Revenue Collection Archives

What government is doing to improve GST compliance

June 18, 2019 admin Comments 0 Comment

1) What’s the direction of GST in the near term?

Central and state tax officials have until recently taken a lenient approach in administering the technology-driven tax, allowing businesses and traders time to adapt to the new regime. This is quickly making way for a tough new approach to check evasion. Implementing a new, simpler tax return filing form that will make tax evasion harder and stabilizing revenue collection top the agenda of the GST Council. Its medium-term agenda includes converging the two standard tax rates—12% and 18%—applicable on a large number of items somewhere in the middle as revenue collection improves.

2) What’s the plan to check tax evasion?

The GST Council plans to curb tax evasion by using technology and data gathered from various sources to their full extent. One of the proposals is to ask large firms to generate invoices for business-to-business transactions on a designated portal. This will help prevent instances of the buyer taking credits for taxes that the seller has never paid to the government. Identifying and plugging revenue leakage would be a priority for the GST Council, said EY tax partner Abhishek Jain. “The proposed new return form will restrict tax credit utilization to the extent the invoices uploaded by the seller will allow,” he added.

3) What about evasion at the retail level?

Selling without invoices, often with the connivance of the buyer, and the retailer pocketing the tax amount collected from the buyer instead of remitting it to the government are two ways tax evasion takes place at the retail level. Sale without invoice will require inventory more than what is shown in the records. This is often done by using the same e-way bill (electronic permit for transportation of goods) multiple times. Officials believe the plan to validate e-way bills with the data collected at toll plazas of movement of radio frequency identification-enabled vehicles will help check this problem.

4) In what way will close coordination between the direct and indirect tax administration help?

Experts say that globally, indirect tax reforms have helped improve income tax and corporate tax collections as the transparency in sales achieved by GST makes it harder to hide income. Close coordination between the two streams of taxation helps officials to connect the dots and profile assessees better.

5) How serious is the revenue shortfall?

The combined monthly target of central and state governments for this fiscal is about ₹1.14 trillion. They collected just over ₹1 trillion in May, up 6.7% from the same month a year ago but below the monthly target. Revenue shortfall implies the centre has to compensate states for their losses. The sluggish pace of revenue growth means there is not much legroom for the GST Council to cut tax rates in the near future unless revenue receipts soar.

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Source: Live-Mint.

Finance commission may not extend GST compensation

May 22, 2019 admin Comments 0 Comment

The 15th Finance Commission is unlikely to heed the request of state governments to extend the period for the goods and services tax (GST) compensation beyond the initial five years, holding that tax buoyancy will take care of the current shortfall in revenue in some states.

“As GST is a consumption-based tax, the real problem with states is that the guaranteed compensation will end in two years from now, which covers two out of the five years of my award period beginning 2020-21. Some of the states are worried because they are not getting that degree of growth. The changes in GST have now more or less settled down. I now see growth on a more positive wicket. I don’t believe it is necessary nor would it be appropriate (to extend GST compensation). I expect the growth momentum to take care of it,” said the chairman of the 15th Finance Commission, N.K. Singh.

Loss of revenue to the states on account of implementation of GST shall be payable during the transition period of five years till 2021-22, according to the provisions of the GST (Compensations to States) Act, 2017.

The financial year 2015-16 has been taken as the base year for calculating the compensation amount payable to states and the projected nominal growth rate of revenue subsumed for a state during the transition period is assumed to be 14% per annum. The total compensation payable in any financial year is the difference between the projected revenue for any financial year and the actual revenue collected by the state.

The 15th Finance Commission is unlikely to heed the request of state governments to extend the period for the goods and services tax (GST) compensation beyond the initial five years, holding that tax buoyancy will take care of the current shortfall in revenue in some states.

“As GST is a consumption-based tax, the real problem with states is that the guaranteed compensation will end in two years from now, which covers two out of the five years of my award period beginning 2020-21. Some of the states are worried because they are not getting that degree of growth. The changes in GST have now more or less settled down. I now see growth on a more positive wicket. I don’t believe it is necessary nor would it be appropriate (to extend GST compensation). I expect the growth momentum to take care of it,” said the chairman of the 15th Finance Commission, N.K. Singh.

Loss of revenue to the states on account of implementation of GST shall be payable during the transition period of five years till 2021-22, according to the provisions of the GST (Compensations to States) Act, 2017.

The financial year 2015-16 has been taken as the base year for calculating the compensation amount payable to states and the projected nominal growth rate of revenue subsumed for a state during the transition period is assumed to be 14% per annum. The total compensation payable in any financial year is the difference between the projected revenue for any financial year and the actual revenue collected by the state.

One of the major reasons for the huge shortfall of revenue for states compared with the national average is the inbuilt structural design of GST, in which the taxes are levied on destination-based principle, according to a study conducted by the GST Council in September 2018. The study had focused on the large gap between the revenues of states and Union Territories such as Punjab, Himachal Pradesh, Uttarakhand, Jammu & Kashmir, Puducherry and Bihar, and the national average.

For states suffering a huge revenue gap, there was substantial contribution to the states’ exchequer from the subsumed taxes such as central sales tax and purchase tax before the implementation of GST.

“Some other reasons for revenue shortfall are natural and structural factors, such as geographical location, size of the economy, endowments of natural resources, smaller taxable base, consumption pattern, and differential tax rates under the value added tax regime,” the report said.

The more important problem is that some states believe GST is in a sense a real subjugation of their fiscal autonomy, Singh said. “Because, earlier, the Finance Commission going to any state would say ‘why don’t you raise your excise revenue’. Now states say, ‘now tell us what to do’. The answer to this is that all states have (willingly) agreed to implement GST,” he added.

Source: Live-Mint.

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GST: Collections increase to Rs 95,610 crore in May

July 2, 2018 admin Comments 0 Comment

Revenue collections for May from the goods and services tax (GST) have come in at Rs 95,610 crore, of which Rs 31,645 crore will flow into central kitty and Rs 36,683 crore will go to the states.

Collections for April were Rs 94,016 crore while the average for the last fiscal stood at just below Rs 90,000 crore.

The higher-than-average mop-up has been attributed to the effectiveness of the e-way bill system and other enforcement action. Nonetheless, finance secretary Hasmukh Adhia cautioned that the trend was still below Rs 1 lakh crore. Responding to the industry request that the list of items in the 28% list be pruned, Adhia pointed out it was lower than the Rs 50,000 crore per month required to meet the 2018-19 budgetary target.

Speaking at the one-year-of-GST celebrations via video conferencing, Arun Jaitley, who ushered in GST as finance minister, said GST’s impact was already visible in direct tax collections; gross advance tax collections for personal income tax had grown by 44% y-o-y for the April-June period while the corresponding rise for corporate income tax was 17%. “Indirect tax collections for the GST basket of commodities have grown by 11.2% while the buoyancy is at 1.2, which is unheard of for indirect taxes,” he said.

He recounted the trajectory of the GST Council and its decision-making in 27 meetings over the last year. Jaitley said GST had ensured that consumers could now see all the taxes levied on any item unlike earlier when excise tax and applicable cess were always hidden. “The items currently in the 28% slab used to be taxes at 31% pre-GST due to cascading effect but the same was not apparent to consumers,” he said.

Speaking at the celebrations, finance minister Piyush Goyal said the April tax collections of Rs 94,016 crore was music to his ears as historically only about 7% of annual revenues were collected in the first month of the fiscal. “The total collections for the Centre and states could go up to Rs 13 lakh crore for FY 19,” Goyal said. He currently holds charge of the finance ministry in the absence of Arun Jaitley.

Goyal also said GST could be further simplified by allowing composition dealers to file annual return instead of every quarter as is the current practice. Businesses involved in manufacturing and trade with an annual revenue of less than `1.5 crore can opt for a low-compliance regime under GST, which requires payment of only 1% of sales as tax and filing returns quarterly.

Goyal reiterated the need to report businesses that were not issuing bills to consumers and said the government will set up a system for lodging such complaints. “While the majority of traders want to conduct business honestly, some indulge in evading taxes. This gives the dishonest taxpayers a cost advantage which pushes otherwise honest taxpayers to also adopt corrupt practices to remain competitive,” he said.

Representing the businesses, industry association representatives said they hoped that the items currently outside GST — alcohol, real estate, petroleum product and electricity — would be brought in soon as it would rein in inflation. PHD Chambers president Anil Khitai appealed to the industry to shun the practice of using fake invoices for claiming input tax credit. He also urged the finance ministry to remove applicability of GST on exporters as exporters didn’t pay excise in the pre-GST era.

Source :  Financial Express

Low GST return numbers points to non-compliance

February 27, 2018 admin Comments 0 Comment

100 days of GST

Despite all earlier claims of the government that the GST would force taxpayers to be more compliant, the number of returns filed in the first seven months since the launch of GST belies this claim.

The number of returns filed each month has not crossed 70 lakh though the number of tax payers registered with the GSTN has crossed one crore (64 lakh earlier indirect taxpayers who migrated to GST and 38 lakh new registrants). Out of over one crore registered taxpayers, around 18 lakh are under composition scheme, who have to file quarterly returns.

According to figures quoted by GST Network’s CEO Prakash Kumar, 63 lakh returns were filed in July, 67 lakh in August and 69 lakh in September. From there ownwards, the number of return filed has started coming down – 65 lakh in October, 64 lakh in November and 63 lakh in December. Final numbers for January are awaited.

Why are the rest of 15-20 lakh registered taxpayers not filing GST returns? Experts cite many reasons for the gap in number of registrants and filers.

Also read: GST: What happens if person files return but doesn’t make payment of taxes?

“Many taxpayers who migrated from the older systems to the GST regime may not have any business at all (even earlier), and hence they do not file returns,” says Prateek Jain, leader, indirect tax, PwC. However, he admits that the number of non-filers is too big to be accounted for by this reason, and he says that government would have to see the real reasons for this.

M S Mani, senior director, indirect taxes, Deloitte India, says, “Under GST there is a concept of nil return where even if there are no sales in a month, the registered dealer has to file returns. Quite possibly, many dealers and businesses who think that they may not need to file return if they have made no sales.”

And the third reason could be, say experts, the habit of some taxpayers to file late returns. Mani of Deloitte says that there are some dealers and traders who are continuously on wait and watch mode when it comes to filing returns. “In GST there is no concept of revised returns, returns once filed is filed for good. So, these traders would be thinking even if they delay it by a couple of month all they have to do is pay the interest and a fine of Rs 50 a day, a price they are ready to bear,” he explains.

The GST Council, the governing body of GST, has also relaxed the return filing rules, reduced the late penalty from Rs 100 a day to Rs 50 a day (Rs 20 for nil return), and extended the deadlines several times, in the process diluting the seriousness attached with the GST compliance.

This also partly explains the continuous fall in the number of returns filed each month.

Rajat Mohan, partner, AMRG & Associates Chartered Accountants firm, says that in the early couple of months there was fear among registered dealers and businesses that if they do not file returns on time, they may not be allowed to file returns. However, after many extension that fear among businesses have come down.