Tag: Goods and Services Tax

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Finance

Mandatory 1% Cash Payment of GST Liability will Reduce Fake Invoicing & Tax Evasion

good and service tax
GST (Photo Credits: Wikimedia Commons)

To curb the menace of fake invoicing, the Central Board of Indirect Taxes and Customs has amended the GST rule. According to the new GST amendment, the taxpayers now will be required to pay 1% of GST liability in cash with effect from January 1, 2021.

This rule applies to registered taxpayers whose taxable income, other than exempt supply and export is more than Rs 50 lakh, monthly or the annual turnover is more than 6 crore. The rule, however, is not applicable in the cases where the registered person has deposited income tax more than Rs 1 Lakh in each of the last two years.

 

Also, the registered users who have received a fund of more than Rs 1 Lakh in the preceding FY on account of the export or inverted tax structure, are out of the purview of this rule. If the registered person belongs to a government body, PSU, from a local authority or any statutory body the rule will not apply to him/her. Small businesses including MSMEs and composition dealers are also exempted from the new rule.

 

Registered users who have paid output tax through cash over 1% of the total output tax liability, will be exempted from paying 1% of GST liability in cash. The mandatory requirement of 1% cash payment of GST liability will be applied to about 45,000 taxpayers, which only constitutes 0.37% of the total businesses registered in the Goods & Services Tax System.

 

The provision is meant to bring fraudsters or suspicious dealers who use a lot of fake credit to evade tax and make no cash payment under control. It would neither affect any genuine business dealer nor it will affect ‘ease of doing business’ in any manner. The new rule also restricts the use of Input Tax Credit for discharging GST liability to 99 percent.

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Finance

Delayed GST Payment: Govt Changes Interest Liability Rules, Interest to Be Charged on Net Tax Liability From September 1, 2020

GST Payment (Photo Credits: Unsplash)

New Delhi, August 26: The government on Wednesday changed the interest liability rules and said that the interest on delayed payment of Goods and Services Tax (GST) will be charged on net tax liability with effect from September 1. Reports inform that the industry had earlier this year raised concern over the directive of recovery of about Rs 46,000 crore of unpaid interest on delayed GST payment. The interest was charged on gross tax liability.

It was in March that the GST Council, which comprises of centre and state finance ministers, had decided in its 39th meeting that interest for delay in payment of GST to be charged on net tax liability with effect from July 1, 2017, and law would be amended retrospectively. However, on August 25, the Central Board of Indirect Taxes and Customs (CBIC) notified September 1, 2020, as the date from which interest would be charged on net tax liability.

Earlier, the CBIC had said that GST law permits interest calculation on delayed GST payment on the basis of gross tax liability. This position has been upheld in the Telangana High Court’s decision dated April 18, 2019. It must be noted that the net GST liability is arrived at after deducting input tax credit from gross GST liability. Therefore, calculating interest on gross GST liability increases the payout burden on businesses.

According to AMRG & Associates Senior Partner Rajat Mohan, this notification seems to be in disconnect with decisions of GST Council wherein it was assured to the taxpayers that the said benefit would be available retrospectively from July 1, 2017. “Prospective availability of this benefit would mean that millions of taxpayers may be looking at demand of interest for over 3 years from the date of GST implementation. Businesses are expected to approach the High Courts again on this unjustified and illegal demand of interest basis the ”principle of estoppel”, Mohan said.

Businesses, which are other than those under the composition scheme and quarterly return filers, registered under goods and services tax (GST) have to file returns (GSTR-1). They have to show tax liability by 11th of following month and pay taxes by filing GSTR-3B between 20-24 (due date varies according to the state in which businesses are registered). There have been cases where GST assessees have paid taxes after due date but did not pay the interest due on account of delayed payment.

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Finance Strategy

GST Council Likely to Meet on August 27 to Discuss Compensation Payout to States

जीएसटी
जीएसटी

New Delhi, August 19: The Goods and Services Tax (GST) Council is likely to meet on August 27 to discuss the compensation pay-out to states. The council will also discuss the opinion of the Attorney General on the legality of market borrowing to meet revenue shortfall. This will be the 41st meeting of the GST Council and will be held via video conference. Sources reveal that the meeting would be a single agenda meeting on states’ compensation.

A full-fledged meeting of the Council would be held on September 19, the agenda for which is to be decided, a report by news agency PTI said. The Attorney General, the chief legal officer of the government, is of the opinion that the Centre has no statutory obligation to make up for any shortfall in GST revenues of states from its coffers, sources revealed.

They had earlier indicated that following the AG’s opinion, states may now have to look at market borrowings to meet the revenue shortfall and the GST Council will take a final call. In March, the Centre had sought views from Attorney General KK Venugopal on the legality of market borrowing by the GST Council to make up for any shortfall in compensation fund – a corpus created from levy of additional tax on luxury and sin goods to compensate states for revenue shortfall arising from their taxes being subsumed into GST.

Reports inform that the Attorney General had also opined that the Council would have to decide on meeting the shortfall in the GST compensation fund by providing the sufficient amount to be credited to the fund. As per sources, the options before the Council for meeting the shortfall could be to rationalize GST rates, cover more items under the compensation cess or increase the compensation cess, or recommend higher borrowing by states to be repaid by the future collection into the compensation fund.

Under the GST law, states were guaranteed to be compensated bi-monthly for any loss of revenue in the first five years of the GST implementation from July 1, 2017. The shortfall is calculated assuming a 14 per cent annual growth in GST collections by states over the base year of 2015-16. Under the GST structure, taxes are levied under 5, 12, 18 and 28 per cent slabs. On top of the highest tax slab, a cess is levied on luxury, sin and demerit goods and the proceeds from the same are used to compensate states for any revenue loss.

The GST Council has to decide how to meet the shortfall in such circumstances and not the central government, sources added.  Any borrowing of the central government is upon the security of the Consolidated Fund of India. Similarly, borrowing by a state government is upon the security of the consolidated fund of the state.

In either case, it would lead to increased general government debt burden and also a higher fiscal deficit. The payment of GST compensation to states became an issue after revenues from the imposition of cess started dwindling since August 2019 and the Centre had to dive into the excess cess amount collected during 2017-18 and 2018-19.

In 2019-20, the Centre had released over Rs 1.65 lakh crore as GST compensation. However, the amount of cess collected during the year 2019-20 was Rs 95,444 crore. The compensation payout amount was Rs 69,275 crore in 2018-19 and Rs 41,146 crore in 2017-18.