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ITC frauds behind GST shortfall, need more than short-term steps: WB finance minister

FE Bureau
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ITC frauds behind GST shortfall, need more than short-term steps: WB finance minister

Attributing the dip in the Goods and Service Tax (GST) collections to 'frauds' and the 'flaws in the system' that led to incessant leakage of revenue, West Bengal finance minister Amit Mitra urged the Union finance minister Nirmala Sitharaman to convene a meeting urgently to discuss revenue augmentation and the setting up of an effective mechanism to detect and avert such tax frauds.

In a letter to Sitharaman, Mitra said that the 'short-term measures' likely to be suggested by a committee of officers set up in the wake of the GST collections hitting a 19-month low in September might not suffice to boost the revenue.

Citing instances of frauds detected by authorities recently, Mitra said: "Fake ITC (input tax credit) means tax lost, as this ITC is not backed by transaction in goods or services in reality. Even worse is the fact that some recent reports are suggesting that these chains appear to be ending in export. This means not only that they are not paying taxes, they are actually getting cash refunds against ITC where actual business never took place." It is an established policy that tax content in exports are neutralised.

According to the West Bengal finance minister, the authorities continue to work in silos. "Development of business intelligence systems to detect such frauds, setting up of dedicated units in each state, or issues which are barely getting mentioned in the last few (GST Council) meetings, though it is the need of the hour", Mitra wrote. He called for a detailed look at the composition of the revenue and the sources from which they are not being effectively collected.

On Thursday, the government not only extended for yet another time the due dates for filing Form GSTR-9 (annual return) and Form GSTR-9C (reconciliation statement), by one and three months respectively to December 31 and March 31, but also undermined the utility of these returns by virtually removing its crucial anti-evasion features.

As the GSTR-9 and GSTR-9C forms have now been 'simplified', taxpayers won't require to provide the split of input tax credit availed on inputs, input services and capital goods. Also, they won't need to provide HSN level information of outputs or inputs, etc. for 2017-18 and 2018-19.

The changes are attributed to the government's recognition of the 'challenges' faced by taxpayers in furnishing these details, but experts point out that with the latest relaxations, the authorities would find it difficult to match the invoices of buyers and suppliers to check evasion, even after the annual returns are filed.

As reported by FE earlier, GST collections in October -concerning mostly September transactions - came in at Rs 95,380 crore, 5.29% lower than in the year-ago month. The September GST collections were just Rs 91,916 crore, a 19-month low, and these were 2.7% lower than the year-ago month.