GST mop-up bounces back in June; crosses ₹90,000 cr

Source: The Hindu Business Line, Jul 01, 2020

New Delhi: The Finance Ministry on Wednesday released the GST collection data for the first three months of the current fiscal. The June collection exceeded ₹90,000 crore, but it was 9 per cent less than the mop-up in the same month last year. This is the first GST data after the pandemic crippled the economy.

The collection was ₹90,917 crore in June, ₹62,009 crore in May and ₹32,294 crore in April. “The GST (Goods and Services Tax) collection for the first quarter of the year is 41 per cent less than the revenue collected during the same quarter last year. However, a large number of taxpayers still have time to file their return for May, ” the statement said.

The collection in June this year is 91 per cent of the GST revenue in the same month last year. The revenue collected from import of goods was 71 per cent of the revenue from the same source in June last year. Revenue from domestic transactions in June 2020 (including import of services) is 97 per cent of the revenue collected under this source during the same month last year.

In June, returns of February 2019, March 2019, and April 2020 have been filed in addition to some returns of May 2020 as the government has allowed a relaxed time schedule for filing of GST returns. Some returns of May, which would have otherwise got filed in June, will get filed during the first few days of July . Commenting on the numbers, Rajat Bose, Partner, Shardul Amarchand Mangaldas & Co, said the increase in GST collection in June is a positive sign and it is an indication that the economy is slowly recovering.

However, it is important to note that many companies paid GST for March, April and May also, in June due to the partial moratorium extended by the government.

“It will be interesting to wait and see how much GST is collected for supplies made in June after unlock 1.0, which will be the true indicator of the economic situation post-lockdown,” he said.

“One fact to be taken into consideration while looking at these collection numbers is that revenue collections are post announcement of government schemes, which were aimed to relax the collection of revenues. These all-cumulative scenarios signify that domestic consumption is back on track, as also the strong comeback of SMEs,” said Kapil Rana, Founder and Chairman, HostBooks Ltd.

Centre releases Rs 36,400-crore GST compensation to states

Source: Business Standard, Jun 04, 2020

New Delhi: Ahead of the Goods and Services Tax (GST) Council meeting next week, the Centre on Thursday released compensation worth Rs 36,400 crore to states for three months up to February 2020.

The much-delayed compensation comes at a time when state finances are under severe stress due to the Covid-19 lockdown.

“Taking stock of the current situation due to Covid-19 where state governments need to undertake expenditure while their resources are adversely hit, the central government has released the GST compensation for the period between December 2019 and February 2020 on Thursday,” the Ministry of Finance said in a release.

The GST compensation of Rs 1.15 trillion for April-November 2019 was released earlier, the government said. This stands against Rs 95,551 crore collected as cess in the compensation fund in 2019-20 (FY20).

The compensation mechanism to states under GST has come under strain due to inadequate cess collection amid bleak consumer demand.

Under the law, if states’ GST revenue does not grow by at least 14 per cent over the base year of 2014-15, the Centre pays them the difference, on a bi-monthly basis for the first five years of GST implementation.

States have been up in arms with the Centre over non-payment of compensation dues, while the Union government has conveyed its inability on account of cess shortfall.

Besides dwindling cess collection in the compensation fund, the rising dependency of states on the promised GST compensation amid sharp fall in revenue due to the Covid-19 pandemic has compounded the challenge.

In FY20, the Centre used Rs 47,271-crore surplus cess from 2017-18 and 2018-19.

The compensation cess is levied on luxury and sin items such as aerated drinks, coal, paan masala, cigarettes, and automobiles over the peak rate of 28 per cent.

The government is exploring a slew of options, including borrowing from the market and extending the cess period further, to repay.

The monthly GST compensation requirement is estimated at Rs 20,250 crore in 2020-21, against Rs 13,750 crore last year.

Under the GST structure, taxes are levied under 5, 12, 18, and 28 per cent slabs. The GST Council in its meeting held in March deliberated on whether it could go for borrowing if the compensation cess collections fall short of the requirement of states. It will seek opinion on various legal issues – who will give guarantee to the borrowing, how will it be repaid, how interest is to be paid, impact on the fiscal responsibility and budget management Act, etc.

Double whammy for service companies: Required to pay GST on defaults, bad debts

Source: The Economic Times, Jun 04, 2020

MUMBAI: As customer defaults mount due to the Covid-19 crisis, Indian services companies have been dealt a twin blow: Of unpaid bills, and Goods and Services Tax (GST) liabilities on those incidents on non-payment.

Under the current GST framework, there is no provision to allow adjustments of GST paid on supplies for which recoveries are not made. Companies have to pay GST when they raise the invoice or generate the bill, which often is at least a month or two before the customer pays the money.

As companies struggle with cash flows, they have to pay GST out of their own pocket even when the customer has defaulted. So, companies are seeking relief.

“The absence of a provision for allowing adjustment of GST paid on supplies for which recoveries are not made (bad debts) is a double whammy for businesses,” said Abhishek Jain, Tax Partner, EY. “It leads to a loss on account of consideration for supply not being received, coupled with an outflow of GST from their own pocket. While this has been a concern for businesses historically, in the current economically depressed times, the government should consider relief on this aspect.”

Customer defaults have been on the rise due to the Covid-induced job losses, salary cuts, business closures, and a general breakdown in corporate payment cycles.

“Companies have to pay GST based on point of taxation and the tax payout precedes the receipt of consideration for the supply. Often, leads to a situation when the supplier ends up paying the tax for which consideration is either not received or received after significant delay, thereby causing great financial and working capital issues for several service sectors and MSMEs,” said Abhishek A Rastogi, partner at Khaitan & Co.
Once a services company, such as a telecom or credit card company, raises the invoice, it has to pay GST to the government.

For instance, a telecom company generates a bill of Rs 1,000 to a consumer in the month of February, and levies Rs 180 as GST on that. The tax is paid in March by the company. However, if the consumer refuses to pay or delays the payment, the company is stuck with the outgo of Rs 180 in taxes and Rs 1,000 in unrealized revenue.

FinMin notifies retrospective amendment in CGST Law

Source: Business Standard, May 17, 2020

New Delhi: The Finance Ministry has notified retrospective amendment in the Central Goods and Services Act (CGST Act 2017). With this amendment the Centre has bought itself to disburse the pending input tax credit.

With this amendment in Section 140 of the Central Goods and Services Tax Act relating to transitional arrangements for input tax credit has formally been made effective, so as to prescribe the time limit and the manner for availing input tax credit against certain unavailed credit under the existing law. This amendment shall take effect retrospectively from July 1, 2017.

This amendment is expected to pose problems to every one except the petitioner of that ruling for claiming all pending transitional credit (technically known as input tax credit or ITC) till June 30. The Notification for the amendment says: May 18, 2020 is the date on which the provisions of section 128 of the said Act (Finance Act 2020, shall come into force.

The fine print of this amendment makes it clear that the power to prescribe a timeline now emanates from a law enacted by Parliament and not from the sub-ordinate legislation (read law). Since the Delhi High Court order focusses on rule, that is why notification will impact the claim settlement for number of businesses except the petitioners in the matter decided on May 5.

Rajat Mohan, Partner with AMRG, said that Delhi High Court’s landmark decision on Transitional Credits in favour of taxpayers would lose its grip in light of the defect occurring due to retrospective amendments brought in by the Finance Act, 2020. The Court had reasonably declared that the time limit of 3 years under the Limitation Act was relevant for transitional credit benefit, enabling all taxpayers to claim legitimate CENVAT credit till June 30, 2020.

“This ruling would have a far-reaching impact on the stressed revenue streams of the exchequer, however, now with the retrospective amendments, the tax authorities have tightened their grip around transitional credit,” he said.

Transitional credit refers to use of tax credit accumulated up to June 30, 2017, that is, last day of the erstwhile central excise and service tax regime.

After the introduction of Goods & Services Tax (GST), a special provision was made for credit accumulated under VAT, excise duty or service tax to be transited to GST. However, there were some conditions set. The credit will be available only if returns for the last six months — from January 2017 to June 2017 — were filed in the previous regime (that is if VAT, excise and service tax returns had been filed). And Form TRAN I (to be filed by registered persons under GST, may be registered or unregistered under the old regime) has to be filed by December 27, 2017, to carry forward the input tax credit which further March 31, 2019.

Later Commissioners were authorised to extend the date for submitting the declaration electronically in Form GST TRAN-1 but not beyond December 31, 2019. The Court had ruled that the time limit for transitional credit was only ‘directory’ and not ‘mandatory’ and not only the petitioner but all assessees can claim all pending transitional credit (technically known as input tax credit or ITC) till June 30. A ‘mandatory’ rule means it must be strictly complied while ‘directory’, means it would be sufficient for it to be substantially complied.

GST annual return filing for 2018-19 extended till September 30

Source:, May 06, 2020

The government has extended the due date for filing GST annual return for FY18-19 to September 30, 2020.

“In exercise of the powers conferred by sub-section (1) of section 44 of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereafter in this notification referred to as the said Act), read with rule 80 of the Central Goods and Services Tax Rules, 2017 (hereafter in this notification referred to as the said rules), and in supersession of notification No. 15/2020-Central Tax, dated the 23rd March, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 198(E), dated the 23rd March, 2020, except as respects things done or omitted to be done before such supersession, the Commissioner, on the recommendations of the Council, hereby extends the time limit for furnishing of the annual return specified under section 44 of the said Act read with rule 80 of the said rules, electronically through the common portal, for the financial year 2018-2019 till the 30th September, 2020,” the Ministry of Finance said in a gazette notification.

People registered under provisions of Companies Act 2013 can furnish their GSTR-3B through electronic verification code (EVC), according to Department of Revenue, Ministry of Finance. “A person registered under provisions of Companies Act 2013 shall, during the period from 21st April 2020 to 30th June 2020 shall be allowed to furnish the return under section 39 in Form GSTR-3B verified through electronic verification code,” read an order issued by the Revenue Department.

Centre releases Rs 14,103 crore GST compensation to states; more to be released soon

Source: The Economic Times, Apr 09, 2020

The central government released the second installment of goods and services tax (GST) compensation to states, of over Rs 14,100 crore, for the October-November period.

Officials aware of the development said that funds were released earlier this week, completing the full tranche of Rs 34,503 crore for the two months. Centre had given me ven Rs 19,950 crore as the first installment in February.

One of the officials said that dues for December and January were also to be released soon, which in turn can be used for fighting the Covid 19 outbreak.

States like Rajasthan, Punjab and West Bengal have asked finance minister Nirmala Sitharaman to ease the fiscal deficit limit under the Fiscal Responsibility and Budget Management (FRBM) Act to 5% from 3% for the ongoing financial year, release pending GST compensation and allow use of interest accruing to the Consolidated Sinking Fund.

States have also asked for full release of revenue deficit grant provided by the 15th Finance Commission, besides a moratorium on loan payments.

In case of GST compensation, the Centre has released a total of Rs 1.2 lakh crore as compensation to states for the fiscal till mid-February.

GST collection slips below Rs 1 trillion in March after four months

Source: Business Standard, Apr 02, 2020

New Delhi: Goods and services tax (GST) collection fell below the Rs 1-trillion mark in March after a gap of four months, even as disruptions caused by the coronavirus-induced lockdown will get captured only in the coming months.

The numbers pertain to GST paid in February but collected in March, suggesting that collections might turn grimmer going forward.

The GST mop-up in March stood at Rs 97,597 crore, down 8.4 per cent on a year-on-year basis, the data released by the Ministry of Finance showed on Wednesday. The government had targeted a collection of Rs 1.25 trillion in March. GST collection grew by a meagre 3.7 per cent in the full fiscal year 2019-20.

The dismal collection in March is despite the stringent anti-evasion measures introduced by the government, including the blockage of e-way bill and restricting input tax credit to 10 per cent in the case of failure of invoice uploads by suppliers.

Already hit by an economic slowdown, the country went into a 21-day lockdown from March 24 to prevent the spread of Covid-19. All industries that were struggling have become non-operational, which will reflect in the April GST collection figures.

Kerala Finance Minister Thomas Isaac told Business Standard that the April numbers, which would essentially be transactions in March would only be about 15-20 per cent of the March figures.

Pratik Jain, partner, PwC India, said, “It seems that many businesses may not have been able to pay GST because of liquidity issues being faced after the lockdown. As the second half of March 2020 has been significantly impacted due to the Covid-19 outbreak, collections in April are likely to be substantially lower.”

In a major relief for businesses facing lockdown due to coronavirus, the last date for GST return filing for March, April and May 2020 has been extended to June 30, with no interest, late fee and penalty, for companies with up to Rs 5 crore turnover and subsidised interest of 9 per cent, and no penalty or late fees for bigger companies.

M S Mani, partner, Deloitte India, said it was necessary for businesses to conserve cash in order to enable resumption of operations once the lockdown ends. Hence, any deferral of the GST payment timelines by a few months would significantly assist them in this process, Mani said.

Central GST collection for FY20 at Rs 4.95 trillion fell Rs 18,188 crore short of revised estimates for the fiscal year. The finance ministry, in Union Budget 2020-21, had lowered the CGST collection target for FY20 to Rs 5.13 trillion from Rs 5.26 trillion estimated in July.

Of the Rs 97,597-crore revenue in March, the central GST collection stood at Rs 19,183 crore, state GST at Rs 25,601 crore and integrated GST at Rs 44,508 crore, which included Rs 18,056 crore collected on imports, the finance ministry said in a statement.

GST collection on domestic transactions witnessed an 8 per cent decline, while GST collection on imports posted a negative growth of (-)23 per cent, indicating the beginning of Covid-related supply and demand disruption.

In order to plug revenue leakages, the Council allowed blocking of input tax credit in the case of fraudulent invoices and blocking of e-way bills in the case of non-filing of returns for three straight months.

The Council in its meeting on March 14 deferred the new simplified returns and e-invoicing till October, which was to be launched from April 1. Meanwhile, in order to improve collections, the government is aiming to correct inverted duty structure. It raised the GST on mobile phones to 18 per cent from 12 per cent, bringing the rate on a par with the inputs. Lower-than-expected revenues are also putting pressure on the Centre to compensate states for the revenue shortfall. The compensation cess collection stood at Rs 8,306 crore during the month, much smaller than the approximately Rs 14,000-15,000 crore compensation required by states on a monthly basis. States are up in arms with the Centre over a delay in payment of compensation dues and are planning to drag Centre to the Supreme Court.

GST on mobile phones hiked to 18% from 12%

Source: Business Standard, Mar 14, 2020

New Delhi: In a move that is likely to make mobile phones more expensive, GST Council today proposed a high in the Goods and Services Tax (GST) rates on mobile phones and allied parts.

Addressing a press conference following the GST Council meet, Finance Minister Nirmala Sitharaman said the Council also brought the manufacture of matches to a common rate of 12 per cent across the board. Earlier, hand-made matches attracted 5 per cent, while machine-made ones attracted 18 per cent.

She also said interest for delayed GST payment will be charged on net tax liability, not gross tax liability, and would be effective July.

Sitharaman said all decisions taken at today’s GST Council meeting would come into effect on April 1.

Stating that a there were a host of technical glitches in GST administration, the minister said she was engaging with Infosys to implement reforms and had asked the firm to come up with a sustainable solution. She added that Nandan Nilekani had made a presentation to this effect today and that she had asked Infosys to be present for the next three GST council meetings.

Sitharaman also called for better coordination between Tech Mahindra and Infosys without the Ministry’s intervention. She said that tasks that were earlier to be completed by January 2021 will now be accomplished by Jun 2020.

GST on MRO services with respect of aircraft has been brought down from 18 per cent to 5 per cent, with full input tax credit (ITC) The due date for filing the annual return for FY 2018-19 has been extended to June 30. Sitharaman said late fees would not be levied for delayed filing and reconciliation statement for 2 years, for taxpayers with turnover less than Rs 2 crore.

GST on cellphones, footwear, textiles to be rationalised on March 14

Source: The Economic Times, Mar 11, 2020

NEW DELHI: The Goods and Services Tax (GST) Council is likely to consider a proposal to increase GST on mobile phones to 18% in its next meeting on March 14 to correct the inverted duty structure being faced by the industry, said officials in the know.

At present, mobile phones attract a 12% GST rate, even as several parts that go into making mobile phones fall under the 18% GST rate bracket, creating a case where the duty on inputs is higher than that on finished goods, leading to an inverted duty structure.

“The inverted duty issue on mobile phones has been brought up several times… it can be taken up this time,” said a senior official, who did not wish to be identified.

If the council were to accept the proposal, the rate increase would lead to a rise in prices of mobiles across categories, a move that would be detrimental to the industry which has been asking for a rate reduction to 12% on components so as to bring in parity with fully made mobile phones.

“Parts of printed circuit board assembly (PCBA) and other sub-assemblies or components are not being considered as parts of mobile phones and are therefore being charged GST at 18%, which needs a correction,” said Pankaj Mohindroo, chairman of the Indian Cellular Electronics Association.

He said that after the implementation of the phased manufacturing programme, PCBA began to scale up and now covers more than 90% of the PCBAs used in mobile phones in the country. Any move to increase the rate on fully made phones can worsen the impact on the industry, which is reeling under the difficulty in importing components from China amid the coronavirus spread.
The proposal is likely to be taken in the upcoming meeting this Saturday, when the council is likely to take up deferment of e-invoicing and QR code benefits, along with exemption on certain sections of the industry from undertaking einvoicing.

The council is also likely to take up several procedural relaxations, besides deferring the new return form which was to come into effect from April 1, said another official. EThad reported it earlier this week.

A third official said proposals to correct the inverted duty structure in fabrics, readymade garments and even fertilisers could also be taken up, as even in these cases the tax rate on raw materials is higher at around 12% while the finished goods are taxed at 5% rate.

February GST mop-up at ₹1.05-lakh cr

Source: The Hindu Business Line, Mar 01, 2020

New Delhi: Goods and Services Tax (GST) collections crossed the ₹1-lakh crore mark for the fourth month in a row in February.

However, the February 2020 collection of ₹1,05,366 crore were lower than the January 2020 figure of ₹1,10,828 crore.

It was higher than December 2019’s ₹1,03,184 crore mop-up.

For February 2020, CGST stood at ₹20,569 crore, SGST at ₹27,348 crore, IGST at ₹48,503 crore (including ₹20,745 crore collected on imports) and cess at ₹8,947 crore (including ₹1,040 crore collected on imports).

The total number of GSTR 3B Returns filed for January up to February 29, 2020 is 83 lakh, an official release said.

The government has settled ₹22,586 crore to CGST and ₹16,553 crore to SGST from IGST as regular settlement.

The total revenue earned by the Centre and the State governments after regular settlement in February is ₹43,155 crore for CGST and ₹43,901 crore for SGST.

Domestic transactions

The GST revenues during February from domestic transactions grew 12 per cent year-on-year.

Taking into account the GST collected from import of goods, the total revenue was up 8 per cent year-on-year in February. During the month, the GST on import of goods contracted by 2 per cent as compared to February 2019.

States’ profile

The major States of Maharashtra, Gujarat, Karnataka, Tamil Nadu, Uttar Pradesh and Haryana recorded robust growth in GST revenues in February.

Maharashtra’s GST revenues in February grew 12 per cent to ₹15,735 crore (₹14,092 crore) and Gujarat’s GST revenue grew 11 per cent to ₹7,216 crore (₹6,507 crore).

Karnataka’s GST revenues grew 15 per cent to ₹7,414 crore (₹6,453 crore) and Tamil Nadu’s by 8 per cent to ₹6,427 crore (₹5,974 crore). Uttar Pradesh posted 13 per cent growth in GST revenues in February ₹5,776 crore (₹5,112 crore) and Haryana’s revenues grew by 8 per cent at ₹5,266 crore (₹4,873 crore) in the same period.