There have been few national-level complaints over businesses tending to profiteer after the goods and services tax (GST) roll-out and so the proposed authority to check such practices might not be required, revenue secretary Hasmukh Adhia said on Thursday. In an exclusive interview with FE, he also said more than Rs 8,000 crore has already been released to the states for their GST-related revenue shortfall for July-August period, as “almost all states except one or two” have sought the constitution-guaranteed succour.
Calling invoice-matching the “heart” of GST, the official said it would have to start in right earnest sooner rather than later, although the GST Council was still open to relaxing the schedule for filing the comprehensive returns (GSTR-1, 2 and 3) and concomitant invoice-matching after learning from the July cycle that is underway.
The review could mean that even larger businesses that are now filing returns on a monthly basis could get leeway to upload bills on the GST Network after longer intervals, say quarterly or half-yearly. Recently, the council allowed firms with a turnover below `1.5 crore (over 90% of the taxpayer base) to move to quarterly-filing mode from October.
Asked how much of the Rs 65,000 crore transitional credit claimed against input taxes (excise/service tax) paid in pre-GST regime was allowed against the claimants’ July GST liability, the revenue secretary said that these credits were difficult to segregate from the fresh credits for July purchases.
However, he added that the whole transitional claims will be exhausted “in six months” (starting July). “Some people may not have a big (tax) liability so they could continue (to utilise transitional credit) for a few more months and reduce (government) revenue in the period to that extent,” he said.
Without hazarding a conjecture on the revenue potential of the GST in the present form, as “we may have to wait for at least six months” to make a reasonable conclusion, the secretary said the proposed rate convergence would not happen this year. On the highest GST rate of 28% (applicable on 19% of items under GST when it was launched in July; the rates were cut on a few subsequently) being pinching, he said: “We may move items from higher to lower tax slabs on the basis of certain principles enunciated in the approach paper approved by the council. A fitment committee will work on it and its proposals will be considered in the council.” However, he added that the council hasn’t yet started working on more rate cuts as the approach paper was approved only in its last meeting on October 6.
Asked whether it wasn’t a matter of concern that 40% of the 55 lakh businesses that filed the interim returns for July had paid nil tax, Adhia said it indeed was. “It is a large number. If enforcement is required, we will carry it out, but not in the nature of search and seizure. We may carry out discreet inquiries and hold meetings with such groups of taxpayers, trying to find out the reasons (for claiming no business activity).”
The official admitted that once invoice-matching is regularised, it could prove a bit painful for a couple of months or so (as deferment will have resulted in some accumulation), but the system will be a powerful deterrent to non-compliant suppliers as they “run the risk of being pushed out of business permanently”. “Such suppliers will be recorded and based on who is defaulting and how much, we will issue compliance rating to them. A buyer will then look at the rating and if it is bad, might decide not to buy from the seller. It is a self-policing system.”
Adhia hinted at the redundancy of dreaded Anti-profiteering Authority, considering the nature of complaints and their resolution so far. “Whatever (complaints) we have got are from restaurants and real estate and these too are small in nature. There are no national level complains as of now. If a state receives a complaint, it will be examined by the screening committee at its level and the complaint will come to the standing committee (at the Centre) only if the screening committee finds merit in it. The standing committee could refer the matter to the DG-safeguards which, upon probe, could refer to the authority,” he explained. The GST Council has cleared the setting up of the authority, but it is yet to be approved by the Union Cabinet, let alone take shape.
While about `15,000 crore has been collected via the GST cesses on demerit goods in the July-August period, the funds released to the states were lower at just over `8,000 crore. But Adhia hastened to add that the cess proceeds might not be in surplus. Because of the transition, states saw buoyant VAT revenues in July and almost the entire revenue shortfall for the first two months of GST was of August, he said, adding that cess revenue might even fall in the coming months.