Parliamentary panel asks government to prevent misuse of input tax credit under GST as collection slows

Economic Times, December 10, 2019

A Parliamentary panel on finance on Tuesday observed that the Goods and Services Tax (GST) collection has slowed down in recent months and asked the government to prevent misuse of input tax credit.

Two years after its launch, the government has begun the review of GST, including a possible resetting of rates along with the slabs, the Standing Committee on Finance headed by Jayant Sinha said in its report tabled in Parliament.

“In this connection, the committee are constrained to observe that GST collections have somewhat slowed down in recent months as compared to the target. The committee would therefore expect the government to resolve all the troubling issues related to GST at the earliest to achieve the desired revenue buoyancy,” the panel said.

GST revenue collection crossed the Rs 1 lakh crore mark after a gap of three months in November, with the revenue growing by 6 per cent to Rs 1.03 lakh crore in the month. The collection stood at Rs 95,380 crore in October.

“The committee would also urge the Department of Revenue to remain vigilant so as to prevent misuse of provisions as input tax credit and enhance monitoring of overall compliance,” the committee said.

It further asked the revenue department to have systematic reports and conduct feedback surveys from taxpayers to evaluate whether GST is operating smoothly.

On large amount of tax refunds and the accruing interests on it, the committee said the processes should be revisited to dispense with the “need for raising realistic demands as also payments of disproportionately large advance tax by assesses”.

In 2017-18, the direct tax refunds stood at Rs 1.52 lakh crore and Rs 17,603 crore as interest, which rose to Rs 1.61 lakh crore and Rs 20,566 crore respectively in 2018-19.

It also suggested that the interest component in tax refunds should be reflected in the Union Budget itself so that it passes through parliamentary scrutiny and also has a deterrent effect.

Further, in order to broaden the tax base, it asked the government to bring the new Direct Tax Code in line with the global best practices, keeping in view the country’s economic needs.

For assessment year 2018-19, the committee noted that the number of taxpayers were 8.45 crore, out of which 8.04 crore were individual taxpayers.

“Assuming the total population of the country to be 130 crore, the percentage of taxpayers in India works out to be a mere 6.2 per cent. The committee would, therefore, urge the department to reformulate their policies/strategies so as to have wider tax base, which would help the country move towards a truly comprehensive direct tax regime,” the committee said.

In a separate report, the committee asked the Department of Economic Affairs, Expenditure and Financial Services to expedite the payments to vendors and contractors so that the private sector participants doing business with the government are not placed under financial stress.

“In addition, timely payments are necessary to maintain transaction velocity in the economy,” it added.

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