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News Indirect Tax-GST

  • Feb 24, 2020
  • Lotteries to attract 28 per cent GST from March 1

    A 28% Goods and Services Tax (GST) will be levied on lotteries from March 1, according to a notification. Last year in December, the GST Council had decided to impose a single rate of 28 per cent on state-run and authorised lotteries.

    The revenue department notified the GST rate on supply of lotteries and amended its earlier Central Tax (Rate) notification.

    Accordingly, the Central Tax rate for supply of lotteries has been amended to 14 per cent and a similar percentage will be levied by the states.

    This will take the total GST incidence on lotteries to 28 per cent.

    "This notification shall come into force on the 1st day of March, 2020," the revenue department notification said.

    Currently, a state-run lottery attracts 12 per cent GST, while a state-authorised lottery attracts 28 per cent tax.

    There were demands that a uniform tax rate should be imposed on lotteries following which a group of ministers were set up to suggest the GST rate. Following this, the GST Council in December voted for a single rate of 28 per cent on supply of lotteries.

  • Feb 22, 2020
  • Past cess surplus to halve states’ GST deficit in FY20

    The Centre will use about Rs 28,000 crore of the Rs 47,271 crore absorbed by the Consolidated Fund of India in FY18-FY19 period as ‘surplus’ revenue from the GST compensation cess to reduce the state governments’ GST revenue shortfall in FY20. Even after this, the states’ GST revenue (SGST) in FY20 will be some Rs 28,000 crore short of the level they would have achieved under the 14% ‘guaranteed’ annual growth formula.
    Some Rs 20,000 crore of the surplus that merged with the CFI was used to bridge states’ shortfall in the final months of FY19.

    Given the wide gap between the GST compensation fund and the funds required to compensate the states’ GST revenue shortfall, there has been considerable friction between the Centre and state governments in recent months. While states wanted the Centre to meet its ‘constitutional obligation’, the Centre remained ambivalent on how the issue would be tackled. Clarity on the Centre’s stand emerged when, in her budget speech, finance minister Nirmala Sitharaman said, “It is decided to transfer to the GST compensation fund balances due out of collection of the years (2017-18 and 2018-19), in two instalments. Hereinafter, transfers to the fund would be limited only to collection by way of GST compensation cess.”

  • Feb 21, 2020
  • Global IT companies told to assign value to brands

    The indirect tax department wants the software companies to value the global brand names and logos used in India, charge a fee on that and pay 18% goods and services tax (GST) on top of it, according to people with direct knowledge of the matter.

    Industry trackers said currently there is no valuation mechanism for global technology companies in India.

    In most cases, a brand licensing agreement is undertaken for which the Indian arms pay a fee to the parent that software majors club under “management fees” or “consultancy fees”.

    Software companies including Google, Facebook, Microsoft, SAP and Oracle, among others, have been questioned by the tax department and asked to explain whether they assign value on such transactions.

    None of the companies responded to an email query ET sent.

    “The moot point of debate will remain whether there is a mutual agreement for rendition of service. Further, the absence of consideration in various cases would lead to exclusion from the definition of supply,” said Abhishek A Rastogi, partner, Khaitan & Co, a law firm.

  • Feb 19, 2020
  • GST’s input credit problems: Taxpayers must be allowed to do business without hassles

    The Central Board of Indirect Taxes & Customs (CBIC) has instructed its officers to initiate measures to recover interest payable for delayed filing of monthly returns (GSTR-3B). As per FE (February 13), the instruction from Member of the Board puts the figure at over Rs 46,000 crore. Considering the shortfall in tax collections, and the financial year coming to close, the concern and drive are understandable. Under the GST law, tax payments and filing of returns go hand in hand. As per Section 39(7) of CGST Act, the due date for filing the monthly summary return (GSTR-3B) is the prescribed date for payment of tax as well. The GST law does not provide the option to pay the tax on time when return could not be filed for reasons like technical issues with GST portal..

  • Feb 19, 2020
  • UP notices to infrastructure companies raise question over levying GST

    Does a company that rents out heavy infrastructure equipment for projects needs to register in each state where the machinery is used? In what could become a contentious point between revenue authorities of states, indirect-tax officials of Uttar Pradesh recently issued notices to several infrastructure companies that lease heavy equipment such cranes for projects. The officials have questioned as to why the leasing companies were not registered within the state.

    This could lead to other states too asking such companies to register in their jurisdictions and pay goods and services tax there. Because of the way the GST framework is structured, multiple registrations may not cause additional cost to these companies, but their compliance burden will go up, tax experts said.

  • Feb 17, 2020
  • About 92% of rich taxpayers filed annual returns for FY18: GSTN

    The GST Network on Sunday said around 92 per cent of large taxpayers with turnover of over Rs 2 crore have filed annual returns for 2017-18 fiscal.

    With Goods and services tax launches on July 1, 2017, this is the first time when businesses registered under GST have to file annual return GSTR-9 and reconciliation statement GSTR-9C.

    "Statistics show that out of eligible large taxpayers, 91.3 per cent had filed their annual return by February 12, 2020. Similarly, 92.3 per cent eligible large taxpayers had filed their reconciliation statement before the said date," the GSTN said in a statement.

    While annual return filing is optional for taxpayers having annual turnover up to Rs 2 crore, the same is mandatory for those having annual turnover above Rs 2 crore. Such taxpayers are also required to file reconciliation certificate known as GSTR-9C, which can be filed only after filing of GSTR-9. The data shows that the number of taxpayers with a turnover of more than Rs 2 crore is 12.42 lakh, which is only 13.4 per cent of the total 92.58 lakh regular taxpayers. This means 80.16 lakh taxpayers are not mandated to file annual returns.

    The GSTN statistics, however, showed that 1.04 lakh taxpayers who had an annual turnover of up to Rs 2 crore have filed reconciliation statement.

    The top three states where businesses registered under GST (Goods and Services Tax) recorded maximum return filing are Maharashtra (96 per cent) followed by Rajasthan and Gujarat (95 per cent each).

  • Feb 17, 2020
  • India's GST collections are below potential: IMF team

    Multiple rates, exemptions and implementation challenges are affecting goods and services tax (GST) collections in India, an analysis by an International Monetary Fund (IMF) team has said.

    The study of India’s resource mobilisation for next five years has estimated that in 2018-19, GST collections were 5.8% of GDP, which was better than some of the comparable developing countries, but far below the potential of 8.2% of GDP, indicating that the efficiency gains from the new regime have not fully accrued.

    “The IMF team has estimated that the compliance gap may be of the order of 40%,” a government official told TOI. The team included Ruud de Mooij, Arbind Modi, Li Liu, Dinar Prihardini, and Juan Carlos Benitez.

    While it blamed multiple factors for the divergence between actual collections and potential revenue, the assessment flagged exemptions such as those on food articles as an area of concern.

  • Feb 15, 2020
  • ‘New GST filing format, e-invoicing to help in ease of doing biz, reporting for taxes’

    GST Network CEO Prakash Kumar on Friday said e-invoicing and the new format for filing GST will help improve the ease of doing business and reporting for the indirect taxes.

    “E-invoicing is a step towards improving ease of doing business and reporting for GST. Manual data entry leads to transcription errors and wrong entries,” Kumar said while addressing an event on ‘E-invoicing and New GST Return Format’ organised by the PHD Chamber of Commerce and Industry.

    There is a need for standard to ensure complete interoperability, he said.

    “The economies in the high-income group OECD are at the forefront of invoice digitisation,” he said.

    The GSTN CEO said that in India, the aim is to make digitisation part of business process of taxpayers and eliminate all manual reporting.

  • Feb 13, 2020
  • Delayed GST payments: Unpaid interest alone stands at Rs 46,000 crore

    In an effort to boost goods and services tax (GST) collections, the Central Board of Indirect Taxes and Customs (CBIC) has sent a directive to zonal heads of the indirect tax department to recover a whopping Rs 46,000 crore from taxpayers on account of penal interests arising from delayed payment of tax with GSTR-3B returns. The last date for filing GSTR-3B for any month is 20th of the subsequent month; an annual interest of 18% is payable on the gross tax amount for any delay.

    You are requested to look into the issue personally and to urge the field formations under your jurisdiction for making recovery of applicable interest from the identified taxpayers and to furnish weekly report of GSTIN-wise recovery of interest made in this regard,” CBIC member AK Pandey wrote to principal chief and chief commissioners on Monday. Additionally, Pandey clarified that interest liability would be on the gross tax dues and not just on the cash component. “Doubts have been raised by the field formations on whether interest has to be paid on the gross tax liability or the net cash liability. In this regard, the provision of section 50 (of the GST Act) are very clear that interest liability is required to be paid on the tax liability that is paid belatedly, either through cash or input tax credit. In other words, interest is required to be paid on total amount of tax liability as shown in GSTR-3B,” he added.

  • Feb 12, 2020
  • GST Annual Return: SC stays extension of filing date on Centre’s plea

    The Supreme Court has stayed the Rajasthan High Court order that extended the deadline for filing of Form GSTR-9 (annual return) and Form GSTR-9C (reconciliation statement) without fine by up to a week to February 12, 2020 on a plea by the Centre that the move could undermine its efforts to boost GST compliance. Having had to extend the deadlines for filing of the two forms several times and come under flak for such leniency, the government pleaded in the SC: “Tinkering with such time lines would have a catastrophic impact on the functioning of GST law, as it has the tendency to create confusion and ambiguity in the trade.”

    The stay order was passed pursuant to Mehta’s submissions that only Rs 200 per day was being charged for the filing of late returns and the amount will be refunded in case the government lost the case. However, the apex court bench led by Justice RF Nariman directed the HC to decide the issue on the basis of facts without getting influenced by its ad-hoc order.

  • Feb 12, 2020
  • Rs 81,043 crore GST compensation released to states for April-September, says Anurag Singh Thakur

    The Centre has released Rs 81,043 crore as GST compensation to states for April-September 2019, Minister of State for Finance Anurag Singh Thakur said on Tuesday. In a written reply to a question in the Rajya Sabha, he said GST compensation cess collection has shown upward trend since October 2019. GST compensation cess of Rs 7,607 crore was collected in October, Rs 7,727 crore in November, Rs 8,331 crore in December and Rs 8,637 crore in January.

    For 2019-20, the amount targeted to be collected from cess in GST was Rs 1.09 lakh crore. Of this, Rs 70,534 crore has been collected between April-December 2019. The amount of GST compensation released to states for April-September 2019 stood at Rs 81,043 crore, Thakur said.

    For 2018-19 fiscal, the net collection of GST compensation cess stood at Rs 95,081 crore as against the target of Rs 90,000 crore. For full fiscal, the government had released Rs 81,141 crore to states as compensation.

    For 2017-18, the net collection from cess stood at Rs 62,612 crore, as against the target of Rs 61,331 crore. The compensation amount released to states was Rs 48,785 crore.

    Under GST law, states were guaranteed to be paid for any loss of revenue in the first five years of GST implementation, which came into force on July 1, 2017.

  • Feb 11, 2020
  • Tax dept wants cos to pay GST on non-compete fee

    Non-compete agreements during acquisitions that restrict the seller from starting a new venture for some time or poaching employees and customers, have attracted the taxman’s attention.

    Several private equity firms, strategic investors and others that have bought businesses and entered into these contracts with the sellers have received notices from the indirect tax department, demanding that they pay goods and services tax at 18% on the non-compete fee.

    According to the tax department, a non-compete agreement is essentially a service provided by the seller of the business to the buyer.

    One such case involves a Bengaluru-based technology firm that sold the business to some investors for around Rs 1,000 crore. About 20% of the deal value was the non-compete fee. The sellers — a set of promoters — agreed that they would not start a competitive business for three years. They also agreed that they would not approach the company’s current customers in any way.

  • Feb 10, 2020
  • Govt to release another Rs 35K cr compensation to States soon

    The Centre will soon release another Rs 35,000 crore to states to compensate for the revenue loss on account of GST rollout, an official said.

    Under the Goods and Services Tax (GST) law, states are guaranteed compensation for revenue loss for 5 years if their revenue does not increase 14 per cent on the base year of 2015-16.

    There were no differences between the Centre and States with regard to compensation payment in 2017-18, 2018-19, and in the first four months of the current fiscal.

    However, with revenue mop-up from compensation cess falling inadequate, the Centre held back fund transfer to states for revenue shortage beginning August.

    Following this, states raised the issue with the Centre and in December 2019, Rs 35,298 crore was released as compensation for August-September.

    “We will soon transfer another Rs 35,000 crore from the consolidated fund of India (CFI) to compensation cess fund in 2 instalments. The first tranche will be compensation for October-November,” an official told PTI.

    The excess collection from compensation cess in 2017-18 and 2018-19 was deposited in the CFI earlier and this will now be transferred back to the compensation fund, the official added.

  • Feb 10, 2020
  • Panel to give feedback on new GST system

    The Goods and Services Tax Network (GSTN) has set up a consultation committee to provide feedback on new functionalities in the GST system. Suggestions will be related to policy and technology. The committee, which will include representatives from selected states recommended by the GST Council, member secretary of GSTN, representatives from the Central Board of Indirect Taxes and Customs (CBIC) and independent experts, will provide suggestions related to policy and technology, as per an office order issued to the effect.

    The panel will also have representatives from trade and industry bodies such as CII, Ficci and ICAI. It will provide feedback “when significant changes are brought in the system, or when changes in business processes are contemplated”, the order said. “Provide feedback on procedures and processes from point of view of tax payers and tax consultants,” it said. The committee will elect its chairman at the beginning of every meeting, while the strength of the quorum will be a third of the total number of members.

  • Feb 10, 2020
  • Once-a-year tweak in GST rates on the cards, says FM Nirmala Sitharaman

    The government is examining a proposal to consider tweaks in GST (goods and services tax) rates only once a year against the present trend of periodic changes. Speaking at a press meet in Kolkata on Sunday, Union Finance Minister Nirmala Sitharaman said: “Periodically changing rates brings uncertainty and creates a ripple effect on businesses because they cannot ascertain how much to keep aside for the year. The government also does not know how much revenue would come in. So we, not formally, propose to the GST Council to consider a situation where rate rationalisation can be done only once a year.”

    “We are repeatedly telling industry … whenever they approach us for rate reduction … they should also convey the same concern to the states, and the state minister should also voice the same concern in GST Council meetings. It is a federal structure, where there is a healthy relationship between the Centre and the states,” she said.

  • Feb 04, 2020
  • Centre to release GST compensation to states in 2 instalments

    The Centre will release all due GST compensation to states in two instalments, Union Minister Anurag Thakur said in Lok Sabha on Monday.

    The reply came after MPs from Telangana and Odisha complained during Question Hour that their states were not getting the share of the Goods and Services Tax (GST) and Integrated Goods and Service Tax (IGST).

    "All due GST compensation will be given to states in two instalments," Thakur, union minister of state for finance, said.

    The minister said GST (Compensation to States) Act, 2017 provides for compensation to States/UTs (UT with legislature only) on account of revenue loss due to implementation of GST on a bi-monthly basis.

    Accordingly, he said, the states have been paid GST compensation on a bi-monthly basis with effect from July, 2017.

    Thakur said the GST Compensation has been released till September, 2019 and the next bi-monthly GST Compensation is due for October-November, 2019.

    The minister said a total of Rs 2,10,969.49 crore has been released as GST compensation to states so far including UTs of Delhi and Puducherry after implementation of GST with effect from July 1, 2017.

  • Feb 01, 2020
  • Govt nets Rs 1.1 lakh cr from GST in January

    Goods and services tax (GST) collection has crossed the Rs 1 lakh crore-mark for the third month in a row in January on the back of anti-evasion steps taken by tax officers.

    This is second time since introduction of GST in July 2017 that the monthly revenues have crossed Rs 1.1 lakh crore.

    The GST collection is in line with the target set by Revenue Secretary Ajay Bhushan Pandey after a high-level meeting with senior tax officials earlier this month.

    During the month, GST revenue from domestic transactions has shown a growth of 12 percent over the revenue during January 2019, according to an official statement.

    Taking into account the integrated goods and services tax (IGST) collected from imports of goods, the total revenue during January 2020 has increased by 8 percent in comparison to the revenue during January 2019, it said.

    However, the IGST on import of goods has shown a negative growth of (-)3% as compared to January, 2019.

    "The gross GST revenue collected January 2020 is Rs 1,10,828 crore, of which CGST is Rs 20,944 crore, SGST is Rs 28,224 crore, IGST is Rs 53,013 crore (including Rs 23,481 crore collected on imports) and Cess is Rs 8,637 crore (including Rs 824 crore collected on imports)," it said.

    The GST collection stood at Rs 1.02 lakh crore in January 2019, as per the official statement.

  • Jan 28, 2020
  • Government blocks Rs 40,000 crore GST claims on returns mismatch

    The Central Board of Indirect Taxes and Customs (CBIC) has frozen tax credits of around Rs 40,000 crore as the returns did not match, exposing alleged fraud by close to 2,000 entities, apart from cases where returns were not filed. Last week, the indirect tax wing of the revenue department blocked the credits within four hours, CBIC chairman John Joseph said at an event on Monday.

    Companies are entitled to credits on tax paid on inputs in the production chain so that there is no cascading effect of taxes. But major discrepancies in returns and instances of a large number of frauds prompted the government to crack the whip.

    There have been multiple ways in which frauds have been taken place. Sources said, the department had collected data on mismatch of over 20% in the initial GSTR-1 filing for the month and the final GSTR-3B returns. Subsequently, the bar was lowered to a difference of 10% and the government used various red flags to then identify companies, while completely relying on data instead of sending tax inspectors to premises to check for books.

  • Jan 23, 2020
  • Govt staggers GSTR filing deadline to ease system load

    After taxpayers complained of technical glitch in filing the monthly summary GST returns (GSTR3B), the government on Wednesday said it would allow staggered filing on the basis of turnover and location to ease the load on the system which is witnessed closer to the filing deadline on 20th of every month. For about 8 lakh taxpayers with turnover over Rs 5 crore, the last date of filing would remain the same. For those below the turnover threshold, they have been further divided into two groups of 46 and 49 lakh taxpayers belonging to two sets of states and UTs whose deadline will now be 22nd and 24th of every month, respectively. However, experts said that while excess load is a problem on the last day of filing, when the system shows that it’s busy preventing return-filing, is only a part of the problem. There are other structural issues as pointed out by a CAG report tabled in Parliament earlier this year.

  • Jan 22, 2020
  • GSTN working within limitations; tax consultants say several glitches

    After reports of technical glitch in filing GST returns (summary return GSTR-3B), Goods and Services Tax Network (GSTN) said a total of 65.65 lakh returns for December were filed till January 20, out of which 13.30 lakh returns were filed on the last day itself. “There have been few issues about one-time passwords (OTPs) being received with some time lag on account of delay by the email service provider or local internet issues. Thus, in order to ensure that no inconvenience is faced by the taxpayer on this account, the OTPs are sent simultaneously on email as well as on registered mobile number so that in case there is a delay in receiving OTP on email, OTP received on mobile phone or vice versa can be used,” GSTN said. Some tax consultants complained they were faced several glitches on Monday including payments not being reflected in the taxpayers’ dashboard. “GSTN system is unable to take last minute load of filings and there is a prolonged time lag in payments to appear, multiple OTPs are sent for a single filing, data takes time to reflect, preview of returns show wrong numbers, data uploaded using ASP/GSP takes additional time to reflect and the system frequently logs out the user,” Rajat Mohan, senior partner at AMRG & Associates said.