Informist, Friday, Feb 2, 2024
By Priyasmita Dutta and Pratiksha
--CBIC head: See merit in merging 1 or 2 GST rate slabs
--CONTEXT: CBIC head Sanjay Kumar Agarwal in interview with Informist
--CBIC head: See FY25 avg monthly GST mop-up at 1.7 trln rupees
--CBIC head: GST Council is likely to meet this month
--CBIC head: Unsure about revenue from GST notices to cos
NEW DELHI – The government sees the current trend in goods and service tax collections to continue in 2024-25 (Apr-Mar) and sees average monthly collections at 1.7 trln rupees, Central Board of Indirect Taxes and Customs Chairman Sanjay Kumar Agarwal said today.
For the first 10 months of 2023-24, gross GST collection was at 16.69 trln rupees, 11.6% higher than the gross GST collection for the corresponding period of 2022-23, data shows. The Interim Budget on Thursday assumed GST collections to grow at the same rate, 11.6% on year in the next financial year.
"In the current financial year, the average collection so far is 1.67 trln rupees and in the month of January the collection was 1.74 trln rupees. So, that gives us confidence that the collection will be robust in 2024-25 also," Agarwal said in an interview to Informist.
Some experts believe the government may mobilise some additional revenue from the GST notices that have been sent to companies since September. Refuting the claims, the chairman said, "I am not sure how much revenue will ultimately come out of this. That will depend upon the representations which will be made by taxpayers in reference to these notices".
Central, state, and investigative GST authorities have sent out a flurry of notices since September, and these are likely to continue till the end of April. The spike in GST notices is on account of deadlines for issuing notices and orders for the assessment year 2017-18 and 2018-19.
In the last few months, GST authorities have issued notices to some of the biggest public and private sector companies in India, including Life Insurance Corp of India, NTPC Ltd, Asian Paints Ltd, Vedanta Ltd, Nestle India Ltd, Grasim Industries Ltd, Maruti Suzuki India Ltd, ICICI Bank, Hindustan Unilever Ltd, UltraTech Cement Ltd, and Bharti Airtel Ltd.
Speaking about the GST Council, the chairman said that there are some pending issues that need to be taken up by the rate rationalisation panel. One of the major issues pending for the council to ponder upon is what happens to the compensation cess beyond March 2026.
"Because that power was given only for 5-year period, it cannot be extended unless there is a proposal before the GST Council, and they look into the provisions under the Constitution, whether it can be levied for subsequent period or some amendment is to be brought," Agarwal said.
The government had extended the period for levying compensation cess under GST till Mar 31, 2026 to repay loans taken on account of a shortfall in collections. The Centre had borrowed 2.69 trln rupees in 2020-21 and 2021-22, when GST collections fell during the COVID-19 pandemic, and passed it on to states as back-to-back loans to partly meet the shortfall in collections.
The Council is likely to meet later this month, Agarwal said.
Below are edited excerpts of the interview:
Q. The Interim Budget did not have too much to say about indirect taxes, but there are a few pending issues like the merging of tax slabs. Is it still on the cards?
A. When GST was introduced, the revenue neutral rate was something like 14% and subsequently, many commodities were shifted from 28% to 18% or 12%. Then, that average rate became something like 11%, which was below the revenue neutral rate. Because in GST, the compliance is better as compared to the fragmented tax in the country...revenues kept on growing. But revenue definitely is a matter which may concern the Centre as well as the states, because GST is the main revenue source for states. So some kind of revenue neutrality will have to be maintained, even if there is rate rationalisation. But I see a merit in merging one or two slabs, and keeping one slab. There can be goods which are in merit rate or a lower rate and then there can be some goods which may be in demerit rate--that is a higher rate.
Q. A lot of GST notices have been sent to companies for the assessment year 2017-18 and 2018-19. What is the reason for this? How much will the government get once these are settled?
A. Those notices have been sent because the time limit for issuance of notices or adjudicating those notices was getting over on Dec 31, and for the next period it was getting over on Mar 31, which has now been extended by one month, but last year, it was extended by two months. These are various types of issues, because certain taxpayers are selected for return scrutiny, some are selected for audit, or maybe there may be mismatches in the return which is generated on the basis of suppliers' return filing. For those periods, there is already a provision that if they furnish the self-certification bill up to a certain threshold or beyond that, a chartered accountant certification, then that can be considered as a document for bridging that gap.
I am not sure how much revenue will ultimately come out of this. That will depend upon the representations which will be made by taxpayers in reference to these notices. After constructing those representations and the replies made by the taxpayers, the adjudicating authority will take a view about whether it is sustainable or not sustainable.
Q. What are the sectors where you see the GST notices being sent the most?
A. This is across all sectors. Because many of these notices are based on mismatches between various returns. Not perceived maybe by investigation or maybe a particular point in the audit, because in those cases, notices have been issued at the point when this exercise was completed. There is no particular sector in which these kinds of notices have gone. Sometime back in the media, there was news that notices were going to insurance companies, and sometimes it was going to other sectors, like the banking sector. Those issues may be peculiar to a particular sector. Those are dealt with separately.
Q. Where do you see average monthly GST collections in 2024-25?
A. In the current financial year, the average collection so far is 1.67 trln rupees and in the month of January the collection was 1.74 trln rupees. So, that gives us confidence that the collection will be robust in 2024-25 as well. In the current year, in three months, it has crossed the mark of 1.7 trln rupees. So, it will be difficult for me to say what the average collection per month will be in next financial year, but it will be higher than the current financial year. 1.67 trln rupees is the average this year. So, it is likely that 1.7 trln rupees will be achievable. Average, not every month, but average.
Q. Is the government in favour of bringing fuel, electricity under the ambit of GST?
A. Fuel, apart from GST, is the main source of revenue for the states and Centre. They garner a substantial revenue from central excise duty. States garner it from the imposition of Value Added Tax on fuel. If the benefit is brought under GST, some of this revenue will have to be made good. Although by bringing fuel under GST, there will be an input tax credit chain on industry. But for end consumers, somehow this duty or the tax which is accruing from the present methodology will have to be collected to meet the demands.
Q. What are the changes in the excise duty structure needed to augment more revenue?
A. Excise duty is imposed only on very few items--petroleum products and tobacco items. Tobacco items are not much and petroleum items, mainly some from crude oil, petrol, diesel or aviation turbine fuel. If the rate of duty is increased, that will have an impact on the price to be paid by the end consumers. But the consumption of fuel is going up by 5%. So, that will bring better revenue for the government.
Q. What happens after 2026, till when the cess collection is extended?
A. Because that power was given only for a five-year period, it cannot be extended unless there is a proposal before the GST Council, and they look into the provisions under the Constitution, whether it can be levied for a subsequent period or if some amendment is to be brought. After taking into consideration all these aspects, then only compensation cess can continue beyond what was envisaged for repayment of loans.
Q. If the cess is not extended after 2026, it will be a significant revenue loss. In that case, is there a need to perhaps raise your 28% GST to a higher level so that there is no revenue loss?
A. All these aspects will be looked into by the rate rationalisation committee. What is the revenue need...how is it to be achieved...what should be the mean rate of tax...because very high rates are not desirable.
Q. Any idea when the next GST Council meeting will happen?
A. Yes, GST Council meeting is due now and it should happen this month.
Q. The rate rationalisation panel has been reconstituted and this was mentioned in the previous GST Council meeting also that they will see into what to do with the compensation cess. Is that likely going to be in the agenda because nothing else is pending other than rate rationalisation in the GST Council's report?
A. This committee has to look into many other things. What commodities have to be put...whether there should be merger in two rates...all these aspects will be looked into. And once the report is made available to GST Council, then a decision will be taken.
Q. There was a reduction in the import duty on a few mobile parts. What kind of revenue hit are you seeing from that? Is it going to be significant?
A. Actually, I would not say that it will be a revenue hit. What has happened is that under the Phased Manufacturing Programme, the government has provided notification for a 10% rate on display assemblies, but there are certain components which we call mechanics or die cut parts. These are not part of the display assembly. Those will be subjected to 15% (tax). Whether it will remain display assembly or not, or whether the whole thing will go into 15% was creating a dispute, and to overcome that dispute, it has been decided that these parts which can be added to display assembly will also be subject to 10%. To remove that disputes or litigation, this step has been taken. I don't know what will be the final outcome of that litigation. End
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