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GST Council may set up GoM on compensation shortfall

GST Council may set up GoM on compensation shortfall

The Goods and Services Tax (GST) Council could consider setting up a group of ministers (GoM) to resolve the row over states having to borrow from the market in order to meet the shortfall in compensation. Apart from the two options that the Centre has offered to the states, a third has emerged, which proposes that they make such borrowings jointly, rather than states taking on the entire burden. Punjab has written to the Centre, asking for a GoM to resolve the issue. Kerala and Chhattisgarh have backed the demand.

“Why not set up a GoM to decide?” said Kerala finance minister Thomas Isaac. The issue of borrowing in lieu of GST compensation can be resolved within the GoM, as in the past, he said, adding that the council can also discuss the option of the Centre offering something additional to states, such as agreeing to take on some part of the total borrowing.

The council is scheduled to meet next on October 12 to deliberate on the matter. The government has offered two options to the states to meet the GST compensation deficit – borrow Rs 1.1 lakh crore to partially meet shortfall or borrow the entire Rs 2.35 crore deficit. The GST Council meeting on October 5 could not decide on these options, with 10 states and UTs strongly opposing them. A top official from an opposition-ruled state also backed the third option, with both Centre and states sharing some burden of the borrowing. “This (borrowing) could be in proportion to the vote share of states and the Centre (in the council),” the official said.

Chhattisgarh commercial taxes minister TS Singh Deo asked why a GoM couldn’t be set up, rather than forcing states to choose. “These suggestions could be looked at,” he said. Deo also dismissed the view that the council is not mandated to vote on borrowing proposals. If the proposal has been put to the council by the Centre in lieu of compensation due to states, how can it not be decided by that forum, he asked. Some states such as Uttar Pradesh have suggested revenue augmentation measures, including raising cess on gutka, he said.

Source: Economic-Times.

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GST Council approves increased borrowing limit of Rs 1.1 lakh crore under option 1

GST Council approves increased borrowing limit of Rs 1.1 lakh crore under option 1

The GST Council has approved an increased borrowing limit of Rs 1.1 lakh crore instead of Rs 97,000 crore in the first borrowing option provided to the states.

The Centre had proposed an increased borrowing limit in the ongoing 42nd goods and services tax (GST) Council meeting headed by finance minister Nirmala Sitharaman, assuming a 7% growth rate instead of the earlier assumption of 10% over the previous financial year. States had said the increase should be based on the actual rate of 2-3% witnessed last year.

The decision is the second such after the Council unanimously to extend the GST compensation cess levy beyond 2022.

Sources aware of the development said that levy will continue till the time the principal and interest are paid off, and be reviewed and decided from time to time. The initial proposal was to extend the levy by two years till 2024.

The rift between BJP ruled and opposition led states may widen with the former set to seek faster disbursement of funds through the special borrowing window proposed by the Centre.

But opposition led states will dig in their heels, demanding that Centre borrows and provides to states, as opposed to states borrowing, since it is the statutory obligation of the government to make up for revenue loss to states.
At the GST Council meeting on August 27, the Centre proposed that the states could borrow Rs 97,000 crore, equivalent to the revenue loss due to the GST transition, or Rs 2.35 lakh crore, equivalent to the revenue loss due to the GST transition and Covid-19. In the first option, the principal and interest would be paid from the cess fund, while in the second option, the states would bear the interest.

About 20 states have opted for the first borrowing option, but others have rejected both, which may prompt voting on the matter. States may also seek for a dispute resolution mechanism.

GST Council has worked on consensus among all stakeholders since inception, with the exception of one meeting where voting took place in December last year on the issue of state level lotteries.

The GST Council will also take up procedural issues aimed at simplification besides rate rationalisation on non-alcohol based sanitizers.

Source: Times-of-India

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GST revenues cross ₹95,000 crores in September

GST revenues cross ₹95,000 crores in September

Revenue collections from the Goods and Services Tax (GST) in September hit ₹95,480 crore, the highest in this financial year so far, indicating that economic activity is picking up steam in tandem with the gradual easing of lockdown restrictions necessitated by the COVID-19 pandemic.

September’s indirect tax collections were over 10% higher than August, 4% higher than the GST kitty in the same month a year ago and marked only the second time that the ₹90,000 crore mark was crossed this financial year.

GST collections had been sliding after January 2020 when nearly ₹1.11 lakh crore came in. March 2020, by the end of which the national lockdown was imposed, recorded GST inflows of ₹97,597 crore. April and May saw the worst hit, bringing in little over ₹32,000 crore and ₹62,000 crore, respectively.

“The gross GST revenue collected in the month of September, 2020 is ₹95,480 crore, of which Central GST is ₹17,741 crore, State GST is ₹23,131 crore, Integrated GST is ₹47,484 crore [including ₹22,442 crore collected on import of goods] and cess is ₹7,124 crore [including ₹788 crore collected on import of goods],” the Finance Ministry said in a statement on Thursday.

Economists were cautious about reading the healthier numbers as a sign of a sustainable rebound from the sharp 23.9% contraction in the country’s gross domestic product in the first quarter of 2020-21.

Principal economist at rating agency ICRA Aditi Nayar said the uptick in GST collections had come as a relief, although it had likely been driven by ‘a combination of pent up demand and inventory restocking, and thus its sustainability remains unclear.’

“Overall, the high frequency data available for the month of September 2020 confirms that a fragmented recovery is under way. We continue to expect the GDP contraction to narrow appreciably to 12.4% in the second quarter,” Ms. Nayar said.

“With a significant part of the economy resuming operations and international trade as well resuming pace, the collections have shown decent growth,” said Abhishek Jain, EY tax partner. Revenues from import of goods were at 102% and revenues from domestic transactions which include import of services were at 105% of the revenues from these sources during September 2019.

Among the larger States, Rajasthan and Tamil Nadu saw the highest growth in GST inflows at 17% and 15%, respectively, compared to September 2019. Andhra Pradesh saw a 8% growth, Gujarat 6%, while Maharashtra and Uttar Pradesh saw a flat trend and collections in Karnataka dropped 5%, from a year ago.

Source:The-Hindu.

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GST collection drops for second month in Aug to Rs 86,449 crore

GST collection drops for second month in Aug to Rs 86,449 crore

The GST collection declined for the second consecutive month in August to Rs 86,449 crore, the finance ministry said on Tuesday.

On year-on-year basis, the August collection was 12 per cent lower compared to Rs 98,202 crore mopped up in the same month last year.

Of the gross collection, Central Goods and Services Tax (CGST) stood at Rs 15,906 crore, State Goods and Services Tax (SGST) Rs 21,064 crore, Integrated Goods and Services Tax (IGST) Rs 42,264 crore (including Rs 19,179 crore collected on import of goods) and Cess Rs 7,215 crore (including Rs 673 crore collected on import of goods).

Tax experts said the revenue numbers indicate that domestic economic activity is picking up and the drop in the collection is mainly due to reduced imports.

In a statement, the finance ministry said the government has settled Rs 18,216 crore to Central GST and Rs 14,650 crore to State GST from Integrated GST as regular settlement.

“The total revenue earned by Central Government and the State Governments after regular settlement in the month of August, 2020 is Rs 34,122 crore for CGST and Rs 35,714 crore for the SGST,” it added.

The revenues for August are 88 per cent of the GST collected in the same month last year. During the month, the revenues from import of goods were 77 per cent and the revenues from domestic transaction (including import of services) were 92 per cent of the revenues from these sources during the same month last year, the ministry said.

It further said that taxpayers with turnover less than Rs 5 crore have been permitted to file GST returns till September.

The GST collections have faltered since the beginning of the current fiscal as COVID-19-induced lockdown hampered economic activity.

The revenue in April was Rs 32,172 crore, May (Rs 62,151 crore), June (Rs 90,917 crore) and July (Rs 87,422 crore).

Leader (Indirect Tax) Pratik Jain said the trend in the last couple of months show collections seem to have stabilised at around 10 per cent lower than corresponding month last year.

“As things are opening up gradually, the collection is likely to be progressively better in coming months,” Jain said.

India Partner M S Mani said the collections are on the recovery path and GST collections on domestic transactions just 8 per cent lower than the same month last year indicate revival of economic activities.

“The state-wise data of GST collections indicates that the revival process has resulted in marginal collection increases in some states like Rajasthan and UP, marginal reductions in states like Haryana and Gujarat with significant dips in Maharashtra, Karnataka and Tamil Nadu,” Mani said.

Tax Partner Abhishek Jain said a significant part of the dip is attributable to imports, which has witnessed a decline as a result of reduced international trade.

“Also, domestic collections having attained 92 per cent year-on-year for operations in July is a sign of economic recovery post upliftment of lockdown,” he added.

Chairman and Founder Kapil Rana said: “The GST collection data demonstrates two things – domestic consumption is strongly overcoming the effect of the pandemic, secondly, people are showing more reliance on domestic products, which is pushing the domestic consumption hence the revenue collection”.

Source: Times-Of-India.

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Central Government Released Rs 1.65 Lakh Crore As GST Compensation To States In FY20

Central Government Released Rs 1.65 Lakh Crore As GST Compensation To States In FY20

The central government’s payout to states as compensation towards goods and services tax for the year ended March more than doubled over the last year as a result of slowing economic activity.

The compensation to states was Rs 1,65,302 crore, the Ministry of Finance said in a statement, adding the GST compensation cess, collected by the Centre, stood at Rs 95,444 crore. In 2018-19, the GST cess collected and compensation released to states were Rs 95,081 crore and Rs 69,275 crore, respectively.

The virus outbreak and the world’s most stringent lockdown lasting over more than two months aggravated an already-slowing economy by obliterating consumption—which nearly contributes 60% to the economy. As a result, India’s economy is widely expected to witness its first contraction in nearly four decades.

The central government compensates states bi-monthly as they lost powers to levy taxes such as value added tax with the rollout of GST. The compensation is guaranteed for five years, and is calculated at a growth rate of 14% keeping 2015-16 as the base year. With declining GST collections last year following a demand-led slowdown, the government had stopped releasing compensation bi-monthly due to inadequate collections from GST compensation cess that’s levied on sin or demerit goods.

Since the cess collected was about Rs 70,000 crore less than the requirement to compensate states, the amount collected as excess in 2017-18 and 2018-19 of about Rs 47,271 crore was used for the same. Besides, Rs 33,412 crore—that was transferred to Consolidated Fund of India—as balance IGST in 2017-18, was also utilised to compensate states, the statement said.

The amount of compensation to be given to the states is going to increase substantially this year, Rajat Bose, a partner at Shardul Amarchand Mangaldas & Co., said. That, he said, would be on account of muted GST collections as the Covid-19 pandemic has impacted consumption.

The government may have to resort to market borrowing to fulfill its commitment towards compensating states for losses due to GST, Bose told BloombergQuint.

The government is exploring various options to adequately compensate states that involve raising money from the markets with a guarantee from the central government or by extending compensation levy beyond five years and continuing to compensate states with the collections.

No Compensation For Five States
Maharashtra received the highest compensation of Rs 19,233 crore in 2019-20 followed by Karnataka that got Rs 18,628 crore, the statement said. Meghalaya received the lowest compensation of Rs 157 crore. States such as Manipur, Mizoram, Sikkim, Nagaland and Arunachal Pradesh reported surplus collection and didn’t need compensation from the Centre.

Source: Bloomberg-Quint

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June GST collections stand at Rs 90,917 crore

June GST collections stand at Rs 90,917 crore

Goods and service tax (GST) collections for June 2020 clocked Rs 90,917 crore at gross levels, 9% lower than the same month last year, the department of revenue said Wednesday.

The collections are higher than those recorded in April and May – the peak months of lockdown due to the Covid 19 pandemic – where GST collection for April was Rs 32,294 crore and Rs 62,009 crore for May.

However, for both months, the collections were lower than those in 2019. Collections in April were down 72% on-year and 38% down on-year in May.

For the month of June, of total collections of Rs 90,917 crore, CGST was Rs 18,980 crore, SGST was Rs 23,970 crore, IGST was Rs 40,302 crore, including Rs 15,709 crore collected on import of goods and Cess was Rs 7,665 crore, including Rs 607 crore collected on import of goods.

The government said GST collection for the first quarter of the year was 41% less than the revenue collected during the same quarter last year, but a large number of taxpayers still have time to file their return for the month of May, 2020 till early this month.

“Since government has allowed a relaxed time schedule for filing of GST returns, returns of the month of April, March as well as some returns of February got filed during June, 2020 and some returns of May, 2020, which would have otherwise got filed in June, will get filed during first few days of July,” the department said.

Source: Economic-Times.

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Kerala becomes the first State to adopt second-level verification for new GST registrations

Kerala becomes the first State to adopt second-level verification for new GST registrations

In an effort to curb ‘benami’ businesses under the Goods and Services Tax (GST) regime, Kerala has become probably the first State to introduce second level verification of registration granted on or after June 1.

This verification will be done for both State and central assessees.

In case of services, GST registration would be mandatory for all businesses with turnover of ₹20 lakh or more, with the exception of Manipur, Mizoram, Nagaland and Tripura, where this threshold would be ₹10 lakh. Registration is done mainly on the basis of Permanent Account Number (PAN). As on date, there are nearly 1.22 crore registered assessees in the country.

A circular issued by Kerala’s Commissioner of State Tax, State Goods and Services Tax Department said the Registering Authority has the primary responsibility of ensuring proper paper work.

“Considering the present situation, it is decided to conduct a second level verification by the intelligence wing,” it said.

Details on portal
Further, it mentioned that once registration is granted, all details will be made available on the GST portal and the Deputy Commissioner (Intelligence) of each jurisdictional district will collect and assign the Enforcement Squad for verification.

Squads will conduct detailed enquiries and check the background of proprietor/partners/directors. They will also confirm whether the applicant is genuine or a benami. Then a report will be submitted to District Joint Commissioner with a recommendation whether the registration is to be cancelled or not along with giving reasons for that.

“This verification and furnishing report is to be completed within seven days of receiving the details by each squad,” the circular said. The same mechanism will be adopted for Central assessees but the report will be submitted to the Deputy Commissioner of Central Goods and Services Tax.

The circular noted that despite the instructions issued for ensuring utmost care while granting new registration, bogus and benami registrations are being reported in the State.

This is very critical especially in the case of evasion-prone commodities such as lottery, iron and steel, flooring materials, glass, timber, hill produce, plywood, arecanut, cardamom etc. Since, the system automatically approves the application within three days of filing, many unscrupulous persons misuse the system. This is being done to claim fake input tax credit or taking and supplying credit through circular trade.

Interestingly, the Central Goods and Services Taxes (CGST) rules prescribe physical verification of the place of business of a registered person after the grant of registration, in case of doubt or incomplete Aadhaar authentication.

Accordingly, a report is to be submitted within 15 days. However, as on date no such mechanism has been developed at the State level for re-confirming or verifying the credentials of applicants but now Kerala seems to have taken the lead.

This exercise is critical for all States as all administrative control over 90 per cent of taxpayers having turnover below ₹1.5 crore vests with State tax administration and the remaining with Central tax administration.

Further all administrative control over taxpayers having turnover above ₹1.5 crore shall be divided equally between the Central and State tax administrations.

Source: The-Hindu-Business-Line


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Centre releases Rs 36,400-cr GST compensation to states for 3 months till February

Centre releases Rs 36,400-cr GST compensation to states for 3 months till February

The Centre has released Rs 36,400 crore as GST compensation to the states and union territories for three months till February 2020.

For the April-November 2019 period, the Centre had already released Rs 1,15,096 crore to compensate states and UTs on account of revenue loss due to implementation of the Goods and Services Tax (GST).

“Taking stock of the current situation due to COVID-19 where state governments need to undertake expenditure while their resources are adversely hit, the central government has released the GST compensation of Rs 36,400 crore to the states/UTs with legislature for the period from December 2019 to February 2020,” an official statement said.

The Centre had released Rs 69,275 crore in 2018-19 and Rs 41,146 crore in 2017-18 as compensation for GST which was rolled out on July 1, 2017.

The cess collection in 2019-20, 2018-19 and 2017-18 fiscal was Rs 95,000 crore, Rs 95,081 crore and Rs 62,611 crore, respectively.

As the compensation requirement of the states was less than collection in the first two years (2017-18 and 2018-19) of GST rollout, Rs 47,271 crore GST compensation cess collected had remained unutilised in the compensation kitty.

Under the GST law, states were guaranteed to be paid for any loss of revenue in the first five years of the GST implementation from July 1, 2017. The shortfall is calculated assuming a 14 per cent annual growth in GST collections by states over the base year of 2015-16.

Under the GST structure, taxes are levied under 5, 12, 18 and 28 per cent slabs. On top of the highest tax slab, a cess is levied on luxury, sin and demerit goods and the proceeds from the same are used to compensate states for any revenue loss.

There were no differences between the Centre and states with regard to compensation payment in 2017-18, 2018-19, and in the first four months (April-July) of previous current fiscal (2019-20).

However, with revenue mop-up from compensation cess falling inadequate, the Centre held back fund transfer to states for revenue shortage beginning August 2019, following which states raised the issue.

Source: Economic-Times.

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GST collections down 70% in April

GST collections down 70% in April

Centre may have held over the monthly GST collection figures for April, but data released by the Comptroller General of Accounts (CGA) suggests that GST collections have seen a precipitous drop of up to 70 per cent in April.

Data released by the Comptroller General of Accounts (CGA) for April 2020 shows that the Centre’s share of GST collection during the month was a paltry Rs 16,707 crore compared to Rs Rs 55,329 crore in the previous year, a drop of 70 per cent. Usually, the GST numbers announced by the government comprise collection by both the Centre and states. However, CGA’s data only shows the Centre’s share of the GST collection.

In April 2019, total GST collection – state and Centre included – was Rs 113,865 crore. Extrapolating from the Centre’s GST numbers (Rs 16,707 crore) for April, 2020 the total GST collection – Centre and State – could be around Rs 34,300 crore.

The sharp drop in the GST collection in April 2020 could partly be because of lockdown due to coronavirus outbreak. However, it is to be noted that April GST collections are for March transactions, and the lockdown started only from 25 March.

Therefore, the poor collection in April could be mostly due to extension of return filing dates. On March 24, the government announced several measures to ease the compliance burden on taxpayers given the outbreak of Coronavirus.

As per the announcements, for registered GST taxpayers with aggregate annual turnover less than Rs 5 crore, the last date for filing GSTR-3B due in March, April and May 2020 by the last week of June 2020. For such taxpayers, no interest, late fee, and penalty were to be charged.

For those whose turnover is Rs 5 crore or more, could file returns due in March, April and May 2020 by last week of June 2020 but the same would attract reduced rate of interest at 9 per cent per annum from due date (current interest rate is 18 per cent per annum). No late fee and penalty to be charged, if complied before till June 30, 2020.

Source: Business-Today.

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CBIC extends due date for Filing GST Annual Return

CBIC extends due date for Filing GST Annual Return

The Central Board of Indirect Taxes and Customs ( CBIC ) has extended the due date for filing GSTR-9 (Annual Return) for the Financial Year 2018 – 19 to be extended till the 30th of September, 2020.

The GST Council, in its 39th meeting, had extended the due date for filing GSTR-9 (Annual Return) and GSTR-9C (Reconciliation Statement) for the Financial Year 2018 – 19 to 30th June 2020.

GSTR 9 is an annual return to be filed yearly by taxpayers registered under GST. It consists of details regarding the outward and inward supplies made/received during the relevant previous year under different tax heads i.e. CGST, SGST & IGST, and HSN codes. It is a consolidation of all the monthly/quarterly returns (GSTR-1, GSTR-2A, GSTR-3B) filed in that year. Though complex, this return helps in extensive reconciliation of data for 100% transparent disclosures.

The late fees for not filing the GSTR 9 within the due date is Rs 100 per day, per act. That means late fees of Rs 100 under CGST and Rs 100 under SGST will be applicable in case of delay. Thus, the total liability is Rs 200 per day of default. This is subject to a maximum of 0.25% of the taxpayer’s turnover in the relevant state or union territory. However, there is no late fee on IGST yet.

Read Notification here: https://www.taxscan.in/preview/?previews=15ax53cDwCpa7kwoRqfcTGX6Lai_q4Go_

Source: TaxScan.

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