The new government is likely to further tighten GST norms due to poor revenue collection in the last financial year. The government is facing a revenue shortfall of Rs 1 lakh crore.
Though monthly receipts have picked up recently, the entire collection of FY 2019 is not enough to meet the government's own estimate.
The looming pressure on the fiscal position may push the government to implement invoice matching and reverse charge mechanism in the coming days.
A finance ministry official privy to the matter said revenue collection issues would be discussed in the GST council meet in the first half of June.
The actual gross GST collection dipped 10 per cent to Rs 11.77 lakh crore in FY 2019 from the budget estimate. The collection was also lower from the revised estimate by 3 per cent. The GST collection for FY 2019 was expected to be Rs 13.13 lakh crore, which was revised to Rs 12.13 lakh crore.
However, in April, GST revenue collection reached its peak. Total collections stood at Rs 1,13,865 crore, the highest since its rollout in 2017.
Finance ministry sources said revenue targets for FY 2020 might be revised in the July budget, given the trend in the previous fiscal. The government is also mulling widening the GST net to include new sectors such as electricity, petroleum and alcohol under its purview.
At present, the average monthly GST collection is Rs 0.98 lakh crore against the revised estimate of Rs 1.2 lakh crore. In April, collections crossed Rs 1 lakh crore for the third time in four months.
Experts said this shortfall is on account of reduction in GST rates for multiple commodities and services. "Some of the weaknesses in FY19 could be on account of tax cuts in July and December 2018.
GST collections as a percentage of non-Agri GDP had fallen sharply but have now recovered," economists Sanjay Mookim and Nafisa Gupta of BofA Merrill Lynch, a US-based multinational investment bank, wrote in a note.
Reverse charge mechanism (RCM) is a popular method of collecting taxes on all such supplies where the tax administration does not want to put compliance burden. GST envisages two such provisions under Section 9. Though one section that refers to supplies from unregistered suppliers has been put in a state of comatose, another provision - section 9(3) - is being lucratively used by the revenue department.
Shailendra Kumar, founder and CEO of tax research portal Tax India Online, told India Today, "A quick look at a bundle of decisions taken by the GST Council may indicate that RCM has been increasingly used as a successful tool of revenue collection. A good number of services have been brought under it. If the Modi government decides to rake in more revenue, it just needs to withdraw the notification suspending provisions of section 9(4) and it would ensure a minimum 10 per cent growth in GST collections."
The NDA government had touted GST as the best tax compliance tool when it was introduced on July 1, 2017. But over a year later, loopholes persist.
"The back-up system, which is in function today, is resulting in substantive mismatch. The attributable factors range across a broad spectrum. This may be one of the reasons that tax collection suffers today. It is also likely to cause trouble for genuine taxpayers in the future," said Shashank Gupta, partner and head, indirect tax, for tax consultancy Girish Ahuja & Associates.
In FY 18-19 the average increase was around 8 per cent on a monthly basis, compared to FY 17-18.
"With limited room for increase in tax rates, the government is likely to focus on plugging tax leakages in the next few months. Along with data analytics which has already started, the government now plans to start e-invoicing to track invoices on a real-time basis. With all these measures, GST collections are likely to increase, but that process may be gradual. The government has an ambitious target in FY 19-20 which is over 20% more than FY 18-19," Pratik Jain, partner, PwC India told India Today.
Published On : 31-05-2019
Source : India Today
