if it appears that it is under billed. CAIT has sent similar letters to Union Commerce Minister Piyush Goyal and finance ministers of all states.

Source: Money-Control.

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gst
GST Council Sets Up Panel To Boost Revenue Collection

GST Council Sets Up Panel To Boost Revenue Collection

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The GST Council on Thursday constituted a committee of officers to improve revenue after the collections dropped to a 19-month low of Rs. 91,916 crore in September reflecting weak consumer demand. The second straight month of decline in the GST collections came amid a massive slowdown in the economy, visible in six year low GDP growth numbers for the April-June quarter.
“The committee shall submit its first report within 15 days to the GST Council Secretariat which shall coordinate the meeting of the committee to ensure finalisation of the inception report..,” the GST Council office memo said.

The GST Council, in a memorandum, said that that it has been decided that that a committee of officers from state as well as the Centre is “required to suggest steps to be taken to improve revenue collection”.

The Council expects the newly formed committee to look into “policy measures and changes in the law”, measures to “improve voluntary compliance and improved compliance monitoring and anti-evasion measures” among others.

The aim is to move to GST 2.0 and leapfrog tax reform to its second phase by bringing electricity, oil & gas, real estate and alcohol under its ambit and converging the rate structure into two-three slabs.

The members of the committee, as stated, were the Commissioners, SGST of Maharastra, Tamil Nadu, Uttar Pradesh, West Bengal and Punjab.

The members from the Centre would include Principal Commissioner, GST PW, Joint Secretary (TRU 1 and 2), ADG (ARM and Systems) and Joint Secretary, Revenue.

Besides, the Joint Secretary, GST Council Secretariat and Executive VP, GSTN will also be the part of the committee.

Source: NDTV-Profit.

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GST Collections
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

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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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