With close to 70% of the 1.1 crore businesses registered for the goods and services tax (GST) filing the returns by the deadline, the compliance level is now satisfactory, GST Network’s chief executive officer Prakash Kumar told FE, adding that the vexed issue of delays in refunds to exporters has also been fully resolved for those pay integrated GST and seek to get it back.
In the initial months since GST’s July 2017 launch, just a little over half of the registered taxpayers used to file returns (and pay tax) by the deadline (the 20th of the next month). While overall taxpayer base has expanded over months from around 64 lakh at the start, the number of monthly return-filers also has risen. According to Kumar, almost all taxpayers who have a tax liability are now filing the returns. “These numbers are in line with what we had in the VAT regime. Even in the case of income tax returns, there are 25 crore PANs but only over 6 crore people who actually file the returns,” he added.
Among exporters, those who pay integrated GST (IGST) and file refund applications with “the correct details” were getting the refunds in four to five working days, he added. The prospect of prompt refunds, he said, encouraged exporters to use the fully automated IGST route rather than the letter of undertaking route, which doesn’t involve tax payment but only refund of input tax credits. Exporters are eligible for refund of tax content in export goods as such such sales overseas are zero-rated.
“Refund process for claims filed since February has largely been smooth. We have been clearing refunds everyday and it has become relatively error-free,” Kumar said. Exporters have to declare the identical details to the customs department as well as to the IT backbone for GST refunds but failure to match details in earlier days had led to refunds getting stuck.
However, Kumar added that the input tax credit (ITC) route for exporters still suffered from delays as it was not completely automated and tax officials were required to verify details before sanctioning refunds. Apart from exporters, ITC refunds are also claimed by businesses supplying GST-exempt goods and those dealing in goods with inverted duty structure.
“We had the software for even automated ITC refund but it would work only with GSTR-2 and 3 forms, which have remained suspended. Since there is no validation with GSTR-2 and 3, the time-consuming task of manual interference is required,” he said.
The Central Board of Indirect Taxes and Customs (CBIC) has had to undertake special refund drives — one in March and the other earlier this month — to ensure that refunds are cleared with manual intervention and checks. At the beginning of the second such drive, the government had said that Rs 14,000 crore of refund claims were stuck.
GSTN will start work on the new simplified return-filing system after the tax department moots the final draft (software modules related to appeals, investigation and assessment are currently being developed). Detailed returns are crucial for invoices-matching, which is integral to check tax evasion.