GST Revenue Collection Analysis brings eye-opening results – CA. Keshav R Garg

Yesterday government released the figures of GST collection. It has been reported that total GST collection has been worth Rs. 94,726 crores which constitutes CGST Rs. 16,442 crores, SGST Rs. 22,459 crores, IGST 47,936 crores and Cess Rs. 7,888 crores. Curiosity to understand the difference of Rs. 6,017 crores between CGST and SGST made us analyse the collections during nine months of FY 2018-19. What came out of the analysis was an eye-opener.

At the very outset we need to understand that the liability  and input tax credit on account of CGST/SGST is calculated equally. Both the head work hand in hand. Then why is the difference in collection. There could be two major reasons, one claim of input tax credit on stock as on 30.06.2017 by the non-excisable unit/traders and the second could be surplus input tax credit of IGST. 

Source: The Economic Times - 02.01.2019

On the appointed day when GST was implemented i.e. 01.07.2017, it was provided by law that no trader/non-excisable unit shall be allowed to claim input tax credit on the stock having age more than one year. Which broadly meant that the stock having gestation period more than 1 year should not be eligible for input tax credit. If that is held true, the stock reflected by traders/non-excisable units as on 01.07.2017 should have been either consumed or sold out by July 2018. But it doesn’t look like so. The stock which was originally supposed to have one year gestation period is still lying with the traders even after 18 months of implementation of GST. We understand that could be the only reason for excess CGST credit utilization while payment of tax. This factor surely needs an intervention by the Ministry of Finance.

Second reason for lesser CGST collection could be excess IGST Credit with the taxpayers. IGST credit would arise only in case of inter-state purchases or imports by the taxpayers. The GST collection data reveals that around 40% - 50% of the IGST collection is on account of imports. There is a need to plug tax leakages in case of inter-state dealings by the taxpayers. Not only the movement of goods needs to be intercepted but stock verification must be conducted in large numbers. There could be possibility of back dated invoices (when e-way bill was not in force) being received by taxpayer. Also let me again laud the fact that there is no-requirement of e-way bill in case of services procured from outside the state. All these invoices have IGST charged on them. There is a dire need that matching of HSN codes on purchases must be carried to ensure that the taxpayer is dealing in same line of items, adventure in business could be an exception. There are certain HSN codes which does not require e-way bill. But the very manner of set-off of IGST credit permits its utilisation against CGST once the IGST liability has been knocked off in full. If IGST credit could be the reason for lower CGST collection, I think there would have been no collection under the IGST head and left over credit would have been utilised for payment of CGST. The possibility of this is bleak, but certainly a point to be looked into.  

Another reason we find in surplus revenue collection under SGST head is lesser credit of SGST claimed by taxpayers during transition period. The major reason for the same is the pending cases on the part of the local VAT authorities. These days cases pertaining to FY 2011-12 are being assessed what to talk about quarter ending on 30.06.2017. Also most of the dealers who had deficient Form C in case of purchases made on CST. This was the big reason for non-claiming of ITC on account of SGST. But in the due course as and when the assessments for FY 2016-17 will get finalised the states might land up refunding the vat credit accumulated on that date. But that will certainly have no impact on the SGST revenue collections at the later stage.

One of the results which came from the analysis is certainly needs to interrogated. It came out that there had been increase of around 6% in the total revenue collections during October 2018. The provisions of TDS and TCS were implemented during that month. The government authorities and e-commerce industry was liable to deduct tax while making payment to the suppliers. This means that government contractors and suppliers listed with e-commerce entities are a major reason for tax evasion. There is a need that the TDS/TDS provisions are implemented in full swing, not only in respect person liable to deduct tax but also whose tax is getting deducted under GST. There could be possibility that ways and means had been worked out to avoid the tax incidence including the splitting of invoices in name of different vendors.

Also one of the major reasons found for jump in the revenue in the same month was the activism by Director General of GST Intelligence which resulted into collection of around Rs. 3500 crores. This proves the efficiency of the Intelligence unit. The unit needs to be further strengthened and appropriate powers be vested with them to plug the tax leakages. The government must ensure that even minutest arena of tax evasion must be explored and all necessary actions in that regards must be taken.

We feel that if appropriate measures are adopted and concrete steps are taken, GST has lots of potential to help the government in its war against fiscal deficit.

Regards

CA. Keshav R Garg

(B.Com, FCA, CS, ISA(ICAI))

Author: Bharat's GST Ready Reckoner

            A Handbook on GST

Member: Indirect Tax Committee of CII, 

Founder: MyGst.MyTax Foundation

Adviser: Industries Association of Chandigarh

Adviser: Chambers of Chandigarh Industries

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