The biggest tax reform i.e. Goods and Services Tax is now a part of Indian Economy. A new and unified tax structure is followed for indirect taxation on the place of various tax laws like Excise duty, Service Tax, VAT, CST etc. and for sure the new tax regime is determined to eliminate the cascading effect of tax on transaction of products and services, and it will result in availability of product and services to consumers at lower price.
Recently, India accounted 5 percent growth for the Q1 of FY 2019-20, and it is now lower than China’s GDP growth rate of 6.2 percent for the same period.
Latest Update on GDP Data for FY 2019-20 1st Quarter (April to June 2019)
As per the recent data by CRISIL, the Indian economy may not see a rise over above 6.3% for the fiscal year 2020. The current data have opposed the previous suggestion of 6.9% GDP for the year.
The news is in the air due to the disclosure of the lowest 5% GDP of the country in recent years. As per the statement by crisil, “We expect growth to get some lift from the low base effect of 6.3 per cent in the second half of the FY19.”
There is a lowered 0.6% of GDP for the given financial years due to slowdown in the overall economy and revelation by the economics department responsible for foir the maintenance of the financial health of India.
GDP Data for FY 2018-19 Last Quarter (January to March 2019)
India’s GDP has been recorded at 7.7 percent in the quarter of January – March, with a fast approach towards better number than 7.0 in the previous quarter. With some expectations for 6.7 percent in the financial year 2018, to the 7.3 percent and 7.5 percent in the FY 19 and FY 20 respectively. There is some hindrance to the GDP number due to GST as speculated by the experts but still, many economists are likely to maintain around 6.5 percent.
So here in this article, we will see the GST impact on the Indian Economy.
Read Also: GST Impact on E-commerce Sector in India
GST Positive Impact of GDP
Now, There is only one tax rate for all which will create a unified market in terms of tax implementation and the transaction of goods and services will be seamless across the states.
The same will reduce the cost of the transaction. In a survey, it was found that 10-11 types of taxes levied on the road transport businesses. So the GST will be helpful to reduce transportation cost by eliminating other taxes.
After GST implementation the export of goods and services will become competitive because of nill effect of cascading effect of taxes on goods and products. In a research done by NCAER, it was suggested that GST would be the key revolution in Indian Economy and it could increase the GDP by 1.0 to 3.0 percent.
GST is more transparent in comparison to the previous law provision so it will generate more revenue to the Government and will be more effective in reducing corruption at the same time. Overall GST will improve the tax Compliances.
In a report issued by the Finance Ministry, it was mentioned that Make In India programme will be more benefited by the GST structure due to the availability of input tax credit on capital goods.
As the GST will subsume all other taxes, the exemption available for manufacturers in regards of excise duty will be taken off which will be an addition to Government revenue and it could result in an increase in GDP.
The GST regime has although a very powerful impact on many things including the GDP also. The Gross Domestic Product has the tendency to loom on the shoulders of revenue generated by the economy in a year. Still, a worthwhile point includes that the GST has the capability to extend the GDP by a total of 2 percent in order to complete the ultimate goal of increasing the per-capita income of every individual. Also, the GST scheme will certainly improve the indirect revenues to the government as the tax compliance will be further enhanced and rigid, extending the tax paying base which will add to the revenue. The increased income of the government will redirect towards the developmental projects and urban financing creating an overall implied scenario.
GST Negative Impact on GDP
In a report, DBS bank noted that initially, GST will lead to the rise in inflation rate which will remain for a year but after that GST will affect positively on the economy.
As we know Real Estate also plays an important role in Indian economy but some expert thinks that GST will impact the Real Estate business negatively as it will add up the additional 8 to 10 percent to the cost and reduce the demand about 12 percent.
GST is applied in the form of IGST, CGST AND SGST on the Center and State Government, but some economists say that there is nothing new in the form of GST although these are the new names of Central Excise, VAT, CST and Service Tax etc.
As every coin has two faces in the same way we tried here to familiarize the things related to GST with both perspective i.e. positively and negatively in this article. Despite having some factor which is being expected to affect the Economy adversely there are so many other things which are expected with a positive impact on GDP.
Now with this insertion of this sub-rule (4) under the CGST Act, the reconciliation of invoices and GSTR-2A form is mandatory, which will increase the monthly workload of taxpayers professionals or practitioners. Keeping a close eye or following up with suppliers about the uploading of invoices will also become mandatory for taxpayers claiming ITC.
The reckless reporting of B2B transactions as B2C by suppliers due to this amendment will result in non-appearance of invoices/debit notes in the recipient’s GSTR-2A. Such a time lag will also make it difficult for them to claim ITC.
Taxable entities with few suppliers belonging to the MNC/organized sector won’t be largely affected due to such an amendment. Reconciliation and follow-up will be easy for such players. However, taxable persons at lower belts with multiple vendors, especially in the FMCG sector, will find it difficult to comply with such an amendment.
CBIC Notification for CGST Rules, 2017
“(4) Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37, shall not exceed 20 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37.” Check Notification
Issues that Need to be Addressed
Addressing the Mismatch Problems Between GSTR-1 and GSTR-2A:
As we know, GSTR-2A gets auto-populated based on the detailed filled in GSTR 1 from suppliers end even after passing of due date. Hence, a mismatch between invoices and updated GSTR 2A is common, making reconciliation challenging for taxpayers.
Quarterly GSTR-1 Filings by Suppliers:
The taxpayers with annual turnover less than INR 1.5 crores file quarterly returns as per GST rules. However, with Monthly ITC claiming via GST 3B return form, it is nearly impossible for anyone to reconcile monthly invoices with GSTR 2B (as it would be generated after the given quarter).
Miscellaneous Problems:
The newly inserted sub-rule has left ambiguity in terms of scenarios when the supplier needs to report invoice/debit note for a given tax period. Whether such amount will be a part of the eligible ITC for a reported tax period is still unclear. ITC can be taken as a credit of a FIFO basis or as a pro-rata basis, is also not clarified.
Legal Difficulties on Input Tax Credit
Based on Section 164(1), the government has the authority to form rules for applying the provisions of CGST Act 2017, on the basis of the recommendation of the Council. However, the provision of the CGST Act: section 16 and section 17 is not a part of such an embargo. So, invoking such restrictions by a rulemaking make is certainly not an accurate legal position. Also, it is very clear that a rule cannot override the provisions of the Act.
In actuality, Article 14 of the Constitution of India formed by Delhi High Court has been violated by the insertion of sub-rule(4) in CGST Act as it does not offer clarity between bona fide cases (the mismatch is due to the fault of the supplier) and non-bonafide cases (bogus credit claim by the recipient).
The last legal difficulty related to the insertion of new sub-rule in Act includes violation of the basic principle of law viz., Lex non-cognit ad impossibly, i.e., the law should not compel a person to do something which is impossible. With the current rule, the recipient is restricted from claiming Input Tax Credit because of the failure of the supplier in furnishing details in Form GSTR-1 on time.
Income tax is a kind of direct tax among the two types of taxes – direct tax and Indirect Tax. Income Tax is charged by the government on the income earned by the taxpayer or any profit or revenue generated by him in a specific Fiscal Year i.e. the year in which income is generated. Income tax new rate and slabs for the FY 2019-2020 or the AY 2020-2021 were declared at the time of budget 2019.
However, an assessee pays the income tax in the assessment year 2020-21 i.e. the year next to the FY 2019-20 in which income of the taxpayer is assessed or evaluated. Provisions to deal with income tax are mentioned in the Income Tax Act, 1961.
Let’s have a look at the income tax slabs for different taxpayers for the AY 2020-2021.
Income Slab & Tax Rates (AY 2020-21) for Resident Individual Age =>60 years
Income Slab
Income Tax
Upto Rs. 2,50,000
NIL
Rs. 2,50,000 – Rs. 5,00,000
5%
Rs. 5,00,000 – Rs. 10,00,000
20%
Above Rs. 10,00,000
30%
Surcharge( subject to Marginal Relief )
10% (If taxable income > Rs. 50 lacs)
15% (If taxable income > Rs. 1 Crore)
25% (If taxable income > Rs. 2 Crore)
37% (If taxable income > Rs. 5 Crore)
Health & Education Cess
4% of(Income Tax + Surcharge)
Note: The same income tax slab & rates are applicable on any Non-Resident Individual (NRI), Hindu Undivided Family (HUF) or Association Of Persons (AOP) and Body Of Individuals (BOI) and Artificial Juridical Person (AJP).
Now, we are coming on to new income tax slab & rates are applicable on Senior Citizens for FY 2019-20 i.e. the citizens who are above 60 years of age but below 80 years of age. The exempted income of Rs. 2,50,000 for individual resident increases to Rs.3,00,000 when it comes to Senior citizens. Let us have a deeper dive into the tax rates applicable to senior citizens.
Recommended: Calculate your Taxable Income with Free Income Tax Calculator
Income Slab & Tax Rates for Senior Citizens (FY 2019-20 & AY 2020-21)
Income Slab
Income Tax
Upto Rs. 3,00,000
NIL
Rs. 3,00,000 – Rs. 5,00,000
5%
Rs. 5,00,000 – Rs. 10,00,000
20%
Above Rs. 10,00,000
30%
Surcharge( subject to Marginal Relief )
10% (If taxable income > Rs. 50 lacs)
15% (If taxable income > Rs. 1 Crore)
25% (If taxable income > Rs. 2 Crore)
37% (If taxable income > Rs. 5 Crore)
Health & Education Cess
4% of (Income Tax + Surcharge)
Income Tax slab & rates for the very senior citizens FY 2019-20 i.e. the citizens of age 80 years or above is showcased in a below-given table in which tax exemption limit of income extends to Rs. 5,000,000. Here we go.
Income Slab & Tax Rates (AY 2020-21) for Income of Very Senior Citizens
Income Slab
Income Tax
Upto Rs. 5,00,000
NIL
Rs. 5,00,000 – Rs. 10,00,000
20%
Above Rs. 10,00,000
30%
Surcharge( subject to Marginal Relief )
10% (If taxable income > Rs. 50 lacs)
15% (If taxable income > Rs. 1 Crore)
25% (If taxable income > Rs. 2 Crore)
37% (If taxable income > Rs. 5 Crore)
Health & Education Cess
4% of (Income Tax + Surcharge)
Note: Budget 2019 underlines Rebate for individuals with income below Rs 5,00,000 u/s 87A. Rebate is of Rs 12,500 or 100% of income tax (whichever is lesser).
Now, we shall discuss the different Income Tax slab & tax rates applicable on the income of Firms, Cooperative Societies, Local Authorities and Companies.
Income Tax Slab & Rates Applicable on Cooperative Society
Income Slab
Income Tax
Upto Rs. 10,000
10%
Rs. 10,000 – Rs. 20,000
20%
Above Rs. 20,000
30%
Surcharge( subject to Marginal Relief )
12% (If taxable income > Rs. 1 Crore)
Health & Education Cess
4% of (Income Tax + Surcharge)
Income Tax Slab & Rates Applicable to Firm
Particular
Income Tax
Income Tax
30%
Surcharge( subject to Marginal Relief )
12% (If taxable income > Rs. 1 Crore)
Health & Education Cess
4% of (Income Tax + Surcharge)
Income Tax Slab & Rates Applicable on Local Authority
Particular
Income Tax
Income Tax
30%
Surcharge( subject to Marginal Relief )
12% (If taxable income > Rs. 1 Crore)
Health & Education Cess
4% of (Income Tax + Surcharge)
Income Tax Slab & Rates Applicable to Different Companies
For the Domestic Company which is claiming exemptions and whose turnover in FY 2017-18 was up to Rs. 400 crores, the new income tax rates and slabs are as follows:
Particular
Income Tax
Income Tax
25%
Surcharge( subject to Marginal Relief )
7% (If taxable income > Rs. 1 Crore)
12% (If taxable income > Rs. 12 Crore)
Health & Education Cess
4% of (Income Tax + Surcharge)
For the Domestic Company which is claiming exemptions and whose turnover in FY 2017-18 was more than Rs. 400 crores, the new income tax slabs and rates FY 2019-20 are as follows:
Particular
Income Tax
Income Tax
30%
Surcharge( subject to Marginal Relief )
7% (If taxable income > Rs. 1 Crore)
12% (If taxable income > Rs. 12 Crore)
Health & Education Cess
4% of (Income Tax + Surcharge)
For the Domestic Manufacturing Company which is not claiming exemptions (under section 155BAA), the income tax slabs and rates are as follows:
Particular
Income Tax
Income Tax
22%
Surcharge
10% (If taxable income > Rs. 1 Crore)
Health & Education Cess
4% of (Income Tax + Surcharge)
Read Also: Trust Act 1882 Types & Taxation Policies Under Income Tax
For the Domestic Manufacturing Company which is a NEW company (under section 155BAB), the income tax slabs and rates FY 2019-20 are as follows:
Particular
Income Tax
Income Tax
15%
Surcharge
10% (If taxable income > Rs. 1 Crore)
Health & Education Cess
4% of (Income Tax + Surcharge)
Income Tax Slab & Rates Applicable to Foreign Company
Particular
Income Tax
Royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government
50%
Any other income
40%
Surcharge
2% (Iftaxable income >Rs. 1 Crore)
5% (If taxable income > Rs. 10 Crore)
Health & Education Cess
4% of (Income Tax + Surcharge).
Surcharge and Marginal Relief on it
Income Tax Surcharge refers to an additional charge or added tax which is payable on income tax by the individual having a higher income inflow during a particular fiscal year.
Marginal Relief on Surcharge
The taxpayer has to pay a surcharge on income tax at applicable rates when his taxable income is more than Rs. 50,00,000 or Rs. 100,00,000. However, the surcharge is reduced when the increase in ‘Income Tax + Surcharge’ > the increased income over Rs. 50,00,000 or Rs. 100,00,000.
‘Surcharge’ is reduced to a limit which will result in ‘Income Tax + Surcharge’ = increase in ‘Total Taxable Income’ over Rs. 50,00,000 or Rs. 100,00,000. The amount so lessens from ‘Surcharge’ is known as ‘Marginal Relief on Surcharge’.
Section 115BAA – New Section that lowers down the tax rate for Domestic Companies
Section 115BAA is a New Section which was added w.e.f. A.Y 2020-21. This section offers an option to the domestic companies to pay lower tax at 22 %. This tax rate of 22% will become 25.168% u/s 115BAA after adding 10% surcharge and 4% cess. The computation of income under this option is subject to the following conditions:
Exemption/deduction under the below-mentioned sections is not claimed.
10AA [SEZ units]
32(1)(iia) [additional depreciation qua new plant and machinery @ 20%/ 30%]
32AD [15% on new assets in undertaking set up in mentioned backward areas of Andhra Pradesh, Bihar, Telangana, and West Bengal]
33AB [prescribed %age of amounts deposited with Tea/ Coffee/ Rubber Board]
33ABA [prescribed %age of amounts deposited in Site Restoration Account]
35(1)(ii)/(iia), 35(2AA) [prescribed deduction for scientific research]
35AD [expenditure on prescribed business]
35CCC [expenditure on agricultural extension project]
35CCD [expenditure on skill development project]
Under Part C of Chapter VIA other than sec- 80JJAA of the Act (like 80IA/ IB/ IC/ ID/ IE & so on)
Carry-forward losses are not settled off to the limit that the loss relates to deductions specified above. These losses also would not be permitted to be carried forward to subsequent years.
Depreciation except for the additional depreciation u/s 32(1)(iia) is duly claimed.
Section 115BAB – New Section that lowers down the tax rate for Domestic Manufacturing Companies
Section 115BAB is a New Section which was added w.e.f. A.Y 2020-21. This section offers an option to the domestic manufacturing companies to pay lower tax at 15 %. This tax rate will also include 0% surcharge and 4% cess. The availability of the option is subject to the condition that the company is established and registered on or after 1st October 2019 and starts manufacturing operation by or before 31st March 2023.
Alike section 115BAA provisions, income for the above mentioned lower rate, has to be calculated without claiming exemptions & deductions and setting-off the losses which have been brought forward.
Besides, the company shall not be allowed to subsequently drop out the option if any of the option available u/s 115BAB & 115BAA is chosen by it.
Additional requirements for the execution of this option are as follows:
The company must not be found by dividing or reconstructing the business which is in existence already.
The company must not use building hitherto used as a convention centre or hotel.
The company must not use the plant or machinery used earlier for any purpose. However, the used plant and machinery can be reused to the limit of 20% of the total value of plant and machinery.
Section 115JB – Recent amendments that lower down MAT on book profit for companies not opting beneficial option u/s 115BAA/ 115BAB
Amendments have been made in the provisions of section 115JB to bring down the Minimum Alternate Tax (MAT) on book profit. MAT shall be reduced to 15% from 18.5% w.e.f. the assessment year 2020-21.
Note: Companies opting for the lower tax option u/s 115BAA/ 115BAB are exempted from MAT on book profit u/s 115JB.
Income Tax Rates for FY 2018-19 (AY 2019-20)
As per the rules and regulations of the income tax department, the filing of Income tax return and sharing your income details with the department is mandatory. The provisions for filing of income tax depending upon the status of the assessee. The detailed information about the income tax rates of the taxpayer is given below:-
Applicable Income Tax Rates for Individual/HUF
The filing of individual/HUF income tax is mandatory if the total income of the individual/HUF exceeds the maximum amount not chargeable to tax, which is defined as the basic exemption limit. But condition under Chapter VI-A (i.e. Allowed deduction under section 80C to 80U) must be followed.
The exemption limits and income tax rates (for the Financial year 2018-2019) for the individual/HUF are as follows:-
A. For all individuals (other than below)/HUF remaining
Up to Rs. 2,50,000 – no tax payable
From Rs. 2,50,000 to Rs. 5,00,000 – 5% of the earned income
From Rs. 5,00,000 to Rs. 10,00,000 – 20% of the earned income
Above Rs. 10,00,000 – 30% of the earned income
Note: The annual income tax rebate has been extended till gross annual income 6.50 lakhs in case of the individual invests into the provident fund and other opted equities while there is a full tax rebate on annual income tax up to 5 lakh (applicable from FY 2019-20).
B. For individuals, residing in India, who is the age of 60 years or more but less than 80 years at any time in the previous year:-
Up to Rs. 3,00,000 – no tax payable
From Rs. 3,00,000 to Rs. 5,00,000 – 5% of the earned income
From Rs. 5,00,000 to Rs. 10,00,000 – 20% of the earned income
Above Rs. 10,00,000 – 30% of the earned of income
C. For individuals, residing in India, who is the age of 80 years or more at any time in the previous year:-
Up to Rs. 5,00,000 – no tax payable
From Rs. 5,00,000 to Rs. 10,00,000 – 20% of the earned income
Above Rs. 10,00,000 – 30% of the earned income
Surcharge on Income Tax having a Total Income of 50 Lacs but not exceeding 1 Crore:-10% of Income Tax.
Surcharge on Income Tax having a Total Income exceeding 1 Crore: 15% of Income Tax.
Recommended: Calculate your Taxable Income with Free Income Tax Calculator
Income Tax Rates for Companies
Being a company, a person is needed to file his income tax return, because it is mandatory. Irrespective of its income as profit and loss.
Domestic Company: 25% if Gross Receipts/Turnover is not more than 250 crore in the previous year 2016-17.
———————–30% in other cases————————————————
Foreign Company: 40%
Surcharge on Income exceeding 1 crore:-7% of Income Tax.
Surcharge on Income exceeding 10 crore: 12% of Income Tax.
IT Rates for Partnership Firms
Being a partnership firm, it is the responsibility of either its partner or authorized person to file an income tax return, because it is mandatory. Irrespective of its earned income as profit and loss.
Income will be taxable @ 30%
Health & Education Cess (Updated in AY 19-20)
It will be calculated at 4% of (Income Tax and surcharge)
So these are categories of the taxpayer defined by the income tax department if a taxpayer belongs to any one of these categories, then he/she has to pay the income tax because it is mandatory.
Online filing of income tax return is quite an easy process with available tools and software. SAG Infotech company also provides Income Tax E-Filing solution to upload returns directly from the software, named Gen Income Tax Return Filing software.
PAN cards will now be issued online and instantly in India by the Income Tax Department. This is a good move towards digitalization of services by the Income Tax Department.
Applicants will not need to fill out an application form and submit the required documents manually as now the income tax department would procure the details from the Aadhar card of an applicant and issues a PAN card instantly. Besides the facility is free to use.
The procedure is entirely online and since it knocks off every single manual processing which consumes a time-frames of 15 days, the e-PAN facility guarantees a “near to real-time” process.
Read Also: Simple Steps for Filling New PAN Card Application Online
To apply for the instant e-PAN, the applicants would need to quote their basic details such as name & address along with Aadhaar details which are mandatory to be mentioned. The details would need to be verified by the applicants using a one-time password (OTP) which will be sent on their registered mobile phone number. Since Aadhaar card already carries details such as Date of birth, Address and Father’s name so the applicant would not need to upload any substantial document as an address proof or any other evidence. However, it should be noted that applicants must send correct Aadhaar details because any mismatch would lead to the rejection of the application.
Once the details of Aadhar get verified through OTP, a digitally signed e-PAN will be issued to the applicant. The e-PAN will feature a QR code that will carry the applicant’s photo and demographic information in an encrypted manner for security reasons and to avert the risks of fraudulence & forgery or digital photoshopping.
Read Also: Avoid Errors in Aadhaar/PAN for Income Tax Return Filing
“The move is part of greater digitization of income tax services and aimed at providing the facility without anyone having to visit any office,” an official said.
The e-PAN facility will benefit the new applicants as well as the existing PAN users. A few clicks and minutes, the existing PAN holders will get a duplicate.
In the ongoing pilot test of the instant e-PAN service, more than 62,000 e-PANs have been issued in the period of merely eight days. After the successful test, the facility will be launched throughout the country.
Goods and Services Tax ( GST ) department has received orders by the Punjab and Haryana High Court to reinitiate the facility of filing or revising Tran-1. The directions have been given to the GST department to allow the Petitioners to file TRAN-1 Form or revise their already filed erroneous TRAN-1 either electronically or manually.
Petitioners have been urging the High courts for directions under Article 226 of the Constitution of India to Respondents for allowing them to carry forward the unutilized CENVAT credit of duty discharged under Central Excise Act, 1944 and Input Tax Credit of VAT paid under PVAT Act, 2005 or HVAT Act, 2003.
These petitioners are registered under the Central/State Goods and Services Tax Act, 2017 and their credits could not be carry forwarded because they either failed to file the stipulated Form i.e. TRAN or filed it incorrectly by the prescribed due date of 27th December 2017.
Such petitioners have been behesting for permitting them to revise the incorrect TRAN or file a new TRAN in any mode and carry forward the unclaimed credits.
Justice Jaswant Singh and Justice Lalit Batra of the division bench decided and directed to allow the claimants to claim the transitional credit of the eligible CENVAT / ITC duties by filing a declaration in GST TRAN-1 and GST TRAN-2 Form.
It should be noted that only those duties are permitted to be claimed which are related to the inputs kept in stock on the appointed day as per Section 140(3) of the Act.
The Court also said that “the due date contemplated under Rule 117 of the CGST Rules for the purposes of claiming transitional credit is procedural in nature and thus should not be construed as a mandatory provision”.
Petitioners are given a time-restricted opportunity to claim or carry forward their unclaimed credit. 30th November 2019 is the due date of filing the statutory Form(s) TRAN-1 or revising an already filed erroneous TRAN.
“The Respondents are at liberty to verify the genuineness of claim of Petitioners but nobody shall be denied to carry forward the legitimate claim of CENVAT / ITC on the ground of non-filing of TRAN-I by 27.12.2017”, added by the Court.
As anticipated the GST collections for the month of October the collection took turns for the INR 95,380 crores only which is less than the normal peak stable fo 1 lakh crore of targets. The same collections for the month of October from the previous year were 1,00,710 crore.
The central GST was evaluated at 17,582 crores, state GST came at 23,674 crores, Integrated GST came at 46,517 crores while the cess collection came at 7,607 crore rupees for the month of October for the government.
Also, there was a total of 73.83 lakh of GSTR 3B returns filed in the month which have not brought any significant collections to the government.
GST collection was at a 19-month low in September
Information received by the Revenue Department had revealed a total GST collection of Rs 91,916 crore in September 2019. The figure was at a 19-month low. Even in the month of August, the GST collection figure was Rs 98,202 crore. However, the economic slowdown was said to be the reason for the decrease in GST collection in both the months.
A reduction of approx 2 lakh crore rupees in the total tax collection in the financial year 2019-20 is likely to happen. The government has informed the Finance Commission regarding the same. The central government had estimated the gross tax collection of Rs 24.6 lakh crore in the current fiscal year.
Initially, the estimate was Rs 22.5 lakh crore. The total tax collection this year was Rs 21 lakh crore. This means that the government needs to increase the total tax collection by 18 per cent to meet its target in the current financial year. Government of India needs more than Rs 1 lakh crore GST to meet its fiscal target but not to offset the state-level losses as GOI is responsible to compensate the states for its revenue losses only once in every two months for the first five years of GST onset.
Read Also: First Meeting of GST Review Committee Went Inconclusive
The government has already compensated the states with Rs 27,955 crore and Rs 17,789 crore in June-July & April-May this year, respectively.
The tax collection in the month of September came out to be the lowest in nineteen months which is another symbol of economic downturn. In such a scenario, the government’s concern regarding the GST collection and economic improvement has increased because of poor tax collection.
The state of Jammu & Kashmir has been bifurcated into two Union Territories – Union territory of Jammu and Kashmir and Union territory of Ladakh.
According to the Table II, in column (3), in serial number 51, of the concerned notification by the government of India, dated 19th July, 2019, the words “State of Jammu and Kashmir” shall be replaced by the words “Union territory of Jammu and Kashmir and Union territory of Ladakh”.
The Jammu and Kashmir Reorganisation Act, 2019 of Indian Parliament contains provisions regarding the reformation of the state of Jammu and Kashmir into two union territories on 31 October 2019.
According to this Act, the state GST Act will continue because without this the issues related to enforcement of the indirect tax on the two union territories will spawn out and also J&K has the assembly of its own. GST Act for union territories will have to be made for Ladakh for which law will have to be passed.
Read Also: What is Union Territory GST (UTGST) and Why It Is Implemented
The government shall exercise the powers specified under section 5 of the Central Goods and Services Tax Act, 2017 (12 of 2017) along with section 3 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017).
Besides, the government will simultaneously have to hammer away other issues for the smooth execution of the GST regime. Both the Union Territories, as well, will need to acquire separate registration under GST and carry out other procedural formalities. GST will be levied on any kind of supply between these two Union Territories.
As the deadline for filing GST returns under the new, revised mechanism is approaching, many taxpayers are still confused regarding the new rules for claiming a refund of input tax under GST. So, they are now waiting for some kind of clarification from the government’s side over the revised mechanism, which limits the maximum amount of input tax credit to 20% of the total eligible amount.
The GST returns under the new rules will begin starting from next week.
Earlier this month, the GST Council had announced updates in its GST refund policy, which restricts the ITC amount to a maximum of 20% of the claim amount in case of suppliers have not uploaded documents or details in the form GSTR 1.
Since it is still a new rule, there is a lot of confusion around it, as to where and how the rule is applicable. Moreover, businesses are also likely to face cash-flow challenges if their input credit refunds are restricted on the grounds of unavailability of supplier documents.
The decision to limit input credit refund was taken to reduce the instances where businesses were acquiring input tax credit by uploading fake returns. However, the lack of clarity over the new rules may do more harm than good. “GST returns of October 2019, which will be filed on or before 20th November are going to be the first return after introduction the newly introduced restrictions of 20 per cent,” says a Mumbai based Chartered Accountant.
One of the confusions among the taxpayers is how exactly the government will decide how much is the input tax credit eligible for a particular time. The input credit mechanism was introduced by the government to avoid tax cascading and refund the input tax amount back to the taxpayer while paying output tax. “Online credit is a dynamic amount so how to determine 20 per cent of it will be another issue to be addressed.”
Moreover, taxpayers also need clarity over the time or date for matching of invoices, since the process of return filing and invoice matching happens online only through the GSTN portal.
It was not until this month, two years after GST implementation, that the GST Council chose to activate the provision to match invoices, which was already mentioned under section 43A since the very beginning. This was because the government had come across several cases where some companies were reportedly misusing the input tax credit mechanism by claiming ITC on fraud invoices.
Another thing that troubles taxpayers is that only a part of the section 43A has been introduced, as of now. Since the remaining section is yet to be made effective, there is big uncertainty regarding the applicability of the rule in specific cases.
