The registered taxable person shall be entitled to such credit and it will get credited to his electronic credit ledger. muGST is a platform which work as the information gateway to 360 degree information regarding GST registration GST filing, GST software & more.
The financial year 2018-19 (FY19) ended on a happy note on the goods and services tax (GST) front. At Rs 1.06 trillion, the government has announced the highest monthly collection from GST in March since its roll-out 21 months ago.
This is the fourth time in FY19 that the monthly GST collection has crossed the Rs 1-trillion mark, meeting the target.
With this, the total GST collected during the year has touched Rs 11.77 trillion, still nearly Rs 75,000 crore short of the initial annual expectation.
Even so, the GST mop-up, together with the direct tax collection of Rs 11.5 trillion (against a Budget target of Rs 12 trillion), may somewhat ease the government’s worry about a steep tax shortfall for now. Analysts said the latest numbers would help the government move closer to the fiscal deficit target of 3.4 per cent of the country’s gross domestic product (GDP) set for FY19.
“The monthly average of GST revenue during FY19 is Rs 98,114 crore, which is 9.2 per cent higher than 2017-18. These figures indicate that the revenue growth has been picking up in recent months, despite various rate rationalization measures,” the finance ministry said in a statement on Monday.
The total GST collections in March were up 16 per cent from the corresponding period last year. Of that, the central GST (CGST) stood at Rs 20,353 crore, while state GST (SGST), and integrated GST (IGST) were pegged at Rs 27,520 crore and Rs 50,418 crore, respectively.
Faced with the big challenge of tackling fake invoicing in GST regime, tax officials are looking at different strategies to curb this menace and shore up revenue collections.
Central Board of Indirect Taxes and Customs (CBIC) Member (Investigation) had recently said that between April and February 2018-19, GST evasion to the tune of ₹20,000 crore was detected, of which ₹10,000 crore was recovered.
Officials estimate that evasion through fake and under-invoicing could be pegged at anywhere between one per cent and five per cent of collection.
Tax officials at both the Centre and States have regularly been busting such rackets “This is just the tip of the iceberg,” said an official, who did not wish to be named.
CGST and SGST officials are also looking at use of data analytics from the GST Network for variation in returns, variation in e-way bills and are also looking at trends in various sectors to understand where such evasion is taking place .
Setting up of fake cos
According to people in the know, one of the popular ways of generating fake invoices is setting up of fake companies to which businesses issue invoices for sales or by issue invoices to companies within the group or known persons for sales. Issuing invoices allows them to claim input tax credit.
“Companies have to file annual returns by June 30, 2019 and these are likely to be taken up for scrutiny only by 2020. By then, many of these companies would have shut down or vanished,” said a person familiar with the development, adding that enforcement is a big challenge.
One expert pointed out that there is no proper invoice matching under GST until now. Another handicap is that visiting the businesses premises prior to granting GST registration is not followed fully.
Officials of the Central GST have unearthed an alleged tax fraud of Rs 224 crore and detected fake invoices worth Rs 1,289 crore by a group of eight companies involved in the trade of iron and steel products.
A key suspect involved in the racket has been arrested and Rs 19.75 crore was recovered from him, a press release from the Hyderabad Central GST Commissionerate said Tuesday night.
Several documents were recovered during the simultaneous searches conducted at the residential and business premises of these companies on Tuesday night.
The companies have been generating fake invoices without actual supply of TMT bars, MS bars, MS flat products among others, and were passing on the input tax credit to other tax payers within the same group, besides some other taxpayers since July, 2017, it said.
The fake invoices generated by them involved about Rs 1,289 crore of value and input tax credit of about Rs 224 crore.
“Five out of these taxpayers are operating from the same address and many of the Directors/Partners/Proprietors of these firms/companies,are common,” the release said.
These companies were also found to be indulging in circular fake trading to inflate their turnover, besides supplying such fake invoices and e-way bills to some others, the GST officials said.
“Investigation also, prima facie, reveals that the above modus operandi is also being adopted to defraud the Banks for claiming ineligible credit facilities or Letters of Credit (LCs), without any collateral securities,” it added.
The GST Council is likely to meet next week via video-conferencing to approve the rules related to under-construction buildings. It will clarify the grey areas governing the rule, according to a senior finance ministry official.In its last meeting, the council had reduced Goods and Services Tax (GST) rate for under-construction buildings from 12 per cent to 5 per cent and on projects under affordable housing from 8 per cent to 1 per cent.
However, there were many grey areas left, over which developers have been seeking clarification. The Central Board of Indirect Taxes and Customs (CBIC) met several real estate sector representatives last week to discuss these grey areas.“The next meeting will explain the issues over which the sector has been seeking explanation. Also, the law committee of the council will approve the rules, which would be effective from April 1,” the official added.
Another important issue to be taken up by the council would be relaxation of the 80 per cent mandatory procurement from registered suppliers. “So far, the general consensus is that 80 per cent procurement norm is going to make many dealers GST-compliant. So, the council is unlikely to relax this norm. Also, there is confusion over the rebuilt property. The council largely agrees that rebuilt property must be considered as under-construction property itself. The final call will be taken at the meeting,” he added.
The government has released new return forms that businesses will have to file for paying GST from next financial year. Businesses that have an annual turnover of up to `5 crore have the option to file one of the three quarterly returns — Sahaj, Sugam and Normal. The new returns would be implemented on a pilot basis from April 1, and will be made mandatory from July 1.
The GST Council is also expected to discuss calls for relaxation of the 80 per cent mandatory procurement from registered suppliers.
The goods and services tax (GST) network released the revised return forms which businesses would need to comply with from this year. The new forms would be operated on a pilot basis from April 1, 2019, and would be mandated across the country from July, according to the decisions of the GST Council.
The new and revised return format would obviate the need to furnish returns under the family of GSTR-1, GSTR-2 and GSTR-3, but the annual return GSTR-9 might continue, experts said.
The GST Council had suspended GSTR-2, a purchase return, and GSTR-3, input-output return, because of the complex form structure. On the other hand, GSTR-1, a sale return, and GSTR-3B, summary input-output return, remain. The new forms are uploaded following an exercise to simplify the returns under GST.
The new return formats — named “normal”, “sahaj” and “sugam” — would make the compliance process simpler for the smallest of businesses wherein taxpayers up to a turnover of Rs 5 crore would have an option to file any of the three forms.
For the revenue department, the new format would help in matching the invoices of the seller and the purchaser, and would help the department check evasion to a great extent. But at the same time, it is likely to increase clerical and administrative work for businesses.
The HSN-wise details need to be provided at the invoice level rather than the summary level. In addition, while details at 4-digit HSN codes are required in the current format, the new format would need those details at the 6-digit HSN level.
Under the new format, invoices can be reported on a continuous basis.
The Finance Ministry on Thursday asked trade and industry to exercise caution while filing the annual GST returns form as the facility to revise it is not available.
In a statement, the ministry said the annual returns form is now available on the common portal for filing and asked Goods and Services Tax (GST) payers to file their returns at the earliest.
The ministry had on December 31, 2018, notified the annual returns forms GSTR-9, GSTR-9A and GSTR-9C. The GST Council had in December extended the last date for filing these forms by three months to June 30, 2019.
GSTR-9 is the annual return form for normal taxpayers, GSTR-9A is for composition taxpayers, while GSTR-9C is a reconciliation statement.
“Taxpayers may please exercise caution while filing this return as facility to revise the Form GSTR-9 and Form GSTR-9A is not available,” the ministry said.
The anti-profiteering body has held that US pharmaceutical company Abbott Healthcare did not pass on the benefits of the goods and services tax to customers after the new regime started in July 2017 and the rate was further reduced in November that year.
Abbott had instead increased the price of a cream after GST became effective, the National Anti-profiteering Authority (NAA) said in an order on its website on Tuesday, fining the company and a pharmacy 96.59 lakh for profiteering rom GST.
Although the order pertains to only one product, the NAA will now investigate all products sold by Abbott, as per the order.
“DGAP (Director General of Anti-Profiteering) is directed to further investigate the quantum of profiteering on all the products including the present product which respondent (Abbott) is supplying,” NAA said in the order.
“This situation is a difference of interpretation of the GST rules and we are looking at next steps,” an Abbott spokesperson said in response to ET’s queries on the matter.
Tax experts said the order is set to open a Pandora’s Box for the pharmaceutical sector. ET first reported on June 22 that the NAA had started started probing drug companies for not passing on the benefits of lower taxes under the GST regime to customers. They said even manufacturing companies and pharmacies will come under the investigator’s lens.
The government last month slashed the Goods and Services Tax (GST) on the real estate sector, but along with that it also did away with the input tax credit (ITC), which experts and analysts feel goes against the very purpose of tracking the money trail and curbing black money.
Under-construction properties and affordable housing are the latest segments under GST, after restaurants, to have been denied ITC, by virtue of the rate cut, to 5 per cent or below. ITC is the credit available for all taxes paid on inputs across the value-chain to make production transparent and efficient as well as create audit trails to curb tax evasion.
“It does go against the very spirit of GST. Restricting input is not a good idea for any sector, and particularly for real estate, which needs to be formalised more,” Pratik Jain, partner and leader for indirect tax at PwC India, told news agency IANS.
Anuj Puri, chairman of ANAROCK Property Consultants, said after the rate cut and removal of ITC, developers may have to take a hit in their profit-margins, inducing them to resort to cash payments while purchasing inputs or raw materials. “This will increase the scope of black money generation in the market,” Mr Puri told IANS.
According to Mr Jain, the government slashed GST to 5 per cent and 1 per cent on the under-construction and affordable housing projects, respectively, and removed ITC as several real estate developers didn’t pass on the availed tax credit to customers.
“It’s more in the direction that it (government) wanted to give relief to the common man. But it is obviously not a good idea from a policy standpoint,” he said, adding restricting input credit may incentivise cash or black money transactions in the sector.
Similarly, in the restaurant segment too there was a feeling that restaurants were not passing on ITC they availed to customers in the form of lower prices.
Mahesh Jaising, partner, Deloitte India, said: “The government’s standpoint was that in the first couple of months, even though all the credit was being granted to restaurants, the base price of a menu was not declining. From the optics of customer, 18 per cent GST also felt high.”
In November 2017, the GST council cut rates for both air-conditioned and non air-conditioned restaurants to 5 per cent from 18 and 12 per cent, respectively.
Concluding that removal of ITC would not make much of a difference for customers, Abhishek Jain, partner at EY, said: “In these cases, it’s a lesser evil because buyers in these segments, in any case, do not get the credit.”
According to him, the decision would have both positive and negative implications as it would increase demand but may not lead to return of cash transactions.
However, the GST council’s suggestion to mandate a procurement cap of around 80 per cent of input from registered vendors may thwart untapped cash transactions, according to the analysts and sector players.
The council, while cutting rates on the real estate segment, sought to plug the loophole of having no ITC by making it mandatory for developers to procure 80 per cent inputs from GST-registered suppliers.
“I do hope after a couple of years, when GST settles down with more awareness in all sectors of industry and consumers, there could be a revisit to some of the composition schemes, as it involves credit denial,” Mr Jaising from Deloitte India said.
On the possibility of exclusion of ITC from any more items or segments, experts said such a move is unlikely
The government has detected Rs 20,000 crore worth GST evasion so far this fiscal and will take more steps to check frauds and increase compliance, a senior tax officer said Wednesday.
Central Board of Indirect Taxes and Customs Member (Investigation) John Joseph further said the department would soon call a meeting of the representatives of the real estate sector to understand transition issues faced by the sector post reduction in GST rates.
The GST Council, chaired by Finance Minister Arun Jaitley and comprising state counterparts, earlier this week decided to cut tax rates on under-construction apartments and affordable housing to five per cent and one per cent, respectively.
However, builders will not be able to claim credit for the taxes paid on inputs, like steel, cement.
The earlier GST rate on under-construction apartments and affordable housing was 12 per cent and eight per cent with input tax credit (ITC), respectively.
On demand for giving ITC relief to the builders of the under-construction flats which are already built but not yet sold to buyers, Joseph said the real estate sector will have to raise the issue with the urban development ministry.
Also read: India’s transformational GST has some hits, few misses
“You need to talk to them (urban development ministry). As revenue department we cannot give you any benefit of subsidy to that extent,” he said at an Assocham event here.
Joseph said between April-February 2018-19, GST evasion worth Rs 20,000 crore has been detected of which Rs 10,000 crore was recovered.
He said the tax officers on Tuesday detected fake invoice worth Rs 1,500 crore which was used to claim illegal GST credit of Rs 75 crore.
“We have already recovered Rs 25 crore and the rest is on the way,” Joseph said.
Stating that only 5-10 per cent of the businesses are “black sheep” and bring bad name to the industry, he said the government will take more measures to increase compliance, and act against evaders in a way such that genuine businesses do not suffer.
Joseph said the government has been dynamic in rationalising tax rates since GST rollout on July 1, 2017, while increasing compliance for 1.2 crore registered businesses.
“In future, as GST moves forward, the rates need to consolidate. Across the world it is one rate, but it may not be possible for us to implement it here… because we have the poorest of the poor and the richest of the rich in the country. “What is good for the richest, cannot be the best for the poor… But five rates converging into two or three, depending on what the Council decides. This is the way forward,” he said.
Currently, GST has 4-tier slab of 5, 12, 18 and 28 per cent, while essential items are zero rated.
Demand for residential properties is expected to receive a major boost following the government’s decision to cut the goods & services tax (GST) rates for under construction projects to 5% from effective rate of 12%. In a major push to stated objective of ‘Housing For All by 2022’, the government has reduced GST to marginal 1% for affordable housing while revising the definition of such homes.
Prior to this, under-construction residential properties attracted rate of 18% and effective rate of 12% after factoring one-third abatement for the value of land. The effective GST rate for affordable housing was 8%. Ready properties that have received occupancy certificate (OC) do not attract GST.
The government is focused on its agenda of pushing affordable homes, which is visible in the decision to reduce GST to a mere 1% for this segment. Lower tax burden on home buyers is expected to push demand in the segment which, in turn, will keep developers committed to build more affordable homes.
The decision is expected to help the government steadfastly move towards achieving its target of Housing for All 2022.
“The reduction of GST on Affordable Housing to 1% is a revolutionary move for Indian real estate. This move is a significant triumph for home buyers and will play a huge role in boosting their sentiments,” said Jaxay Shah, National President of realtors’ body the Confederation of Real Estate Developers Association of India (CREDAI). The reduction in the GST for under-construction projects is the most decisive move that will stimulate the demand and sales. This move will give the necessary fillip to the demand in under -construction segment, which has been suffering from low sales levels for last many quarters.
“The elimination of input credit tax benefit may hit profitability for the supply side; however, the potential demand generation as a result of this move will far outweigh any negative aspects leading to greater sales numbers and revenues,” said Shishir Baijal, CMD, Knight Frank India.