Cross-audit of GST and Income Tax to curb evasion: Hasmukh Adhia

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New Delhi | Published: July 1, 2018 1:52:50 AM

Finance secretary expresses concern over C-GST shortfall, says many states may not need compensation in two years

The worry is for GoI rather than states, says Hasmukh Adhia, finance secretary

The Goods and Services Tax (GST) helped expand the tax base and spurred compliance, finance secretary Hasmukh Adhia has said, even as he expressed concern over a huge shortfall (Rs 22,000 crore in May) in the Centre’s GST revenue. “The worry is for the Government of India (rather than states, which are compensated). We don’t have guaranteed revenue (unlike states, which are assured of 14% annual revenue growth under the Constitution). We have to fend for ourselves. If the revenue growth isn’t on expected lines, we will be in trouble,” he told FE in an interview.

Stating that the aggregate (Centre-state) GST revenue should be Rs 1 lakh crore per month at the minimum for FY19 (except for March, this threshold has never been reached), the secretary hinted at cross-matching of the proposed GST audit forms with the income-tax returns.

As FE reported earlier, the GST Network is working on the audit format for assessees reporting over Rs 2 crore in annual revenue. The I-T returns for corporates (ITR-6) and for presumptive income from business and profession (ITR-4) released earlier this year have already been amended to include information on GST. “There is a possibility to match the two (GST audit forms and I-T returns),” he said, when asked how GST evasion was being tackled. On compliance, he said it had grown ‘phenomenally’ from the pre-GST era, but was far from ideal. “Ideally, we should get 80% people complying by due date, but the number is around 60-65%,” he said.

He, however, noted that compliance tended to gradually reach optimum levels – for instance, while only 57% of the ‘eligible taxpayers’ filed returns for July 2017 till the due date (August 20), by June 23, 2018, 96% had complied.

The secretary said a further pruning of the items under the 28% tax bracket was not imminent. When asked about the imperfect structure of GST (with large exclusions and multiple and high rates) and the promised convergence of rates, the official said: “One has to go in that direction (of converging rates), but not so soon. In India, we have got different classes of people. We have to protect the lower-middle class and poor people. So the consumption items of this class have to be in the lower bracket.”

On the question of including auto fuels under GST, Adhia said natural gas and ATF were two ‘natural candidates’ to be brought under GST. However, he added that the GST Council would need to work out a formula for the inclusion of petroleum products. “We will have to work it out because revenue implication of this is very high and as of now it appears to me that the states aren’t comfortable sacrificing that kind of revenue. Then the issue of compensation will also arise,” he said. He, however, said in two-three years, many states would likely reach higher revenue growth and might not need compensation.

Blaming a large amount of transitional credit claimed by taxpayers for the lower-than-estimated Central GST revenue (CGST is lagging State GST), Adhia said the Centre had to discharge transitional credit liability of Rs 1.6 lakh crore compared to Rs 30,000-40,000 crore by states. The government, he said, had undertaken a detailed verification drive for what appeared ‘unusually high’ claims. “They (tax department) have done 50% verification already and have found Rs 5,000-6,000 crore of invalid claims,” he said.

Adhia said while there was no study conducted to ascertain the impact of GST on prices, in his opinion GST helped in sobering the inflation. Food items and petroleum products contributed to a recent spurt in inflation.

On the large undistributed integrated GST pool, the secretary said: “While it was about Rs 2 lakh crore until recently, we distributed Rs 50,000 crore of this (to the Centre and states) on Thursday. This was over and above what is due to them in the regular course of monthly settlements. He explained the process of IGST settlement : “Of (the undistributed) IGST pool, Rs 1.15 lakh crore is in the ledger balance of taxpayers, which is a liability for the Government of India. It is taxpayers’ credit and they can use it anytime. In any system of taxation, taxpayers will have some amount of input tax credit in their ledgers, which cannot be exhausted in a month. During the pre-GST period also, we had a ledger balance of Rs 1.5 lakh crore for excise and service tax.”

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