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GST Council To Explore Making E-Way Bills Must For Moving Gold Within States

GST Council To Explore Making E-Way Bills Must For Moving Gold Within States

A Group of Ministers has agreed that states can individually decide to make e-way bills mandatory for the movement of gold within their territory to check tax evasion.

The panel decided that if states want to implement the e-way bill mechanism for gold and precious stones, they can do so for intra-state movement of the commodity, Thomas Isaac, Kerala finance minister and head of the panel; and Bihar Deputy Chief Minister Sushil Modi, a member of group, told BloombergQuint.

Currently, inter-state movement of goods over Rs 50,000 requires an e-way bill but gold is exempt. Given tax evasion and smuggling of gold, the GST Council created a group of ministers to examine if implementing the e-way bill mechanism for gold and precious stones is feasible. GST on gold is levied at 3% while precious stones and diamonds are taxed at 0.25%-3% .

The legal changes required to make e-way bill generation compulsory for intra-state movement of gold, and a monetary threshold for gold will be worked out by the officials of Department of Revenue, Modi said. The proposal will then be taken to the GST Council for its final approval.

Isaac told BloombergQuint that a proper tax administration is needed for gold. States like Gujarat, known for gold and diamond industry, had reservations about data of transportation of gold and diamonds being revealed if e-way bill system is implemented as it tracks the transport of goods, he said.

The panel agreed to implement the system within a state and secrecy of movement of goods will be maintained, with only commissioner-level officials dealing with the information, Isaac said.

The panel was not in favour of making e-way bills mandatory for inter-state movement of gold as it’s “not feasible” and will complicate the system, Modi said.
E-way bill generation for inter-state movement of gold and precious stones may lead to security concerns as such consignments would be tracked, according to a government official.

Tax evasion in gold is rampant, and the government needs to come up with some framework to control it, Rajat Mohan, a partner at AMRG & Associates, told BloombergQuint. “Implementation of e-way bill system for intra-state movement of gold will help in restricting tax evasion as trade in the commodity mostly happens within a state.”

Besides, Isaac and Modi, the panel includes Gujarat Deputy Chief Minister Nitin Patel; Karnataka Home Minister Basvaraj Bommai; and Manpreet Singh Badal and Amit Mitra, finance ministers of Punjab and West Bengal.

The ministers have yet to submit their final recommendations to the GST Council, and will also explore if e-invoicing system—that’ll be implemented from Oct. 1—can be extended for gold, Modi said.

There’s a proposal to make e-invoicing and e-billing mandatory for jewellery shops, Isaac said. To check smuggling of gold, a reverse tax will be proposed on sale of the old yellow metal, he said. Currently, smuggled gold is sold as old gold, and a tax under the reverse-charge mechanism tax would mean the buyer will have to pay tax, for which he can claim credit, Isaac said. “This will help in keeping a check on smuggled gold that has doubled to about 2,000 kg in 2019-20.”

Source: Bloomberg-Quint

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Banks, telcos, insurers may be exempted from GST e-invoices

Banks, telcos, insurers may be exempted from GST e-invoices

Banks, airlines, insurance companies, armed forces and telecom service providers are likely to be exempted from mandatory issuing of e-invoices under goods and services tax (GST), said people aware of the matter. “Banks, airlines, telcos and other entities that have direct customer interaction on a large scale may be exempted from filing their e-invoices under GST,” said one of the persons, who did not wish to be identified.

Another person said the government would have to specify the exemptions through notification in the rules. Such a move is likely to benefit entities in the sectors that issue a number of invoices to customers directly or have direct debit and credit facilities such as in the case of banks, said experts. Banks and insurance companies are currently allowed consolidated invoices.

“These entities would have to undergo heavy compliance costs if the exemption was not allowed,” said Bipin Sapra,. From April 1, companies with an aggregate revenue of Rs 100 crore or more have been mandated to issue e-invoices, as the government embarks on digital filing of invoices under goods and services tax (GST) regime amid efforts to curb tax evasion and fraudulent claims of GST credits while increasing tax collection.

Source: Economic-Times

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States seek real-time access to GST returns, e-way bills

States seek real-time access to GST returns, e-way bills

Certain states have sought real-time access to annual Goods and Services Tax (GST) returns and e-way bills in order to check tax evasion, which can potentially address the ongoing fund crunch and help compensate states for their revenue shortfall, two officials aware of the matter said requesting anonymity.

Currently, these data are stored in the GST Network, which compiles reports and sends them to all the states and Union territories with a time lag.

Kerala finance minister Thomas Isaac confirmed the development and said,“Kerala may not require compensation cess at all if it is permitted to have real-time access to annual returns and e-way bills, so that tax evasion could be curbed,” Isaac said.

According to Isaac, ineffective tax collection is one of the three key reasons for tardy GST revenue collections across the country and real-time information would help many states nab evaders through the use of data analytics. The other two reasons, according to him, are the economic slowdown and steep cuts in GST rates.

“I will raise this issue in the GST Council,” he said. The GST Council is the apex decision-making body of the federal indirect tax structure that was rolled out on July 1, 2017. It is chaired by the Union finance minister and has finance ministers of states and Union territories as members.

Officials said states’ access to real-time data could be possible if they formally raised the issue at the council. Several states have been raising the issue of large-scale GST evasion at the council. In August last year, West Bengal finance minister Amit Mitra estimated GST evasion at ₹1 lakh crore and demanded an exclusive meeting on the issue.

Owing to inadequate compensation cess funds, the Centre has not yet compensated states for their revenue shortfall over two months – October and November. Ideally, that should have been paid by the second week of December. Even in the past, there was a delay of about two months in paying compensation for August and September, which was paid just two days ahead of the 38th GST Council meeting on December 18, 2019.

An amount of ₹35,298 crore was released on December 16 to pay states for their dues in August and September. The GST law assures states 14% growth in their revenue for five years and the Centre is committed to meeting any shortfall in revenue through cess money, which is levied on luxury goods and sin products such as liquor, cigarettes and tobacco products.

The finance minister of another state, who did not wish to be named, said that there was scope for improvement in GST compliance but that would not be able to meet the entire revenue gap. Commenting on the proposal on real-time access to GSTN data, the minister said, “I doubt this will eliminate the revenue deficit. The ball is always in our court , provided those at the helm allow it to be dealt with efficiently.”

Experts said access to data would certainly help states in better compliance. Common access could be given to states through login IDs and passwords. Pratik Jain, partner and leader, indirect tax, said, “Logistically it should not be difficult.”

The Union government is making all-out efforts to plug revenue leakages of both central GST (CGST) and state GST (SGST). It will hold a national conference on January 7 to address the issue, the officials cited above said. This conference is being organised to curb fraud and evasion and check fake input-tax credits.

Source: Hindustan-Times

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AI, data analytics to track GST evaders, boost compliance

AI, data analytics to track GST evaders, boost compliance

The government plans to increase the use of artificial intelligence and data analytics to track down tax evaders, and improve compliance with the Goods and Service Tax in order to augment revenue.

Top tax officials are scheduled to participate in a brainstorming session to be chaired by revenue secretary Ajay Bhushan Pandey next week to firm up this plan.

“The revenue secretary will hold a day-long meeting on January 7 with tax commissioners to discuss ways to streamline the GST system and plug leakages due to fraud,” said a person aware of the development.

The discussions will include assessing the wider use of data analytics and AI in the process of enforcement and red-flagging tax evaders and fake refund claimants without overreach or harassment to genuine taxpayers.

The meeting comes on the heels of the government notifying changes to GST rules to prevent frauds and fake invoicing, besides setting up grievance cells to ensure that genuine taxpayers are not harassed and the overall tax base increases. The government last week reduced input tax credit to 10% from 20% of eligible credit if invoices or debit notes were not reflected in filings.

Last month, the Central Board of Indirect Taxes and Customs instructed field officers to expeditiously create GST grievance redressal committees at zonal and state levels.

Tax officials have been directed to identify cases of suppression of personal income, wilful tax evasion, fake invoicing or inflated or fake e-way bills, and take stern action.

Those attending the session will include state tax commissioners and chief tax commissioners from the Centre, senior officials of various tax bodies along with officers of the enforcement wings. Their goal is to develop a targeted approach to stop tax and duty evasion while making sure that no taxpayer is troubled.

There’s growing concern over revenue shortfall, with slowing consumption demand adversely impacting GST collections. The corporate tax cut amounting to a loss of revenue of Rs 1.45 lakh crore, along with recent GST compensation of over Rs 35,000 crore to states, have increased the stress on the Centre’s fiscal position.

Source: Economic-Times.

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New GST return forms may force firms to change ERP systems

New GST return forms may force firms to change ERP systems

The new Goods and Services Tax (GST) returns from April 2020 that mandate providing more details may require companies to amend their enterprise resource planning (ERP) systems.

Tax experts and chartered accountants (CAs) said that the new return systems would require a lot of details such as purchases from unregistered dealers.

“Besides, bill of entry-wise import details and bill of entry-wise purchases from SEZs (special economic zones) would be required. As of now, there is one-way traffic. Presently, suppliers upload these data, but from April 2020, recipients will also have to upload all these data,” said Vivek Jalan, Partner, Tax Connect Advisory Services LLP.

Instead of the GST returns being the current supplier-driven traffic, starting April next year, it would become a workflow driven mechanism, he added.

Moreover, electronic or E-invoicing for business to business (B2B) transactions would also kick in from January 1, 2020. This would also require changes in the ERP systems to ensure thgat every invoice is tracked by the tax authorities. The move is aimed at curbing tax evasion.

In addition to the current invoices which are generated on the companies’ ERP, the new system would require automatic uploading of the data on government systems.

Amit Bhagat, Partner, Dhruva Advisors said that depending on the details required in the new return system, the ERP would need to be changed.

“It will not be something which will require complete overhaul of the system, but certainly some changes would be required after e-invoicing is implemented and more details in GST returns are required from early next year,” Bhagat said.

Source: Hindustan-Times.

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Govt set to crack down on GST defaulters

Govt set to crack down on GST defaulters

A government panel will discuss on Tuesday ways to intensify enforcement activities against goods and services tax (GST) defaulters who have been identified by a fraud detection software, amid GST collections dropping to a 19-month low in September.

This marks a shift from handholding businesses in the transition phase of the new indirect tax regime to cracking down on tax evaders. Revenue secretary Ajay Bhushan Pandey will be present at the first meeting of the 12-member panel comprising central and state government officials set up last week to boost revenue collection, a person privy to the development said on condition of anonymity.

The panel will discuss ways to check abuse of the lenient approach taken by the government so far.

Data analytics will be used extensively and action will be taken against entities that have been flagged by the software system, said the person, adding that the IT system enables surveillance in a non-intrusive manner to identify offenders. The panel will give its report in 15 days to the GST Council.

“Fake claims of input tax credit and tax evasion at the retail level are two major areas of revenue leakage that are likely to be in regulatory focus. Some steps have been taken recently to ensure that tax credit is not taken without actually paying the taxes,” said Abhishek Jain, tax partner at EY India.

“The new return filing format that will come into force from April 2020 and e-invoicing from January 2020 are steps in the direction of plugging revenue leakage.”

Indirect tax authorities have started comparing sales reported by businesses and traders under GST with what they have reported to income-tax authorities for mismatches. Steps will be taken to check wrongful claims of tax credit, one of the most common ways of tax fraud.

“The panel will have access to a significant amount of comparable data for the past two years on taxpayer compliance and revenues—these should be used to work out ways to enhance revenues without any disturbance to compliant businesses,” said M.S. Mani, partner at Deloitte India.

The GST Council had last week curtailed the provisional tax credit that buyers of goods and services can claim to 20% of the taxes they have paid if the seller does not upload the invoice details and pay the tax collected from the buyer to the government.

The Union government is trying to check tax evasion and make GST more revenue-efficient as it is obligated by law to compensate states for their revenue shortfall irrespective of it meeting revenue targets. The panel will explore ways of raising revenue and widening the tax base without any increase in tax rates. In September, the Centre and states collected ₹91,916 crore in GST, a decline of 2.67% from what was collected in the same month a year ago. This was the first time monthly collections fell below year-ago levels this year.

Source: Live-mint

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GST Council meet on 21 June to focus on checking tax evasion

GST Council meet on 21 June to focus on checking tax evasion

Goods and Services Tax Council, the federal indirect tax body, is set to take several decisions to curb tax evasion in its first meeting to be chaired by new finance minister Nirmala Sitharaman on 21 June.

The government plans to increase scrutiny on businesses amid lower-than-expected GST collections after handholding them through the first two years of the tax reform. The 35th meeting of the GST Council will seek to introduce compliance requirements, initially on big businesses and eventually on all merchants to curb tax leakage.

The proposals before the council include compulsory generation of e-invoicing by large companies, validation of e-way bills (electronic permits issued for the movement of goods) with the data generated at toll plazas and geotagging of companies, said a person familiar with the discussions in the council.

Generation of e-invoices will improve the transparency of transactions and act as an extra layer of regulatory oversight on transactions of large companies.

One existing safety feature in the GST framework is the rebate for taxes paid on past transactions in the value chain that forces buyers and sellers to keep a tab on each other. “E-invoicing on the designated portal will be implemented initially on companies with a large turnover, which will be specified. Once the system works, it can be extended to others,” the person cited earlier said on condition of anonymity. This is likely to be limited to business-to-business transactions initially.

Experts said the benefits of the tax reform would now start becoming visible. “In the pre-GST era, the common man was used to much higher tax burden due to the cascading effect of taxes. Now it has come down. Now that the initial period of disruption is over, the benefits of liberal and nominal tax rates will accrue to the economy in the coming years. The fruits of indirect tax reform will be felt in the near future,” said V. Lakshmi Kumaran, managing partner at Lakshmikumaran and Sridharan Attorneys, a law firm.

A serious tax evasion concern that tax authorities have been grappling with is the multiple use of e-way bills generated for transportation of goods to suppress the actual value of the supply of items. Validating e-way bills with the data generated by radio-frequency identification-enabled vehicles’ payments at toll plazas is expected to curb this practice, said the person.

Geotagging of companies for GST compliance will take enforcement activities under the indirect tax system to the next level. At present, the ministry of corporate affairs (MCA) is implementing a geotagging scheme for companies aimed at identifying every active company and the people behind them. Pooling the geo-tagging information available from the MCA database with the data generated by indirect tax authorities will help in verifying the credentials of different parties to a transaction.

However, all measures to improve compliance will be implemented only in a gradual way, starting with the largest businesses. The slow recalibration of the tax system is meant to avoid a backlash that the tax reform had witnessed immediately after its rollout two years ago, forcing the council to defer tax return filing deadlines several times and temporarily suspend some of the safety features of the new system.

With revenue receipts below targets, the central government, which has the Constitutional obligation to compensate states for their revenue shortfall in the first five years of GST implementation, and states that worry about loss of revenue in the subsequent years are keen to gradually increase enforcement measures.

Experts said grievances that some businesses and traders, especially the smaller ones, have about GST are not about the indirect tax per se, but on account of the light the technology-driven tax sheds on sales, that makes it harder to avoid paying tax on income. No big tax rate cut is likely in the forthcoming meeting of the council.

Source: Live-Mint.

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Govt probes I-T and GST mismatch in crackdown against evader

Govt probes I-T and GST mismatch in crackdown against evader

Back in office, the Modi government is set to take up the next stage of action against tax evasion and money laundering with data analysis helping detect thousands of overstated goods and services tax (GST) claims that don’t match up with income tax returns.

Action against these entities, which might be the first layer of suspicious transactions, is being launched with notices being sent out. The clean-up operation follows the earlier exercise where potential shell companies were scanned and directors were found fake. Many of these companies were struck off the rolls.

This is the first time the government is matching income tax and GST returns and initial findings have pointed to an overstatement of GST claims and understatement of income in tax returns, officials told TOI. The action against such entities might be tough with the Supreme Court recently refusing to protect GST violators from arrest.

Data analytics is seen to be the core focus of the revenue department in the coming months as some of the analysis has also pointed to misreporting on the customs front. For instance, some traders have shown inflated imports, remitted funds overseas beyond the requirement and then claimed exports. But the exports proceeds are not reflected in the income tax returns.

“So far, various tax agencies were working in silos but now it’s possible to tally data and go after evaders,” explained an official, adding that thousands of companies were identified based on preliminary data mapping. With the BJP campaign stressing the government’s action against corruption, the revenue department is picking up threads now that the election is over.

For long, tax authorities have complained of leakages in GST but the political leadership at the state and the Centre wanted more time for the new regime to settle down. With polls over, arrests have begun in several cases, with Manpasand Beverages being a prime example. Recent court rulings have also strengthened the tax department’s case to crack the whip.

One of the most glaring gaps noticed by tax officials is the use of shell companies to make bogus claims. In several cases of fraudulent claims, identity theft was also noticed.

In these cases, a company is set up which gets into non-existent transactions with entities that have virtually no real business or is related to them. Tax officials have come across instances of drivers, gardeners or slum-dwellers being directors of these companies.

Based on these transactions, the companies claim a fraudulent tax credit. But these transactions and income are not reflected in their I-T returns. Authorities have come across cases where slum-dwellers were made to fill up a form to join a delivery service and details such as Aadhaar numbers were collected. This information was then used to open bank accounts and set up companies. Similarly, domestic help and drivers were made to fill up forms, ostensibly to open bank accounts but were made to sign on papers to set up companies. Separately, steps are being taken to strengthen other monitoring tools to plug gaps and prevent GST evasion.


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Source: Times-of-India
New GST return forms to help authorities check tax evasion

New GST return forms to help authorities check tax evasion

Return forms proposed for the goods and services tax (GST) are set to put an end to one of the widely used methods for tax evasion—claiming a rebate for a tax that was not paid in the first place.

The new forms, set to roll out shortly starting with large businesses, will prevent companies from claiming any more tax rebate than what they are eligible for, going by invoices issued by the vendors. Under GST, which is a value-added tax system, only the amount of value addition, or margins claimed by businesses at any given point in the supply chain, is taxed. This is done by granting credit to businesses for taxes paid previously on raw material and services. The tax credit system under GST is an improvement over what existed in the pre-GST era, but it was not watertight, said, experts. The proposed new forms seek to close this gap.

The original date for businesses to compulsorily start filing the new form was 1 July, but it will be revised for a gradual rollout to avoid any disruption and to give small businesses more time to get on board. The final roll out schedule is likely to be decided when the GST Council meets next.

In the pre-GST era, when businesses paid excise duty, service tax and value-added tax (VAT), buyers could seek credits for taxes paid on raw material and services based on the hard copy of the invoice issued by the seller. Now, the seller has to upload details of the transaction, which gets reflected in what is called the buyer’s electronic credit ledger. However, utilizing this credit is based on self- declaration, which the authorities can verify subsequently. Once the new returns are introduced, the need for self-declaration and the mismatches between credits available as per transaction sales that the seller has uploaded in the tax portal, and what the buyer has claimed gets eliminated.

“Prior to GST roll out, there was no electronic way of checking whether the credit taken buy a business is correct. The current GST system is a much-improved version, wherein tax authorities can check electronically whether it is correct or not. In the revised return form, credit can be taken only to the extent the transaction details uploaded by vendors allow,” said Abhishek Jain, tax partner, EY.

Claiming false credit is one of the commonest ways to evade tax. The other ways include merchants collecting taxes from the end consumer, but not remitting it to the exchequer, as well as selling without invoices. Claiming credit wrongly on the basis of fake invoices has also been a major issue, given that by the time the fraud is detected, those involved would have shut shop and fled. The new form, however, does not mean that businesses will have to submit less information. “The (proposed) regular simplified return requires a whole lot of information, sort of a collation of what was asked in GSTR-1 (relating to sales), GSTR-3B (a summary of transactions) and some additional fields, too. But with the launch of this new mechanism, sellers will upload invoices continuously and buyers will accept/reject and pay tax accordingly,” said Archit Gupta, founder, and CEO, of an online tax platform.

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Source: Live-Mint.
GST officers seek clarification from companies for mismatch in sales returns, e-way bill data

GST officers seek clarification from companies for mismatch in sales returns, e-way bill data

GST officers have started seeking clarification from companies whose tax payments did not match with the e-way bills generated, as revenue authorities start matching supplies data to check tax evasion, sources said.

Touted as an anti-evasion measure, e-way bill system was rolled out on April 1, 2018, for moving goods worth over Rs 50,000 from one state to another. The same for intra or within the state movement was rolled out in a phased manner from April 15, 2018.

Following this, it has come to the notice of tax officers that some transporters are doing multiple trips by generating only a single e-way bill or not reflecting e-way bill invoices while filing sales return. It has also come to the notice that certain businesses are not generating e-way bills even as supplies are being made.

Goods and Services Tax Network (GSTN), the company which handles the technology backbone for GST, has started sharing details of e-way bills vis-a-vis taxes paid to help tax officers identify any discrepancy, sources added.

In one of the letters issued by Ghaziabad GST commissionerate, a taxpayer has been asked to provide “clarification” within three days on the difference between taxes paid and the liability which the tax officer has ascertained after analyzing sales return GSTR-3B and e-way bill data for the period October 2018 and January 2019.

Matching of invoices of e-way bills with the sales shown in sales returns helps taxmen in assessing whether the supplies have been accurately shown in the returns and GST paid on the same.

GSTN has also provided the facility to businesses to include details of e-way bills generated while filing the final monthly sales return under GSTR-1 to avoid double data entry.

The government is banking on anti-evasion measures to meet its GST collection target for the current fiscal.

For fiscal 2019-20, the government proposes to collect Rs 6.10 lakh crore from Central GST and Rs 1.01 lakh crore as compensation cess. The Integrated GST balance has been pegged at Rs 50,000 crore.

AMRG & Associates Partner Rajat Mohan said tax officers have started using the pile of GSTN data retrieved through return filings and e-way bill mechanics to carve out a summary reconciliation statement of estimated tax liability, compelling businesses to justify the outward tax liabilities in a comprehensive manner.

“Tax authorities would be at fault if they presume that reconciliation difference is due to tax evasion only. There be other reasons for this difference like clerical errors, cut off supplies and pre-delivery expiry of e-way bills,” Mohan added.

To further streamline the e-way bill system, GSTN is planning some changes, including auto calculation of route distance based on PIN code and blocking of generation of multiple e-way bills on one invoice/document.

The matching of e-way bill data with that of tax payment is in addition to analysis being done by GSTN by matching taxes paid in summary sales return GSTR-3B and final returns GSTR-1.

Also, businesses whose GSTR-1 did not match with GSTR-2A, which is a purchase return auto-generated by a system from the seller’s return, have been flagged by GSTN systems.

Based on this, last year tax officers sent scrutiny notices to taxpayers seeking an explanation for the reason for the discrepancies

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Source: Money Control.