Given a 12% decline on GST revenue collections in October, finance secretary Hasmukh Adhia has called a meeting of state and central revenue officials on Saturday to review revenue trends and discuss ways to increase collections by plugging leakages. Additionally, the Central Board of Excise and Customs (CBEC) will also hold a meeting of its officials via video conferencing on Tuesday to discuss urgent GST issues. While the October revenue mop-up declined to `83,000 crore — nearly `10,000 crore below the average revenue in the preceding three months — the government as well as tax experts believe that it could be impacted further for at least two subsequent months primarily due to reduction in tax rates of over 200 items, and continued usage of accumulated credit (IGST and transitional) by taxpayers to pay taxes.
The GST Council had cut GST rates on 178 items from 28% to 18%, which came into effect on November 15, and to that extent, will adversely affect revenue for the month. Official sources said that in many industries, the tax rate cuts have created a situation where the output tax liability is lowered but input taxes are not mitigated. This allows these businesses to meet the tax liability with a higher proportion of credit and lesser payment in cash. One reason for the October collections being lower than in the previous months could be this, the sources added. This could be exacerbated further as businesses will continue to claim input tax credit for taxes paid on the pre-GST stock. While transitional credits on pre-GST taxes paid on stocks carried over to the GST regime was estimated at around `65,000 crore, CBEC is ascertaining whether the claims have been on the higher side. These credits have to be claimed by December, meaning the GST revenue will start having lesser impact of them in the subsequent months. The apparently high transitional claims are even as the government hasn’t yet allowed ‘TRAN-2’ filings, which allows credits on excise paid earlier without supporting documents but subject to a cap of 60% of the tax paid. The two meetings this week are also likely discuss the issue of tax returns filed by assessees. These numbers have shown that a set of registered taxpayers have not filed returns since GST was rolled out in July. Meanwhile, the tax department is also worried over the slow increase in the number of entities that pay taxes on a monthly basis, even as ‘eligible taxpayers’ registered on the GSTN have risen during the recent months. While the taxpayers eligible to pay taxes — except the composition-scheme units that pay nominal taxes without tax credit — increased from about 60 lakh in July to some 80 lakh in October, the number of units that paid taxes hovered around 58 lakh in August and September and by now, the October figure is a little over 50 lakh.