GST will lead to consolidation of multiple indirect taxes
States are apprehensive of losing their rights to raise revenue during emergencies.
'Perhaps GST was too complex a system for the Indian economy at its present stage of development,' argues T N Ninan.
If other states follow suit, it is going to become difficult for the GST Council to decide on the next stage of reforms.
Since its rollout 13 months ago, the new indirect tax has yielded Rs 1 trillion only in in April 2018
Finance ministry sources have countered CAG audit finding of central government wrongly retaining Rs 47,272 crore of GST compensation cess meant for states, saying temporary retention cannot be termed as diversion.
Reform ideas do not occur overnight and evolve over the years.
'The low tax to GDP ratio of the country will go up, helping the government to adhere to fiscal discipline and keep inflation in check.'
The forthcoming Budget, the last full one before the 2019 Lok Sabha elections, is expected to contain a number of sops and feel-good announcements, especially regarding social sector schemes.
Amid record-high fuel prices, Finance Minister Nirmala Sitharaman on Monday said there is no proposal as of now to bring crude oil, petrol, diesel, jet fuel (ATF) and natural gas under the Goods and Services Tax (GST). When the GST was introduced on July 1, 2017, amalgamating over a dozen central and state levies, five commodities - crude oil, natural gas, petrol, diesel, and aviation turbine fuel (ATF) - were kept out of its purview given the revenue dependence of the central and state governments on this sector. This meant that the central government continued to levy excise duty on them while state governments charged VAT. These taxes, with excise duty, in particular, have been raised periodically.
The chamber has sought clarity from government to remove uncertainty among businesses
Tomato prices have been on the boil for more than a month. Data from major cities show that the spike has been between 125 and 150 per cent at the wholesale level. Soaring vegetable prices, including tomatoes, pushed the retail inflation rate to a nine-month high of 5.49 per cent in September, according to government data. Though reports say prices are expected to come down in the next few weeks after supplies improve from Madhya Pradesh and Himachal Pradesh, how long will the respite last is anybody's guess.
After the GST Council's meeting in March, the Centre had sought views from Attorney General K K Venugopal -- who is the chief legal officer of the government -- on the legality of market borrowing by the council to make good any shortfall in the compensation fund. The AG in his view said there is no obligation on the central government to pay the GST compensation shortfall, according to the sources.
Lack of visibility on rates makes companies apprehensive.
The states have unanimously pitched for sole administrative powers to carry out assessment, scrutiny and enforcement for entities up to an annual turnover of Rs 1.5 crore.
Higher reliance on GST receipts for revenue reduces states' autonomy as these receipts depend on tax rates decided by the GST Council, a report by Delhi-based non-profit, PRS Legislative Research shows.
Electricity has also been kept out of the GST ambit.
The GST Council on Friday left taxes on COVID-19 vaccines and medical supplies unchanged after the BJP- and Opposition-ruled states sparred over whether tax cut benefits will reach the common man. Congress and other Opposition ruled states have been demanding a reduction in taxes but the central government felt the move may not result in tangible gains for people. "It is one thing to rush to say - do this, it will benefit the common man. But when the technical, fitment and law committees go into the details, you realise that that could have collateral impact on many others," Finance Minister Nirmala Sitharaman said. "I am not talking about the revenue generation aspect, but how many other items will get included in it as a result of which how you are going to implement it," she added.
Mahindra & Mahindra on Friday said it has been imposed a penalty of Rs 4.12 crore over input tax credit claim and education cess credit balance carry forward from pre-GST regime to GST regime in relation to its two-wheeler business. In a regulatory filing, Mahindra & Mahindra said it has received an order from the office of the Deputy Commissioner, State Tax, Audit Wing, Indore-01, Madhya Pradesh imposing a penalty amounting to Rs 4,11,50,120 to the two-wheeler business of Mahindra Two Wheelers Ltd (MTWL), which was demerged from MTWL and has since been merged with the company.
Despite a steady collection rate, the government faces a steep Budget target of Rs 6.1 trillion for CGST for 2019-20.
The finance ministry has set up two committees of state finance ministers which would rework rate slabs, review GST exempt items and identify potential evasion sources. Four years after the roll out of the national Goods and Services Tax (GST), which replaced the complex indirect tax structure, the centre and states have started work on moving towards a "simpler rate structure in GST" by reviewing the current rate slabs, including special rates and merger of rate slabs. The Group of Ministers (GoM) on rate rationalisation would also review items under inverted duty structure to help minimise refund payout, and review the supply of goods and services exempt under GST with an objective to expand the tax base and eliminate breaking of input tax credit (ITC) chain.
The GST Bill, seen as single biggest tax reform in a long time, needs to be ratified by at least 15 state legislatures before the President can notify the GST Council which will decide the new tax rate and other issues
The revenues for August are 88 per cent of the GST collected in the same month last year.
Income tax officials on Monday conducted surveys at offices of engineering major Larsen & Toubro and media firm Zee Group for alleged GST evasion, an official of the tax department said. When contacted, L&T neither confirmed nor denied the development, while the media group has confirmed the tax survey. The tax official said surveys have been carried out at many L&T premises in the city, and in case of Zee, the surveys are underway at all its offices across the country since morning.
GST taxpayers will be required to reverse by November 30 the input tax credit (ITC) claimed in the last fiscal in case their suppliers fail to deposit the due tax by September 30, the finance ministry has said. The taxpayers, however, can reclaim the ITC later following the deposit of taxes by the supplier. The ministry has inserted Rule 37A in Central Goods and Services Tax rules to give effect to the new provision.
The 41st meeting of the GST Council, to be held via video conferencing, has just one agenda for discussion -- making up for shortfall in states' revenues, sources said.
The new restriction will be challenging for businesses, as they will have to do regular follow-ups with their suppliers.
'The professional or the freelancer needs to pay taxes from his pocket first and then wait for payments from his clients.'
For the government to meet its GST roll-out deadline of April 1, 2017, the states will have to ratify the Bill before Parliament's winter session, starting November.
Certain clarifications by the GST Council, such as tax rates on ice cream parlours and royalty paid to state governments over mineral rights, may turn out to be contentious and lead to litigation, feel some experts. The council, at its meeting in Lucknow on Friday, had clarified that ice cream parlours will attract goods and services tax (GST). The clarification said these parlours sell already manufactured ice cream and such supply would draw 18 per cent tax.
The Centre and states are looking to further tighten the GST registration process and legal measures to deal with the rising cases of fake invoicing. A meeting of the law committee of the GST Council has been convened on Wednesday to discuss these issues, finance ministry sources said. The committee, comprising senior central and state tax officers, would also discuss the GST fake invoice frauds, further tightening of the GST registration process and work out other legal measures including necessary law amendment required in the GST Act to curb the menace of fake invoicing, they added. Also the provisions related to deemed registration under Goods and Services Tax (GST) law may be tightened to prevent the misuse of such provisions by fake dealers and the provisions related to suspension of registration may also be streamlined to make the procedure of suspension and cancellation of registration more efficient and faster, so that such fraud operators can be prevented in time from continuing to pass on fake credit down the chain.
The government is going all out to spread awareness about the new indirect tax regime, and training lawmakers is being seen as a necessary first step.
Even if the GST rate is 18-20 per cent, there would be no average impact on inflation.
Pulse oximeters, hand sanitisers, temperature check equipment and ambulances too will attract lower 5 per cent tax.
Industry body CII has pitched for a reduction in personal income tax rates, decriminalisation of the goods and services tax and a relook at the capital gains tax rates as part of its agenda presented to the government for the forthcoming Budget. Arguing that the GST law already contains adequate penal provisions for deterrence against evasion of taxes, CII has suggested decriminalisation of GST law. Also, the applicability of prosecution provisions should not be based on the absolute amount of tax evasion but should be based on real intent to evade the taxes and a certain percentage of the tax payable, it stated.
The liquidity in the banking system moved into surplus almost after three months as the Reserve Bank of India (RBI) absorbed over Rs 40,000 crore from the market on Monday, predominantly on the back of increased government spending. However, this situation may be short-lived given the higher demand for funds to pay taxes and year-end targets, treasury executives said. Meanwhile, two variable reverse repo rate (VRRR) auctions held on Tuesday received weak response.
Stating that GST council meetings have become "almost toxic" with the erosion of trust between the Centre and states, West Bengal minister Amit Mitra on Wednesday urged Union Finance Minister Nirmala Sitharaman to consider a "course correction" to rebuild faith. In a letter to Sitharaman, the state's finance minister also claimed that the central government comes to GST council meetings with a "predetermined conclusion". Mitra on June 13 alleged that his voice was "muzzled" during the GST Council meeting on that day and his opposition to levy taxes on Covid essentials like vaccines, masks, PPE kits and anti-viral drug Remdesivir, was not heard.
The government has extended the deadline for filing GST annual return and audit report for the 2018-19 fiscal year by a month, till October 31.
The panel decided to omit the reverse charge mechanism (RCM) clause from the GST law under which registered taxpayers buying from unregistered taxpayers have to deposit the GST.
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