Finance Secretary Ajay B Pandey has indicated that that rule of using additional Input Tax Credit without matching invoice will be tweaked further.
In an interview to BusinessLine, he said that gap in direct tax collection has now dropped to 11 per cent. On factors contributing to all-time high GST collection, he said that one reason could be that the level of compliance has gone up. Excerpts:
What, according to you, are the factors for all-time high GST collections?
GST collection, as made public on January 1, pertain to the month of sales made in November. Immediately after Diwali, there was resurgence of Covid cases, which led to restrictions in many parts of the country. Inspite of that, we have got over ₹1.15-lakh crore. It means two things — First, that we are on continued path of recovery, and, secondly, the level of compliance, too, has gone up.
Compliance needs to be seen in our actions on the systems side during last two months. In fact, it was work-in-progress on the systems side for almost a year, where we now have pool of data available from within GST, Income Tax and Customs, from Financial Intelligence Unit and also from banks. From these data, with the help of data analytics, sophisticated software tools and artificial intelligence, today we are in a position to pinpoint a few thousand assesses out of total base of 1.2 crore, who are trying to game the system to evade tax and also help others to evade taxes.
Take the example of fake invoices, today we have the capability to identify — right from the time of inception of GST — every fake biller and his/her intermediaries.
Now, we have the technological capability to draw a complete network diagram to identify issuer as well as the beneficiaries of fake bills and the entire chain. We are subjecting these people to questioning. In the last one and a half months, GST investigation authorities have made 187 arrests including five Chartered Accountants and one Company Secretary. Total number of companies being investigated is around 7,000 and some of them of them are well-established ones.
Not only issuers of fake bills, but also companies that have used these fake bills will be subject to questioning by both GST and Income Tax authorities. So, the difference between actions taken earlier and now is that earlier many of our investigations used to be based on informers and now they are based on information. Informer-based actions, sometimes, could be misleading.
From November onwards, we have started facilitating to every assessee the total input tax credit that he is entitled to. The system calculates ITC for him based on the returns filed by his supplier. These curb the chance of overstating ITC and taking benefits more than due. Similarly, rules allowed assessee to take 10 per cent additional ITC, without supporting invoices, now it has been reduced to 5 per cent. Gradually, this will be brought down further so that invoice matching, which is currently at 95 per cent, will be 100 per cent.
Also, with effect from January 1, a business with over ₹100 crore turnover has to generate an Invoice Reference Number (IRN) under e-invoicing and then from April 1 it will cover those with turnover above ₹5 crore. All these measures have resulted in increased compliance as well as ease of doing business. In December, 87 lakh GSTR-3B were filed, which is a record in itself. Ease of compliance is there helping more and more people to follow rules.
What will be the agenda for next GST Council meeting?
The GST Council meeting date is yet to be finalised. There are two major items postponed from the earlier meetings – rate rationalisation and correction of the inverted duty structure. The Council has already decided about correcting inverted duty structure on mobile handsets, other deferred agenda, too, will be placed before the council.
How is the direct tax collection so far?
Based on figures till December, the gross direct tax collection is about ₹7.69-lakh crore, which is down by about 9.9 per cent. Now, consider 5-6 months of difficult time one went through and when the turnover of the companies was impacted and some of the sectors continue to be impacted by the pandemic. Here, the downward slide in turnover will exponentially impact the profitability and in some cases drag the company into losses. This will result in no corporate tax payment, not just in this year but in the coming years too.
Tax Deducted at Sources (TDS) was lowered by 25 per cent. Also, collection through the Dividend Distribution Tax (DDT) was foregone. Both these measures used to contribute significant amount of collections. Considering all these, a dip in collection would have been higher, had the efficiency in tax administration not been improved.
What has been the progress of the Vivad se Viswas Scheme? Any change in the last date of payment?
There is a tendency to file application during last days under any scheme. As on December 31, we had received 96,000 declarations under the scheme out of 5.10 lakh pending appeals. This appears 20 per cent of the total, but if you compare with previous dispute resolution schemes, this number is encouraging. Now, with the extension till January 31, the number is expected to go up. There is no change in the payment date and it remains March 31.
There are complaints that though lthe ast date for filing Income Tax Return has been extended to January 10, the system is still levying a late fee of ₹ 10,000…
The extension of date was announced on December 30. The software had to go for a change and this takes a day or two. Now, during this period, if anyone has paid the late fee of ₹10,000, it will be refunded.