Revenue secretary Hasmukh Adhia speaks about the slow pace of filing of GST returns, the inevitability of invoices-matching, the trend of GST collections, etc, in an interview with Sumit Jha. He says the government is open to course correction and easing taxpayers’ compliance requirements further. “We are learning from experience,” he says, while also hinting at imminent rate cuts for more commodities. Convergence/reduction of the tax slabs could happen at a later date, he says. Excerpts:
Do you have plans to ease compliance requirements further, especially on invoice matching?
The government is open to course correction. We have never said that we will not change rules in the face of difficulty faced by people. This has been demonstrated in our actions also. Invoices-matching is the heart of GST. So far we have given taxpayers leeway. We have said that up to December, GSTR-3B (summary returns) can continue to be filed so that our tax income is uninterrupted. But somewhere down the line, we have to go through the GSTR-1 GSTR-2 and GSTR-3 process. For July, we have allowed 50 days to complete the process so that the taxpayers learn the process of entering data and filing returns. Now GSTR-2, for which we normally give 5 days, we have given 20 days for July. Let the taxpayers find out whether input tax credit invoices are missing, how data flow from GSTR-1 to GSTR-2. Based on the entries, we will allow credit in the same month and GSTR-3 (invoice-matching) will be generated. For July filings, GSTR-3 will be generated in November.
Based on the experience for the first month’s filing, we will fix the time-frame (for filing comprehensive returns) for August and September. Already, 90% of the people below the threshold of Rs1.5 crore annual revenue will file quarterly returns from October 1 for Oct-Dec quarter. These small businesses have also paid taxes for the first two month by filing GSTR-3B. They will do the same for September and have to file it by October 20.
Over what period would the transitional credit of Rs 65,000 crore claimed be the taxpayers be allowed? How much of these claims have been adjusted against July tax liabilities?
As on July 1, there was no balance in anyone’s account. Then Trans-1 returns were filed claiming r transitional credit of excise and service tax, which went into input tax credit (ITC) ledger. In the same month, a business might also buy some goods the ITC claims of which also entered in the ledger. As the combined ITCs are used to discharge output tax liability, these (credits) can’t be differentiated to compute which credit (transitional or new) was utilised. It would take about six months for utilisation of the entire transitional credit.
How many states have so far claimed compensation for GST-related revenue deficits?
All the states, barring one or two, faced revenue shortfall for the first two months and have been compensated through the compensation cess collected. More than Rs 8,000 crore has been released to states for July and August. Fortunately, July was a buoyant month for them due to VAT collections so the compensation was mostly for August.
While some tax experts say e-way bill is a redundant mechanism, many businesses are asking for quick Implementation. Why is this dichotomy?
It is the only mechanism to stop illegal shifting of goods from one place to another. Without it, states will have more reasons to put their inspectors on the field. E-way bill is to be generated on a mobile phone and once the record is created, there is no reason for any inspector to check it. E-way bill can also be matched with invoices. We postponed the implementation of e-way bill because states wanted more time to prepare themselves and even hardware and software development required two more months. We would be ready within two months and start rolling out the practice in some states and from April 1 in the rest of the country.
Cess proceeds (over Rs 7,500 crore each in July and September) seem to be more than estimated.
Our estimate is that while initially there could be an accumulation of cess revenue, that might not be permanent feature.
Some 40% of taxpayers who filed the returns for July have claimed nil-tax liability. Isn’t this a cause for concern?
It is indeed a large number. If enforcement is required, we will carry it out, though not in the nature of search and seizure. We may opt for discreet inquiries and meetings with such groups of taxpayers, to find out the reasons for the trend.
If you consider the people filing taxes out of eligible taxpayers, the number is similar to or even lower than what it was before GST. Has the idea of GST expanding the tax base come a cropper?
It (tax base) will go up over a period of time. Of the 26 lakh new taxpayers who registered, only 10 lakh came in July and the balance in subsequent two months. We will have to make the new taxpayers accountable (in filing returns).
Will the GST Council converge the tax slabs this year?
Convergence will be a process to be carried out later .It is unlikely to happen this year because it takes time (to complete the exercise). Moving items from higher to lower tax slabs can however continue on the basis of certain principles enunciated in the approach paper, which was approved by the Council at its latest meeting. Based on the paper, a fitment committee will finalise the rate changes. .
Is there any plan to change revenue threshold for GST, considering that a sizeable sections of the small taxpayers are not compliant?
There is no immediate plan for this as the existing threshold of Rs 20 lakh is reasonable. And we have raised it for composition scheme to Rs 1 crore from Rs 75 lakh earlier.
Doesn’t allowing inter-state sales for composition dealers go against GST principle of consumption tax?
Some states are opposing this proposal because of that. The group of ministers headed by Sushil Kumar Modi will discuss allowing inter-state supplies for composition dealers dealing in goods. There are certain states like Karnataka and Tamil Nadu, where there are equal number of transactions both ways, so both will gain if this is allowed. But between, say, West Bengal and Meghalaya, there will always be more number of transactions going from then former to the latter, leading to the latter losing out on revenue.
Considering the GST revenue trends so far, does the new tax look revenue-neutral? The talk was that it will boost revenues.
We can’t say anything about the revenue trend unless at least six months have passed.