Do not hike rates, curb evasion: West Bengal FM urges govt

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New Delhi | Published: December 17, 2019 5:51:29 AM

Tax officials have estimated that the annual GST fraud could be as high as Rs. 90,000 crore with circular trading and fake invoices being the usual modus operandi.

According to Mitra, the Council should collectively find ways and means to provide relief to the industry so that it is able to tide over the present crisis.

Ahead of the Goods and Services Tax (GST) Council meeting on Wednesday, West Bengal finance minister Amit Mitra urged Union finance minister Nirmala Sitharaman to desist from hiking GST rates, imposing new cess and pruning the exempt category. The solution to falling GST revenue “lies not in tinkering with the rate structure but in focusing on anti-evasion and fraud detection measures”, Mitra wrote in a letter to Sitharaman.

Tax officials have estimated that the annual GST fraud could be as high as Rs. 90,000 crore with circular trading and fake invoices being the usual modus operandi.

According to Mitra, the Council should collectively find ways and means to provide relief to the industry so that it is able to tide over the present crisis. He called for further simplification of GST processes and procedures to reduce compliance costs. “In my view, we should not in any way tinker with the rate structure or impose any new cess at a time when the industry and the consumers are going through the most distressing times with ‘stagflation’ knocking at our door,” Mitra wrote.

Mitra’s comments come after many other state finance ministers, including Bihar, Punjab, Kerala and Madhya Pradesh, expressed reservations about proposed GST hikes. A comprehensive overhaul of the GST structure was uncalled for at this juncture, they noted. However, some finance ministers are amenable to a hike in the existing cess and/or imposing it on a few items in the 18% tax bracket.

Citing GST Council Secretariat’s recent letter to states, eliciting views on ‘review of items currently under exemption’ for boosting revenue, Mitra said that these items like unpacked cereals, oil seeds and milk were basic goods consumed by the poor and lacked any revenue potential. “Any tinkering with the list would undo the hard work which has gone into the identification of the exempted goods and services and will adversely impact the common man,” he said.

Citing news reports about a proposal to raise the 5% slab, Mitra said that the slab comprised mass consumption items that were either exempt or had a combined (state plus Centre) tax incidence of 5% in pre-GST regime. “This move (to hike the 5% rate) will be hugely inflationary and further worsen the existing macro-economic situation for common consumers,” he opined.

Additionally, Mitra said that imposing cess on items in 18% tax slab would be regressive given that as many as 183 items were brought down to 18% bracket from highest rate of 28% as part of rate rationalisation, to eventually limit the GST rate structure to only three slabs instead of five at present. Since GST was launched in July 2017, the Council has brought down the number of items in the highest slab of 28% to only about 30 from 234 originally. “It will also start a dangerous trend of imposing cess on goods and services arbitrarily as a means to increase revenues in desperation rather than through well thought out logic,” Mitra wrote.

The 38th GST Council on Wednesday is likely to discuss revenue augmentation measures among a host of issues including review of developments in integration of GST e-way bill system with FASTag, new return system and e-invoicing.

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