Going by the trend since the July launch of the goods and services tax (GST), the Centre’s FY19 GST revenue target continues to look ambitious — the mop-up would need to grow by over a quarter to meet the budget estimate of Rs 7.44 lakh crore. During the July-February period, the monthly average GST collection was a tad below Rs 90,000 crore; assuming nearly half of this — around Rs 43,000 crore — goes to the Centre’s kitty, the shortfall is a huge `12,000 crore a month. The GST regime has so far been running with most of the anti-evasion provisions being suspended.
This is primarily due to the GST Network’s inability to handle the load as well as complaints from taxpayers, especially mall and medium enterprises, about increased compliance burden. “The current trend of GST revenue collections are far short of the monthly targeted/estimated GST collections for FY19 by the government. The collections may improve once the e-way bills is implemented from April 1 but that may not be enough to cover the gap. The other anti evasion measure like reverse charge, TDS and TCS are currently suspended which once implemented may further enhance the collections,” Abhishek Jain, partner, EY said.
The GST Network will implement the electronic way bill to track cargo movements across state borders as well as within states from April 1. While the earlier attempt to introduce the mechanism failed on February 1 due to a deficient system, it is expected that it could raise the monthly revenue collection by a substantial Rs 10,000 crore. “The e-way bill mechanism is an anti-evasion measure to plug revenue leakages in business-to-consumer (B2C) transactions. This is monetarily a more important measure than invoice-matching system in the return filing process, which targets evasion in business-to-business (B2B) transactions,” a tax official told FE. He added that the government was expecting about Rs 10,000 crore more from e-way bill and close to Rs 3,000 crore from invoice-matching. But experts say that there is still no clarity on when the new return-filing system with invoice-matching provisions will be finalised and implemented. Currently, the group of ministers of state finance minister, appointed by the GST Council, is considering two proposed variations of simplified returns.
Another anti-evasion measure to track transactions between registered and unregistered dealers, reverse charge mechanism (RCM), has been suspended till June. With the new fiscal year only days away, these delays could further widen the gap between GST collections and target. “The lower-than-expected GST collections have been due to multiple reasons such as rate reductions, repeated extensions of the deadlines for returns-filing etc. There is a strong feeling among tax authorities that the revenue flows could be accelerated by the introduction of anti-evasion measures such as the e-way bill, reverse charge and invoices-matching. A tighter scrutiny of GST returns and transition credits could result in increased GST collections in the coming months,” MS Mani, partner, Deloitte India, said.
Although the government has launched a year-long campaign to minutely verify Rs1.6 lakh crore of transitional credit claimed by taxpayers, tax practitioners say that denying credit claims is fraught with the risk of litigation as many taxpayers are willing to fight the tax department on aspects that are not well defined in the law or have had contradictory judgments on, earlier. Rajat Mohan, partner at AMRG & Associates, said that the government needed to look at economic indicators of other developing nations to determine whether indirect tax payments by Indian taxpayers are sacrosanct with other Asian counterparts.
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