Amid criticism the roll-out of the goods and services tax (GST) has been hasty, haphazard, hit businesses hard and had a transitory adverse effect on the economy, finance minister Arun Jaitley on Friday said it was “going smoother than expected”
Amid criticism the roll-out of the goods and services tax (GST) has been hasty, haphazard, hit businesses hard and had a transitory adverse effect on the economy, finance minister Arun Jaitley on Friday said it was “going smoother than expected”. “The decision-making mechanism at the top between the Centre and and states (GST Council) has been reasonably institutionalised and the mechanism created to address day-to-day issues is robust,” he said at the 70th AGM of the Indian Banks’ Association. His ministry has also clarified that the Rs 65,000 crore credit claimed by taxpayers in respect of central excise and service tax in the pre-GST period isn’t an “incredibly high” figure as made out by some quarters. However, some some of these may not be admissible in the GST regime, it said.
“amount of Rs 95,000 crore, which was received in the month of August 2017 for (July GST), is the amount actually paid in cash other than availing credit”, the ministry clarified, scotching speculation that the government’s revenue might have plummeted because of the transitional claims.
“Firstly, Rs 65,000 crore is the credit claimed by the taxpayers in the TRANS 1 form as their balance of credit. It does not mean that they would have used all of this credit for payment of their output tax liability for the month of July 2017,” the ministry explained. Transitional claims, as reported by FE earlier, can be availed of by the businesses against their supplies in the next six months.
According to the ministry, Rs 1.27 lakh crore of credit of the central excise and service tax was lying as “closing balance” as on June 30, 2017. “Of course, some of these credits may not be admissible under GST regime, for example the credits, which are blocked under Section 17 (5) of Central GST Act or which are not covered under the definition of GST. Also, some of the credits which are claimed in TRANS 1 form may be under litigation and, therefore, it may not be available to the assessee to carry forward or (for) utilisation. It is from this angle that the CBEC is examining the transition credits, which are claimed by the assessees in TRANS I form in certain cases,” the ministry added.
Abhishek Jain, tax partner at EY India, said: “It would be interesting to see how much of the Rs 65,000 crore (transitional credit claimed) has been utilised against July (tax) liability and how much balance credit has been carried forward by the taxpayers, as this would give better clarity on the overall GST collections of the government.” Also, the ministry noted, some assessees would have committed mistakes in filing TRANS 1 form of admissible credit. It has, therefore, been decided to provide facility for revision of TRANS 1 by the GST Council. This facility would be available by the middle of October 2017 and assessees are asked to revise their TRANS 1 form before October 31, 2017, so that they themselves can remove the error.
As far as the GST revenue is concerned, the Centre and states had crossed the “red line” in the first month of July itself, with the collections marginally exceeding the budget target for the Centre and being above the estimated revenue-neutral level for states. While many states individually have since complained of the revenue shortfall, the overall states’ GST growth could be higher than what they they would have achieved from the corresponding taxes in the pre-GST regime, sans rate changes. While the reported GST revenue of Rs 95,000 crore for July is the amount collected till the last week of August, the final collections could be higher because of a host of factors: A few lakh businesses have since paid the month’s taxes, and the units under the composition scheme are yet to pay taxes.
Only 47 lakh of the 90 lakh businesses registered on the GST Network (GSTN) portal have filed taxes as yet for July, and around 31 lakh paid taxes for August. It may also be noted that July was a month when sales remained subdued in many industries as it came after pre-GST destocking. However, some tax experts have a word of caution too. Expansion in the tax base at the outset of GST due to the applicability of GST on transactions not taxed before would likely shrink after the industry avails the credit generated by payment of tax on such newly-taxable transactions, an analyst opined.