While compliance under the GST is improving slowly for regular taxpayers, the January-March quarter also saw the composition-scheme dealers reporting average annual revenue of Rs 20 lakh, over twice as much as they reported in the previous two quarters.
While compliance under the goods and services tax (GST) is improving slowly for regular taxpayers, the January-March quarter also saw the composition-scheme dealers reporting average annual revenue of Rs 20 lakh, over twice as much as they reported in the previous two quarters. This signalled increasing compliance by this segment of relatively small taxpayers and officials attribute the same to recent efforts to nail down evaders.
Composition scheme is open for all taxpayers with annual sales between Rs 20 lakh and Rs 1.5 crore, except for service providers. Clearly, there is still much scope for improving compliance by these taxpayers.
The scheme offers easier compliance requirements including facility to file simple quarterly returns and pay a fraction of sales as GST, rather than pay the tax at item-wise rates. While earlier different rates of tax for composition-scheme manufacturers, traders and restaurants existed, the GST Council in November had reduced the rates to flat 1% for all categories and this became from January.
In January-March quarter, the government received Rs 579 crore from 12 lakh such composition-scheme taxpayers. This means that each taxpayer filing returns under this scheme reported an average annual revenue of close to Rs 20 lakh. While this was still a tad below the GST’s lower threshold of Rs 20 lakh, it was much higher than Rs 8 lakh and Rs 9 lakh reported by such assessees in the July-September and October-December quarters respectively. Currently there are 19.31 lakh taxpayers registered under this scheme but only 60% of them filed returns for the fourth quarter of last fiscal year.
Explaining the better reporting from these taxpayers, a tax department official told FE: “All taxpayers are slowly realising that it’s counter-productive to evade taxes in GST system as mismatches between purchase and sales would show up eventually. We have also sent hundreds f some notices on these mismatches which have played its part in improving better sales reporting.”
The government had estimated large-scale evasion among composition dealers after it collected a paltry sum from sum for the first quarter under GST. If the sales reported by these units were correct, most of them would have fallen below the threshold for GST registration. Obviously, there was massive under-reporting of sales. However, in the absence of anti-evasion tools like e-way bill and comprehensive return-filing system at that time, the tax department has found it difficult to plug revenue leakages.
“Increased tax collections from composition taxpayers can’t be traced back to a single reason; in fact, it is due to multiple factors including lowering of tax rates with effect from January, 2018, fear of harsh penalties, and regular outreach programmes by the government. Besides this smaller taxpayers generally tend to draw up accounts at the year end and show augmented revenue to justify the level of operations for the financial year pushing up the tax collections for March quarter. Easing out of technical glitches by GSTN would have also encouraged the taxpayers to file returns and pay taxes.” Rajat Mohan, partner, AMRG & Associates said.
“With the introduction of the e-way bill across the country on interstate movements and in many states on intrastate transport as well, the collections and compliance in respect of composition dealers is bound to improve in the current quarter (April-June). The fact that the processes, rates etc have stabilised together with the GST portal would also encourage more composition dealers to become compliant,” M S Mani, partner, Deloitte India said.