GST collection from centrally administered assessees rise 10% in Sept in WB

 

The GST collection in West

Bengal from centrally administered assessees has increased by 10.16 per cent in September 2020 as compared to the same month last year, an official said.

The collection from Central Goods and Services Tax (CGST), Integrated GST and coal cess from centrally administered assessees stood at Rs 1,377.04 crore in September 2020 as against Rs 1,250.06 crore in September 2019, he said.

This shows that a recovery is taking place in economic activities in the state, which had taken a hit in April, May and June due to COVID-19 outbreak, the official said.

The rise has also been due to tax collection from many small assessees in September.

The mop-up from big assessees has also been stabilised from July this year, which showed partial recovery compared to the preceding months when the lockdown was in force, the official said.

Collection from centrally administered assessees has already increased by 15 per cent in October this year, due to the beginning of the festive season, as compared to last year.

GST officials arrest 1 person for trading in fake invoice, generating ITC worth Rs 52.19 cr

 GST officials have busted a fake invoice trading racket and arrested a person for passing on input tax credit (ITC) of over Rs 50 crore, a source said on Sunday.

The Directorate General of GST Intelligence (DGGI), Pune Zonal Unit, has arrested Tusshar Ashok Munoat who was into 'trading of fake invoices' and used to generate fake invoices on commission basis for ineligible ITC availment and pass it on to others fraudulently.

Total ITC involved is Rs 52.19 crore approximately, the source added.

Munoat owns M/s Rutu Enterprise and a few other companies such as M/s Reise Enterprises, M/s Namo Enterprises and M/s Patil Contractor, and used to trade fake invoices to earn commission benefit.

The Finance Ministry source also expressed dismay on those lobbying to oppose 'arrest' as an essential preventive measure in GST to curb unbridled dishonest activities by such unscrupulous elements and are challenging the provision of arrest in GST in various courts.

The source further said that the government has started use of Aadhaar number in GST registration to check the menace of bogus/fake firms and thereby, put a curb on fraudulent availment and passing on of ITC.

Also, serious deliberations are going on in the Department of Revenue for putting such dubious firms under risk category and to block their refunds, besides other appropriate legal actions, as necessary.

The source further said that after tracing for long, Munoat was arrested on October 21 from a remote village in Osmanabad district of Maharashtra.

He was produced before a Magistrate who rejected his bail application and remanded him to judicial custody till November 2.

Pune-based M/s Rutu Enterprises had four GSTIN numbers, one each for Maharashtra, Madhya Pradesh, Himachal Pradesh and Uttar Pradesh; and was shown engaged in civil work such as interior work, construction of building/roads/bridges, pipe line laying work, earth work, electric work, among others.

Raise GST borrowing to Rs 1.83 trillion, Kerala CM writes to FM Sitharaman

The Opposition-ruled states are in a huddle over the Centre’s revised proposal to meet goods and services tax (GST) compensation shortfall.

While Jharkhand has rejected the Centre’s proposal of borrowing partial GST shortfall of Rs 1.1 trillion and lending to states, Kerala Chief Minister Pinarayi Vijayan has written to Union Finance Minister Nirmala Sitharaman urging that the Centre should instead borrow Rs 1.83 trillion. More states are expected to write to Sitharaman on Monday.

“I take this opportunity to request for enhancing the limit under the special window facility to Rs 1.83 trillion, from the suggested Rs 1.1 trillion,” Vijayan said in his letter.

He requested Sitharaman to hold further discussions on the matter to be resolved in an “amicable manner”.

While the total compensation due to the states is Rs 2.35 trillion, states would have got Rs 1.83 trillion in the normal course as compensation for 10 months is paid in a fiscal year and that for the past two months is rolled over the early part of next fiscal year.

According to Vijayan’s letter, states will have to wait for another two years to get the balance compensation of Rs 73,000 crore, according to the option given by the Centre.

“The additional 0.5 per cent borrowing without conditions, though welcome, cannot be treated as a facility in lieu of the unpaid part of the compensation as the principal and the interest of the borrowing has to be repaid by the states,” he said.

If the additional borrowing facility is to be considered as an alternative to the payment of compensation, the Centre needs to assure that the interest payment to service this will be given to the states from the cess fund or through any other source based on the recommendation of the Council, Vijayan said.

The state, however, decided to not move the Supreme Court as “the Centre has settled the issue of who will borrow”. “But a few pricklier issues remain such as how much the Centre should borrow. Rather than Rs 1.1 trillion, it should borrow the entire shortfall and give to states as it will not impact Centre’s fiscal deficit,” Kerala Finance Minister Thomas Isaac said.

T S Singh Deo, who represents Chhattisgarh in the GST Council, said all the like-minded states would talk before taking a final call on the issue. “The issue is that the Centre has only taken care of six months GST compensation dues for this year. It should graciously accept that whatever is the shortfall this year, it will compensate states through borrowing. The shortfall estimation cannot be done in an ad hoc manner, first assuming a growth rate of 10 per cent, then 7 per cent.”

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Meanwhile, Jharkhand has rejected the Centre’s proposal, arguing against borrowing by states to make up for the GST shortfall beyond Rs 1.1 trillion this year. This came after the Union power ministry auto-debited Rs 1,417.50 crore as first instalment from the state’s consolidated account maintained by the Reserve Bank of India to pay dues to central power generator Damodar Valley Corporation. According to Jharkhand, the Centre owes it around Rs 3,300 crore as GST dues.

West Bengal is studying the fine print of the latest offer by the Centre before deciding on the issue.

Puducherry Chief Minister V Narayanasamy said that while the aggressive stance of the dissenting states has mellowed after the Centre agreed to borrow, they cannot accept the Centre’s offer of borrowing Rs 1.10 trillion in the current form. “We will not accept Option 1. The Centre should borrow the entire Rs 2.35 trillion and give to states and Union Territories,” he said. However, he clarified that the state was yet to take a final call on the issue.

Former Union finance minister and Congress leader P Chidambaram said the states are asking the Centre that the terms it has given for Rs 1.10 trillion should also be given for Rs 1.06 trillion. “From what they (the Congress-ruled states) told me and what Isaac tweeted it appears to me they will decide to ask her (Sitharaman) that the first part (Rs 1.10 trillion borrowing by the Centre) is okay, but what about the second part (Rs 1.06 trillion),” he said.

The Union finance ministry on Thursday changed stance and said the entire Rs 1.1 trillion estimated shortfall arising on account of GST implementation (excluding Covid-19 losses) will be borrowed by the Centre in appropriate tranches and be passed on to the states as a back-to-back loan in lieu of GST Compensation Cess releases.

GST shortfall: Govt allows 20 states to borrow Rs 69,000 crore more

A day after the goods and services tax (GST) Council meeting ended in a deadlock, the Centre on Tuesday allowed 20 states to borrow an additional Rs 68,825 crore through the market to make up for the compensation shortfall amid inadequate cess collection.

Meanwhile, dissenting states like Kerala, West Bengal, Punjab and Chhattisgarh said they are exploring legal options, including moving the Supreme Court, to counter the Centre’s move.

Twenty states had picked the finance ministry’s first option of raising up to Rs 1.1 trillion to make up for revenue loss estimated on account of GST implementation alone, but not for losses due to the pandemic. Under this option, the entire principle and the interest will be repaid through compensation cess collection, which has been extended beyond June 2022.

“Additional borrowing permission has been granted at 0.50 per cent of the gross state domestic product (GSDP) to those states that have opted for Option 1 out of the two options suggested by the Ministry of Finance to meet the shortfall,” said the official release.

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The 20 states are Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, Uttar Pradesh, and Uttarakhand. All barring Andhra Pradesh and Maharashtra are ruled by Bharatiya Janata Party and its allies.

Chhattisgarh Finance Minister T S Singh Deo criticised the Centre for asking the 20 states to borrow from the market and not through the special Reserve Bank of India (RBI) window, as it had claimed. “What about government’s stated proposal that the Option 1 will be facilitated through the RBI window? These are completely ad-hoc decisions,” said Deo.

Deo said the dissenting states will discuss options like not taking any loans at all or asking the Centre to provide loans to states under Article 293(2) of the Constitution. “The same article that they are quoting to prevent a voting on the subject provides for Centre to take loans and make it available to states,” he said.

A Kerala government official said moving the Supreme Court was the only option left. “The GST Council hasn’t decided on Option 1. We are consulting our law department. The Centre has destroyed the fabric of the GST Council,” the state official added.

West Bengal Finance Minister Amit Mitra said he was unsure what would be recorded in the minutes of the meeting as there was no conclusion and yet the Centre had taken a decision. “The 22 hours of discussion were illegitimate and infructuous,” he said.

Meanwhile, Bihar Deputy Chief Minister Sushil Modi said though the Rs 3,231 crore allocated for the state was not adequate, it will use the whole amount. “Though we required more, at least we got this much… They (dissenting states) wanted to veto it through voting. They may not require money, but we required it. They are playing games. When the FM has said that the states won’t be burdened on repayment of debt, why are you insisting that the Centre should borrow?”

GST Council: No voting expected on new compensation borrowing options

 The finance ministry has ruled out voting on the borrowing options given by the Centre to the states in lieu of their GST compensation dues at the next GST Council meeting on Monday.

Sources in the government said that as per constitutional provisions the GST Council does not have the jurisdiction to approve the borrowing plan of states and it has to be decided only between the states and the expenditure department.

"The constitutional provisions with regard to borrowings to be undertaken by states is clear. If some states want a vote on the issue at GST Council meeting they seem to be mistaken about the mandate of the Council. Even if voting is done there, it would be meaningless," said the source.

With the Covid-19 pandemic sharply reducing the revenue realisation of both the Centre and the states, the GST compensation needs of states have enlarged substantially beyond what is expected to be collected through compensation cess. This gap, however, needs to be filled and in this regard the Centre offered the states two borrowing options to meet the shortfall in compensation cess collection this year.

The GST Council is yet to receive the unanimous support of the states for this proposal with about 10 opposition ruled states and union territories wanting the options to be dropped and the Centre undertaking all borrowings to pay for the GST compensation shortfall to states.

"Majority support of 21 states is for the first option suggested by the Centre. So, even in voting, this option will win. But without the Council's mandate, voting will not take place," said the source quoted earlier.

The expenditure department in the finance ministry is already working and discussing with the states individually to get the borrowing programme going so that the compensation issue is settled.

Sources said that even if all the states do not agree to the borrowing options for settling GST compensation, the plan may be rolled so that the states do not suffer with regard to their enhanced expenditure needs this year in the wake of the pandemic.

Other states, who do not opt to borrow, may be paid compensation from the cess collected this year. The entire compensation will be settled after June 2022, during the extended period of cess levy beyond the five year transitional GST rollout period.

Already, the Centre has distributed the entire Rs 20,000 crore collected from GST compensation cess this year so far to the states. There is expectation that cess collection this year may be around Rs 65,000 crore.

The two borrowing options given by the Centre to the states at the previous GST meeting in August included one calculating GST related shortfall in revenue at Rs 1,10,000 crore that will be borrowed by states under special dispensation from the Reserve Bank of India (RBI). This borrowing will not be counted from any of the states' existing borrowings and its entire interest and principal would be settled through compensation cess including the levy in the extended period.

The second option gives the states' plan to borrow the entire expected shortfall of Rs 2,35,000 crore this year and this borrowing will only be paid back to states during the extended period of GST compensation cess levy.

Centre releases another Rs 34,000 cr GST compensation to states, more soon

The finance ministry released about Rs 34,000 crore to states again as compensation for their revenue loss in the goods and services tax (GST) regime. The fund was released in a bid to provide further relief to states amid the ongoing coronavirus outbreak, PTI reported.

States, so far, have been paid pending dues till November and the remaining will be cleared in phases soon, PTI reported quoting sources. The finance ministry cleared about Rs 34,000 crore pending GST compensation for October and November in two tranches.

The first tranche of Rs 19,950 crore was released on February 17, while the remaining amount of Rs 14,103 crore was distributed to states and Union territories on Tuesday, sources added.

ALSO READ: The GST dilemma

In all, Rs 34,053 crore were released at a time when states are facing liquidity crunch due to the nationwide lockdown imposed to contain spread of coronavirus. The government has released close to Rs 1.35 lakh crore to states and union territories towards GST compensation cess. 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. The Centre has, so far, released about Rs 2.45 lakh crore as GST compensation to states since the implementation of GST on July 1, 2017.

GST, TAXGST collections in March slipped below the psychological Rs 1-lakh crore mark for the first time in four months.

Under GST law, states were guaranteed to be paid for any loss of revenue in the first five years of the GST implementation, which came into force 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.

During July 2017-March 2018, Rs 48,785 crore was released, while between April 2018-March 2019, Rs 81,141 crore was paid to states. For April-May and June-July last year, Rs 17,789 crore and Rs 27,956 crore were released. Further, Rs 35,298 crore was paid to states as compensation for August-September and Rs 34,053 crore for October-November 2019.

ALSO READ: GSTN processed 10,077 new registrations, 7,876 refunds during lockdown

GST collections in March slipped below the psychological Rs 1-lakh crore mark for the first time in four months to Rs 97,597 crore as the COVID-19 lockdown that shut most businesses compounded tax collections in an already sluggish economy.

GST mop-up in March recorded a 8.4 per cent decline over March 2019 collection of Rs 1.06 lakh crore. The collections were lower on account of dip in revenues from domestic transactions as well as imports.

GSTN processed 10,077 new registrations, 7,876 refunds during lockdown

GST Network on Sunday said tax officers have processed over 10,000 new registrations and about 8,000 refund applications in the first 10 days of lockdown till April 3, working through Virtual Private Network (VPN).

In a statement, the Goods and Services Tax Network (GSTN) said it has enabled tax officers of different states and union territories (UTs) to access their office during the lockdown period and is providing secured access to the office network on request.

Till March 31, 2020, GSTN had enabled 1,748 tax officers from 18 states/UTs to access office through VPN, a secure way to access office networks.

This is in addition to the three hill states which already connect to the GST System using VPN.

ALSO READ: Coronavirus LIVE: Cases rise to 3,374 in India, Maharashtra worst hit

"A total number of 20,273 registration-related cases were processed during the first 10 days of lockdown, i.e. from March 25 to April 3, 2020. This includes 10,077 cases of new registration, 3,377 cases of core amendment, 3,784 cases of cancellation by application, 1,966 cases of cancellation by suo moto and 1,069 cases of revocation," GSTN said.

"Similarly, 7,876 cases of refund were also processed during the period," it added.

The government announced a 21-day nationwide lockdown, beginning March 25, to contain the spread of coronavirus.

Apart from 1.23 crore taxpayers, GSTN provides technology services to 29 states/UTs for the implementation of GST.

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For these states and UTs, GSTN provides back-office applications like processing of registration application, processing of refund applications, audit, assessment, appeal, among others, for all their tax officers, which is different from the front-end interface used by the taxpayer -- GST portal.

Soon after the lockdown was announced, GSTN offered secured access to all these states to enable their officers to work remotely.

"VPN is helping officers to avoid the backlog which could have happened if the cases were not processed during the lockdown. With the provision of auto-approval of applications, if not processed by the tax office in a time-bound manner, the officers want them to do it manually to avoid any future complication," GSTN said.

Covid-19: Govt extends e-way bill validity, defers restricted ITC under GST

The government on Friday extended the validity of e-way bills and deferred the application of restricted 10 per cent input tax credit under goods and services tax (GST) giving relief to the industry dealing with supply and cash flow issues amid the coronavirus (Covid-19) induced lockdown.

The validity of e-way bills that were set to expire between March 20 and April 15, has been extended till April 30 to help companies facing supply-related issues with orders stuck in transit in most cases.

“Where an e-way bill has been generated and its period of validity expires during the period 20th day of March, 2020 to 15th day of April, 2020, the validity period of such e-way bill shall be deemed to have been extended till the 30th day of April, 2020,” the finance ministry said in a notification issued late evening on Friday.

ALSO READ: GST collection slips below Rs 1 trillion in March after four months

Under the GST regime, e-way bill has to be generated if goods worth over Rs 50,000 are transported. An e-way bill is valid for up to 24 hours for a distance of 100 km, depending on the size of the vehicle. However, if the vehicle does not cover 100 km within 24 hours, another bill has to be generated. For every 100 km travelled, the bill is valid for one additional day.

The central board of indirect taxes and customs (CBIC) also deferred the application of 10 per cent restriction for availing input tax credit for February, to August, and rolling over the cumulative applicability to the month of September this year. The seven-month window will ease industry's working capital and cash flow.

ALSO READ: GST compliance of companies under IBC: Gaps in the new mechanism

In order to plug evasion, the GST Council in had in December restricted input tax credit to 10 per cent of the eligible amount for an entity if its supplier has not uploaded relevant invoices detailing the payments made. It was tightened from 20 per cent introduced in October.

The GST collections fell below the Rs 1-trillion mark in March after a gap of four months, although disruption caused due to coronavirus-induced lockdown will only get captured in the subsequent months.

Coronavirus impact: Amit Mitra writes to FM Sitharaman, demands GST dues

Facing aggravated fiscal woes due to the lockdown, states have demanded an immediate release of their pending goods and services tax (GST) dues by the Centre, besides a hike in the borrowing limit. To tide over the crisis, states have sought an increase in the fiscal responsibility and budget management (FRBM) limit to 4 per cent, from 3 per cent.

With over four months of GST compensation of more than Rs 40,000 crore still pending, some states even plan to drag the central government to the Supreme Court.

West Bengal Finance Minister Amit Mitra wrote a letter to Union Finance Minister Nirmala Sitharaman on Thursday, urging for an immediate release of pending compensation dues.

Compensation cess, to be released on a bi-monthly basis, is pending for about five months. The central government had released 65 per cent of the compensation due for October and November. The central government is of view that it will only release compensation out of what has been collected by way of levy of cess on luxury and sin items like automobiles, tobacco, and aerated drinks.

“The spread of Covid-19 has created a havoc to the state finances... non-receipt of GST compensation from the central government has further aggravated the already stretched state finances,” Mitra said in the letter. West Bengal's pending dues of Rs 2,875 crore include compensation for some part of October and November and months till March.

Mitra said a “serious cash management situation and fiscal problem” would arise in the coming months with GST revenues, which contribute up to 70 per cent of the state's revenues, getting locked up due to deferment of GST return filing dates.

States have demanded an increase in borrowing limit even if fiscal deficit reaches 4 per cent of state GDP, against the norm of 3 per cent, with most states planning to front-load the exercise to the first quarter of FY21.

Bihar Deputy Chief Minister Sushil Modi said the state had demanded a hike in FRBM limit to 4 per cent and an additional 1 percentage point increase in the market borrowing limit.

“Unlike normal years, we would like to do market borrowing in the first quarter, as we will not defer salaries and pensions. During the 2009 crisis, FRBM limit was hiked. It should be considered now as well,” said Sushil Modi. The matter was raised by Bihar in a meeting with Prime Minister Narendra Modi on Thursday. The fiscal deficit limits for states were relaxed to 3.5 per cent of GSDP for 2008-09 and 4 per cent of GSDP for 2009-10.

Kerala also plans to go for half of the Rs 27,000 crore market borrowing in April-May to be able to pay salaries. “We are on the front line and have to manage the crisis. So, at least, the Centre should pay what is due to us, like the GST compensation cess, let alone additional money,” Kerala Finance Minister Thomas Isaac said

Mobile phones to get costlier as GST rate hiked to 18% from 12%

The Goods and Services Tax (GST) Council on Saturday announced a hike in the tax rate on mobile phones and specified parts to 18 per cent from the next month, from the existing 12 per cent, to correct the inverted duty structure.

It, however, deferred the decision on hiking rates on three other items — footwear, textiles, and fertilisers — which was recommended by the fitment committee of officers to correct the system of having higher duties on inputs than on the final products.

“If there is a need to calibrate the rates on these items, we will take up the issue in one of the future meetings,” Finance Minister Nirmala Sitharaman, who chaired the meeting, told reporters.

West Bengal Finance Minister Amit Mitra, who had urged the Council to not hike the rates on these items, said, “Timing is the key. When you have the coronavirus issue and growth slowdown, what sense does it make in hiking the GST rates on items like these?”

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Mitra, who did not attend the meeting because of health reasons, said his West Bengal colleague raised the issue and got support from all states, barring one or two. “Some BJP states also supported. Tamil Nadu, Maharashtra, all have textile industries. First they deferred (rate hikes on) all items, but after lunch they said they could raise it on mobile phones,” Mitra said.

Responding to a query whether prices of mobile phones would rise after this decision, Finance Secretary A B Pandey said the move was aimed at correcting the inverted duty structure, which was blocking refunds of companies. “I don't believe that prices would rise by 6 per cent,” he said.

The Council, meanwhile, reduced the GST rate on maintenance, repair and overhaul services of aircraft to 5 per cent from 18 per cent. This would help in setting up these facilities in India, Sitharaman said.

It also brought parity in handmade and machine-made matchsticks by imposing a GST rate of 12 per cent on them.

At present, hand-made stick box attracts 5 per cent GST and machine-made 18 per cent.

Correcting GSTN system

The Council decided that it would convey to Infosys Chairman Nandan Nilekani that the GSTN portal be rectified and made better-equipped to respond to challenges by July, as against January 2021 suggested by him.

Nilekani had made a presentation to the Council on GSTN earlier in the day. He demanded additional staff and better hardware capacities, which was agreed to by the Council.

"As all are aware, we had a series of technical glitches, issues of system not being able to bear the load and when more than a lakh of people tried to access the system, the system either stalled or delayed or just did not respond," Sitharaman said.

She said the ministry had been periodically engaging itself with Infosys in order that the system can be improved. "From the Council side, we want completely enhanced capacity, more pruned system, a leaner system of GSTN with better staff response and solution by July 2020," the minister said.

Borrowing by the Council

The Council deliberated on whether it could go for borrowing if compensation cess collections fell short of the requirement of the states.

Sitharaman said she would have to get opinion on various legal issues, such as who would give guarantee to the borrowing, how would it be repaid, impact on the Fiscal Responsibility and Budget Management Act. After the Parliament session is over, a special session of the Council will be called on this.

So far, Rs 78,000 crore of compensation cess has been collected and states have been given over Rs 1.2 trillion, she disclosed.

Procedural issues

The Council deferred the introduction of e-invoicing to October 1 against the earlier planned April 1.

While there is no mention of deferring simplified new returns, officials said the existing returns would continue for a while before new ones are introduced.

However, Cleartax CEO Archit Gupta said,"We are expecting the Council to soon share a detailed roadmap for the new GST return system and clear ambiguities that exist in the current format of new return forms."

The Council deferred the deadline for filing annual and reconciliation returns for 2018-19 by three months till June 30. It also waived the late fee for taxpayers whose annual return is up to Rs 2 crore.

Industry and analysts denounce GST rate hike to 18% on mobile phones

At a time when all major handset manufacturers are struggling to cope with disruptions caused by the coronavirus (COVID-19), the Goods and Services Tax (GST) Council has dealt a body blow to the mobile phone sector, industry players said.

Notwithstanding falling demand and severe crunch in supply of key mobile components, the council on Saturday announced that the rate of taxation had been raised on “mobile phones and specific parts presently attracting 12 per cent to 18 per cent”.

Reacting to the move, Manu Kumar Jain, managing director of Xiaomi India, said the industry had heeded Prime Minister Narendra Modi’s call to participate in the “Make in India” initiative. “But today’s recommendation by the GST Council to raise GST rate on mobile phones from 12 per cent to 18 per cent will seriously harm the industry,” he said.

He said the industry was already struggling with profitability because of the depreciating rupee. “Indian smartphone industry is facing supply chain disruption because of the current COVID-19 situation,” he said.

“As a result of this GST increase, all smartphone makers will be forced to increase prices. This can weaken demand and mobile industry’s Make in India program. This could also have long lasting impact on internet penetration and digital India program as majority of Indians access internet on smartphones,” Jain said. He requested the prime minister and finance minister to reconsider the increase.

“At least for people who cannot afford to buy expensive phones, we suggest that GST on all phones under Rs 15,000 should be brought back to 12 per cent (similar to differential GST structure for TVs smaller than 32"),” he said.

Meanwhile, Nipun Marya, director of brand strategy at Vivo India, said: “We are still evaluating the impact of the new tax structure and will be taking a decision in the next few weeks.”

Analysts said the rate hike could compound manufacturers’ problems as factory shutdowns and production cuts in China have led to a surge in the prices of several components. The increase in Customs duty on imported components announced in the Union Budget has also put severe pressure on their margins.

According to Navkendar Singh, research director at IDC, the new burden in the form of higher GST has the potential to mute growth prospects of the India’s smartphone market in 2020. “Amid an ongoing crisis, this hike defies any logic. The move has potential to dislodge plans for making India a digital economy as smartphones are set to get costlier. While we were anticipating a lower growth rate for the year already — at 5-6 per cent — the move may decrease the rate further,” he said.

Faisal Kawoosa, chief analyst at TechArc, said though the government could earn an additional Rs 12,000 crore in revenues in the form of GST collections, the move will be detrimental to the health of the telecommunication market that has so far performed better than other consumer facing sectors in India. However, the additional revenue estimates could be matched only if the market remains at 160 million units this year, as purchases are already in decline.

Confederation of All India Traders (CAIT) strongly opposed the move. Praveen Khandelwal, CAIT national secretary general, said, “The decision is highly unwarranted, deplorable and will destabilise mobile trade in India, which is already facing a battle for survival from online platforms. Instead of providing relief, the mobile sector is burdened with an unnecessary hike.”

According to companies, as most leading players are already operating under wafer thin margins, they have no option but to pass on the additional burden. In 2018-19, all of the top four players — Xiaomi, Samsung, Vivo, and Oppo — reported poor performances. While, Xiaomi India’s bottom line went into the red for the first time, Samsung’s net profit plunged 59 per cent. Oppo’s net losses widened by 93 per cent, and Vivo continued in red.

However, what is making analysts and manufacturers more uncomfortable is that after facing severe supply crunch they are now staring at falling demand. As public gatherings are being discouraged, malls and markets are witnessing steep decline in footfall. This has led to lower sale of most consumer good items including mobile handsets. Any price hike at the moment is set to further worsen the business prospects, the said.

Don't hike GST rates amid tough times, says West Bengal FM Amit Mitra

A day before the goods and services tax (GST) Council meeting on Saturday, West Bengal Finance Minister Amit Mitra wrote to his Union counterpart Nirmala Sitharaman, expressing contention against the proposed hike in rates of textiles, footwear, fertilizers, and mobile phones amid “very difficult times”.

He said the proposed hike, aimed to correct the inverted duty structure, must be deferred as markets in India were facing a double whammy of stagflation and coronavirus (COVID-19) outbreak. Acknowledging that the inverted duty structure had created a set of problems, Mitra said it needed to be addressed suitably but once economy stabilised.

“May I urge you not to make any changes in the rate structure during these perilous economic times, particularly keeping in mind the interest of the common people?” he said in the letter on Friday.

“I, therefore, suggest that you defer this issue in the upcoming GST Council meeting and take it up for discussion when the economy of India has stabilised reasonably and the COVID-19 matter is not a burning issue,” said Mitra, who will not attend the 39th Council meeting in New Delhi owing to his “pre-occupation with Budget session in the Assembly” and health issues. He had requested for his participation via video conference, which was not responded to.

Inverted duty structure arises when the GST rate on raw material is higher than finished products, resulting in higher input tax credit (ITC) outgo. A registered taxpayer can claim refund of unclaimed ITC on account of higher tax on input and lower tax on output.

The GST rate on mobile phones is 12 per cent, whereas that on phone parts and batteries is 18 per cent, resulting in an inverted tax structure, creating case of unutilised ITC and hence issuance of refunds by the government.

Mitra pointed out that any upward revision in duties, even to purportedly correct the inverted duty structure, might send a very wrong signal to the businesses as well as consumers. He suggested the sectors under consideration were very basic to the common people of India like textiles and footwear, aside from fertilizer and mobiles. Textiles and footwear are large scale employers and any negative effect on their markets may lead to serious job losses.

The GST rate on fabric is proposed to be hiked to 12 per cent from 5 per cent to correct the inverted tax structure. Fabric has a GST rate of 5 per cent, whereas different types of yarns are taxed at 12 per cent. As for shoes, those prices under Rs 1,000 are taxed at 5 per cent, while the rate of inputs like non-woven fabric and leather falls under 12 per cent slab. The rate on chemical fertilizers is proposed to be hiked from 5 per cent to 12 per cent.

“I can only hope that … in an attempt to correct one type of error made in the GST rates, we do not let loose further downturn in major job intensive sectors and the agrarian economy,” said Mitra.

GST portal glitches to dominate agenda of Council meeting on Saturday

Glitches on the goods and services tax (GST) portal will dominate the agenda of the Council meeting on Saturday, even as states will vehemently seek resolution of delayed compensation issue. Infosys Chairman Nandan Nilekani has been asked to make a presentation before the Council.

“Hassles on the GST portal even 30 months after roll-out is unacceptable and that has been communicated to both GST Network and Infosys,” said a government official.

States are likely to demand that Infosys should have a point of contact in each state to resolve these glitches, the official said.

Meanwhile, the electronic invoice facility is likely to be deferred by three months from April 1 to July owing to lack of readiness of both GSTN and the taxpayers.

Finance Secretary Ajay Bhushan Pandey took a detailed meeting with Infosys officials on March 7 on the GSTN-related matters, more importantly ahead of the crucial roll-out of new simplified returns from April 1. GSTN’s tech support partner Infosys has been asked to come up with a plan for quick resolution within a fortnight.

System capacity constraints and the inability of GST Network to provide smooth return filing will be taken up at the Council.

With new returns format to be rolled out from April, it was imperative for GSTN and Infosys to work effectively, he added. The department of revenue, in a letter to Infosys on March 5, highlighted that the issues flagged in 2018 were still unresolved and that failures month after month resulted in genuine taxpayers getting frustrated.

“It is requested to go through the pending issues, day-to-day disruptions and the future road map and come up with a plan for quick resolution within 15 days. Infosys has set high international standards and it is expected that the efficiency which your organisation is known for should be visible in GST project also,” the letter said.

It also said even though the GST system has been in operation for the last 30 months, there have been instances of taxpayer complaints on facing issues in filing returns in the last two days of filing of returns.

“It is noticed that MSP (Master Service Provider) Infosys has been repeatedly asked to take timely action and to identify the root cause of issues after each event and taken corrective action. However, problem still persists,” it said.

The ministry said such glitches on the portal led to an unhealthy tax compliance requirement, more so when on account of such disruptions some taxpayers end up becoming liable for payment of late fee, interest.

The ministry is working to shore up GST revenues. In the April-February period this fiscal year, GST collection stood at Rs 11.24 trillion, down from Rs 12.67 trillion in the year-ago period.

No response at peak hours, wrong computation of late fees for annual returns for FY18, and offline tool not available for GSTR9 are among a list of problems flagged in the letter.

Compensation cess issue will be raised by the states, who are likely to ask for full compensation for the fiscal year, irrespective of collections and pitch for extension of compensation period. The Centre, meanwhile, is expected to clearly tell states that they will be compensated only as much as is collected in the cess fund, according to the law.

With only 56 per cent of compensation dues for October and November worth Rs 19.958 crore disbursed last month, states are expected to strongly seek a resolution on the matter.

The Centre is supposed to compensate states on a bi-monthly basis for any losses they incur in the first five years of GST implementation. The loss is estimated if they do not record 14 per cent increase in the subsumed indirect taxes keeping 2014-15 as the base year.

The Centre has released a total of Rs 120,498 crore as GST compensation to the states and Union Territories so far in FY20 out of Rs 87,821 crore collected till February.

Odisha GST collections up 11% to Rs 27,044 cr during April-February

Odisha has registered an 11 per cent growth in goods and services tax (GST) collection to Rs 27,044.37 crore during April to February period of the current fiscal, a statement said.

The GST collection during the same period of the previous financial year was Rs 24,325.79 crore.

The gross GST collection (CGST, ICGSTT, SGST and cess) in the April-February period of the 2019-20 fiscal shows a growth of 11.18 per cent with the collection of Rs 27,044.37 crore, it said.

The collection of state goods and services tax (SGST) in February was Rs 804.85 crore, which was the second highest monthly collection during the current financial year.

The gross GST collection during the last month was Rs 2,790 crore.

Integrated GST and cess, which were showing a negative trend during the previous months due to slowdown in sales of coal and steel products, have registered positive growth of 9.29 per cent and 27.65 per cent respectively in February as compared to the year-ago month, the statement said.

The VAT collection from petroleum products and liquor in February was Rs 695.81 crore, which was the highest monthly collection during the current fiscal, it said.

As many as 45,639 new taxpayers have been brought in the tax fold during the current fiscal which is encouraging, GST commissioner S K Lohani said.

He also said the field units have been instructed to undertake a special drive against those who have either not filed returns, or submitted faulty documents.

To further streamline the tax administration in the GST regime, instructions have been issued to cancel the registrations of fake dealers after field enquiry, according to the statement.

During the current fiscal, registrations of 12,300 such taxpayers, assigned to the state, have been cancelled on the ground of non-existence of business at the declared place, not filing regular returns for more than 6 months or conducting fraudulent transactions.

Till date, seven persons have been arrested for allegedly running fake dealer networks.

GST collection crosses Rs 1-trn mark for the fourth month in a row in Feb

Goods and Services Tax (GST) collection crossed the Rs 1-trillion-mark for the fourth month in a row in February at Rs 1.05 trillion. The GST collection, which grew 8.3 per cent year-on-year (y-o-y) in the month, was a tad lower than Rs 1.10 trillion mopped up in the previous month.

GST collection had grown 8.1 per cent y-o-y in January. The mop-up could have been much higher, but tax on imports fell 2 per cent y-o-y. However, experts ruled out the impact of the coronavirus outbreak in China on imports since these are contracted three months in advance.

The earlier GST collection target for FY20 required January and February mop-up to be at Rs 1.15 trillion each and that for March to be at Rs 1.25 trillion. However, the Centre truncated the target for its part of the GST, compensation cess and integrated GST by Rs 51,000 crore in the revised estimates for FY20.

The collections have exceeded Rs 1-trillion-mark each month since November. However, experts said it could be due to blockage of input credits. “One will have to see how much of it is due to restriction and blockage of input credits, which has been happening in the last three months or so,” said Pratik Jain, partner PwC.

He said the GST Council should look into this since it could lead to a fall in the GST collections later.

M S Mani, partner at Deloitte India, said the February figures reflected significant ground level measures taken in the past few months. “With e-invoicing and new returns on the anvil, the collections are now expected to continue with the stable trend,” he said.

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Of total GST, Central Goods and Services Tax (CGST) fetched Rs 20,569 crore in February, slightly lower than Rs 20,944 crore in January. The State Goods and Services (SGST) collections stood at Rs 27,348 crore, less than Rs 28,224 crore in the previous month.

Integrated Goods and Services Tax (IGST) yielded Rs 48,503 crore in the month, down from Rs 53,013 crore in January. Within IGST, the portion from imports fell to Rs 20,745 crore, from Rs 23,481 crore in January.

Compensation cess was at Rs 8,947 crore, higher than Rs 8,637 crore in the previous month.

Abhishek Jain, partner at EY, said the GST collections continuing at above the Rs 1-trillion-mark is an encouraging sign for the Indian economy.

The government has settled Rs 22,586 crore to CGST and Rs 16,553 crore to SGST from IGST as regular settlement. The total revenue earned by the Centre and the states after regular settlement stood at Rs 43,155 crore and Rs 43,901 crore, respectively, for the month.

The GST revenue from domestic transactions showed a growth of 12 per cent y-o-y in February. Taking into account the GST collected from import of goods, the total revenue increased by 8 per cent on the yearly basis.

Govt's monthly GST lottery scheme to curb tax evasion to begin from April 1

The government is planning to launch lottery offer under the Goods and Services Tax (GST) from April 1 by conducting lucky draws every month for invoices of all business to customer (B2C) transactions.

The lottery scheme is being envisaged by the revenue department to encourage customers to take bills for every purchase, which will in turn help the government in curbing GST evasion.

Under the scheme, the revenue department will conduct monthly lucky draws which will have one bumper prize, while there would be second and third prizes state wise, an official told PTI.

"The lottery scheme is planned to be launchedon April 1," the official added.

A member in the Central Board of Indirect Taxes and Customs (CBIC) had last month said that the lottery offers would range between Rs10 lakh and Rs1 crore.

The official said consumers will have to scan and upload any B2C invoice using a mobile app, which is being developed by GST Network (GSTN), which handles the technology backbone of GST.

The mobile app would be made available for both Android and iOS users by end of this month.

There would not be any threshold on the invoice value to be eligible for lucky draw, the official added.

GST, which became effective from July 1, 2017, has subsumed over a dozen indirect taxes, like excise and service tax. However, revenue under the new indirect tax regime has not picked up as per expectations, mainly on account of evasion.

Officials expect the lottery scheme to incentivise customers to ask for bill or invoice while making purchases.

The GST Council is likely to vet the lottery scheme in its next meeting on March 14.

As per the plan, the money for the lottery scheme would come from the consumer welfare fund, where the proceeds of anti-profiteering cases are transferred.

Centre approves levy of 28% GST on lotteries from March 1, rate notified

A 28 per cent Goods and Services Tax (GST) will be levied on lotteries from March 1, according to a notification.

The GST Council had in December last year decided to impose a single rate of 28 per cent on state-run and authorised lotteries.

The revenue department notified the GST rate on supply of lotteries and amended its earlier Central Tax (Rate) notification.

Accordingly, the Central Tax rate for supply of lotteries has been amended to 14 per cent and a similar percentage will be levied by the states.

This will take the total GST incidence on lotteries to 28 per cent.

"This notification shall come into force on the 1stday of March, 2020," the revenue department notification said.

Currently, a state-run lottery attracts 12 per cent GST, while a state-authorised lottery attracts 28 per cent tax.

There were demands thata uniform tax rate should be imposed on lotteries following which a group of ministers were set up to suggest the GST rate. Following this, the GST Council in December voted for a single rate of 28 per cent on supply of lotteries.

AMRG & Associates Senior Partner Rajat Mohan said: "Gambling in the form of Lottery has been allowed in a few states, where it has penetrated at grass root levels, now changing the tax rate from a prospective date would help the dealers in effectively implementing the new tax rate".

EY Tax PartnerAbhishek Jain said a uniform rate on lottery brings a parity between state-run and authorized lotteries; thereby aligning an equal footing for businesses in the same line.

Centre releases Rs 19,950 crore as GST compensation to states and UTs | Business Standard News

The Centre has released Rs 19,950 crore as goods and services tax (GST) compensation to states and Union Territories for October.

Generally, the Union government releases compensation for two months and this is the first time it has given compensation for only one month.

Compensation was given on February 17, almost a month ahead of the GST Council meeting, slated for March 14.

States have been complaining about the delay in release of compensation.

Centre releases Rs 19,950 crore as GST compensation to states and UTs

According to an earlier agreement, compensation for October and November should have been disbursed by December.

With this release, the Centre has given a total of Rs 1.20 trillion under this head to the states and UTs from April-October of the current fiscal year, said people in the know.

However, only Rs 78,874 crore was collected as compensation cess as on January 31, 2020.

The Centre has released Rs 41,624 crore more than it has collected as cess. It was able to do so, given that Rs 47,271 crore remained unutilised after the release of GST compensation to states and UTs in FY18 and FY19. It still leaves a Rs 5,647-crore surplus with the government.

Finance ministry officials said a total compensation cess of Rs 62,611 crore was collected in FY18, out of which Rs 41,146 crore was released to states and UTs. Further, in the FY19, Rs 95,081 crore was collected as GST compensation cess, of which Rs 69,275 crore was released to states and UTs.

In her Budget speech, Finance Minister Nirmala Sitharaman said the government had decided to transfer the balance from the GST Compensation Fund, due from its collection in FY17 and FY19, in two instalments.

States that do not see a 14 per cent rise in their GST revenues on the base of FY16 are given compensation.

Anti-profiteering body dismisses complaint against China's Xiaomi

In a relief to Chinese smartphone maker Xiaomi, the goods and services tax (GST) profiteering watchdog has dismissed a complaint against it for allegedly not passing benefits of reduced rates on power banks to consumers.

The National Anti-Profiteering Authority (NAA) observed that the Xiaomi Mi power bank was attracting 18 per cent GST rate before and after January 1, 2019, therefore there had been no change in the price of the product.

“We do not find the present case to be a case of profiteering,” NAA said in its order.

The complaint was filed by a company called LocalCircles, which alleged that the Chinese company had not reduced the price of the product after the reduction of GST rate from 28 per cent to 18 per cent ordered by the government from January 1, 2019.

FinMin revises target for GST collection in FY20; aims mop-up at Rs 1.5 trn

Weeks ahead of the Budget, the finance ministry has revised its target for goods and services tax (GST) collection in January and February — to Rs 1.15 trillion, from the earlier Rs 1.1 trillion. This would be achieved by detecting fraudulent input tax credit using data analytics.

At a meeting convened by the Department of Revenue, under the finance ministry, the target for March was retained at Rs 1.25 trillion.

This means the government aims to collect Rs 10,000 crore more than what was targeted earlier at a time when all months till December in the current financial year (FY20) yielded less than Rs 1.1 trillion, except for April.

Last month, the target for December, January, February and March was set at Rs 1.1 trillion, with one of the months to yield Rs 1.25 trillion. However, the December collection stood at Rs 1.03 trillion. Four of nine months in FY20 so far have delivered less than Rs 1 trillion in GST collections.

Parag Mehta, partner at NA Shah Associates, said, “Considering the sluggish economy, it is an ambitious target. Even during the festive period of Diwali, the collections could touch only Rs 1 trillion.”

The meeting, attended by senior officials of the Central Board of Indirect Taxes and Customs (CBIC) and the Central Board of Direct Taxes (CBDT), highlighted that the GST authorities would look into the mismatch of supply and purchase invoices, failure of filing returns, and over-invoicing, among other things, said sources.

The authorities would also look at fake or excess refunds availed beyond the permissible limits, plugging tax leakages, fake or huge input tax credit (ITC) claims, and data analytic review of all the refund under inverted duty structure, the sources said.

Sources said that SMSs and emails will be sent to those claiming fraudulent or excess ITC, defaulters, non-filers and those who provide mismatched information in their returns or over-invoice or who have been identified through data analytics for evading tax by duping the system through rogue modus operandi.

Taxpayers who have taken ITC wrongfully can voluntarily repay an amount equal to inadmissible credit before verification and punitive action is taken against them, the sources said.

It is further learnt that electronic communications to such people would be followed by visits from the GST field formations.