GST and Taxation for MSMEs: In addition to GST rate cuts which has been a constant demand since the implementation of GST in 2017, one of the major topics for discussion likely to be on the agenda is the crackdown on GST evaders.
- By Archit Gupta
GST and Taxation for MSMEs: The 37th GST Council Meeting is scheduled to take place in Goa on the 20th of September, 2019. In addition to GST rate cuts which has been a constant demand since the implementation of GST in 2017, one of the major topics for discussion likely to be on the agenda is the crackdown on GST evaders. It has been brought to the notice of the government that the evasion of taxes could be to the likes of Rs 50,000 crore, a colossal amount for a country whose indirect tax revenues seem to be on the decline.
Stepping up to the task at hand, the GST Council is expected to put in measures that will ramp up GST collections, and plug revenue leakages. One of the plans of action in the upcoming Council meeting is to monitor the input tax credit (ITC) being claimed by businesses, which are to the tune of 80 per cent of the taxes paid, in most cases, with only the balance 20 per cent being paid in cash. GST officials had recently unearthed fraudulent claims of ITC and other such cases across several states where defaulters have found ways to hoodwink authorities and evade taxes.
Checking Amount of ITC
The Finance Minister seems set to now ask the states to intervene and maybe put in place a mechanism that will ask at least some money to be paid in cash in order to claim the input tax credit. The main focus will be to keep in check the amount of ITC a business can claim, especially in the case of new businesses. The credit claim may even be proportional to its turnover, and any claim in excess of the same may have to be approved by the authorities first. All this seems prohibitive to a new or an existing business if curbs are placed on the genuine ability of the business to claim the credit.
On the industry front, auto, FMCG and, cement sectors are pushing for GST rate reductions in order to boost revenues that have dipped to an all-time low. While the overall GST collections have dropped below the Rs 1 lakh crore mark for the second time this year, officials may be forced to consider rate cuts and other measures for affected sectors in the hope of reviving them, before pinpointing this slump on an economic slowdown. The downside is that once a sop is passed, there will be more knocking on the door.
The GST Council is also expected to discuss the four-time deferred GSTR-9 annual return, that taxpayers are expected to file for the first year under GST that is FY 2017-18. From the initial due date which was the 31st of December, 2018, the deadline has been extended to the 30th of November, 2019, which is almost a whole year later. The return has caused long-standing confusion with its lengthy and complicated form, which CAs and businesses are hoping will get simplified in order to get along with the filing, and finally, move ahead to closure. CAs who have done 80-90 per cent of the work related to GSTR-9 are concerned about their billings to their clients.
On the other hand, the new GST return system is expected to roll out from October 2019, but with several such underlying concerns, the release date is expected to come up for review in the Council meeting and is likely to get pushed out. The new system may be the answer to all the concerns bothering the govt right now, poor collection, high ITC claims, potential mismatches; there is sufficient worry to put things in order.
Only time will tell what the Council meeting has in store for taxpayers, but one thing for sure is that the government is focussed on improving GST collections at this point, and we are hoping for beneficial outcomes for the ecosystem as a whole, in the meeting scheduled this week.
(Archit Gupta is the Founder and CEO at ClearTax. Views expressed are the author’s own.)