GST interim returns: Over 30 lakh paid tax in August, matching July trend

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While the number of businesses registered for the goods and services tax (GST) has crossed 90 lakh, much higher than tax base in the previous regime, filing of even the interim (summarised) returns and tax payments are not keeping pace.

While the number of businesses registered for the goods and services tax (GST) has crossed 90 lakh, much higher than tax base in the previous regime, filing of even the interim (summarised) returns and tax payments are not keeping pace. Just over 30 lakh taxpayers have filed the interim return (GSTR-3B) for August, before the stipulated September 20 deadline, GST Network (GSTN) chairman Ajay Bhushan Pandey told FE. The glitches plaguing GSTN, the inability of a sizeable section of SMEs to comply and a general lackadaisical tendency among taxpayers are said to be reasons for the slack in the return-filing process. But the filing pace for August was not much slower than it for July GST — by August 20, the initial deadline for GST payment for July, only 32 lakh taxpayers filed the interim return and made tax payments; the figure rose to 39 lakh by August 29, the extended deadline without penal interest, and then to 49 lakh till date.

While about Rs 92,300 crore was collected as GST for July till August 20, a similar amount has been paid by the taxpayers till Wednesday for August GST, sources said. To make things easier for the business, the GST Council had extended the last dates for filing detailed returns — GSTR1, GSTR2 and GSTR3 — but businesses need to pay the tax with GSTR-3B filing. However, the slow pace at which even the interim returns are being filed is vexing the government — a TV channel reported that finance minister Arun Jaitley has asked the Central Board of Excise and Customs to submit daily reports of GST filings. With the GSTR1 for outward supplies for the month of July can now be filed until October 10 and GSTR2 for inward supplies by October 31, the government is now putting in place an interim arrangement for refund of taxes to exporters, as waiting for these funds for longer periods could hit the liquidity of thousands of exporters. Pandey said that some assessees were still filing return for July along with August. For July, there were nearly 60 lakh eligible taxpayers and this number must have moved up for August and new registrants are being added.

Pandey said the GSTN portal could handle the sudden rush in filings in the last two to three days, which displayed its robustness. He said GSTN accepted up to 85,000 returns per hour on Wednesday, as nearly 14 lakh assessees filed the interim summarised return on that day. While the government is keeping its fingers crossed on the GST revenue, analysts expect it to cut rates — at least for the goods that fall under 28% slab — given the robustness of collections. The government is closely examining the huge transitional credit claims of Rs 65,000 crore by the industry — these can be availed of by the industry against its supplies in the next six months. Sanjay Garg, partner, indirect tax, KPMG in India, said: “Expansion in the tax base at the outset due to the applicability of GST on transactions not taxed before would likely shrink after the industry avails the credit generated by payment of tax on such newly-taxable transactions. The GST collections might decline. It is apparent that fingers would remain crossed at least for next two quarters of (FY18).” Earlier this month, the GST Council had constituted a group of ministers (GoM) under Bihar deputy chief minister Sushil Modi, to resolve issues faced by businesses while filing returns and paying taxes on GSTN portal. The GoM met earlier this week, and assured taxpayers that most technical glitches in GSTN would be resolved by October-end.

Source: Financial Express

FDI likely to rise further after GST: Moody’s

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FDI in India grew by 18% during 2016 to touch $46 billion, data released by the Department of Industrial Policy and Promotion showed.

India is likely see increased foreign direct investment (FDI) inflows on the back of reforms such as introduction of the goods and services tax and the bankruptcy code, international ratings agency Moody’s said in a report on Monday.

“Combined with reforms such as the introduction of a goods and services tax, which lowers the cost and complexity of doing business, and a simplified and clarified bankruptcy code, FDI is likely to rise further,” the agency said in its report on how structural reforms by Asia Pacific sovereigns could become more effective from stronger global demand.

In India, Moody’s said, the government has raised ceilings for authorised FDI in a number of sectors. “FDI has already increased substantially, albeit from a low base,” the report said.FDI in India grew by 18% during 2016 to touch $46 billion, data released by the Department of Industrial Policy and Promotion showed.

The Narendra Modi government has liberalised FDI framework for a number of sectors including insurance, defence and civil aviation and also taken steps towards the ease of doing business. Moody’s said the positive economic impact of India and Indonesia’s measures to attract higher levels of FDI, combined with steps to improve business conditions, are likely to be more apparent in a stronger global macroeconomic environment. The agency has maintained India’s sovereign rating at Baa3 positive.

“India and Indonesia’s governments have both implemented reforms over the past few years to improve the overall business climate and, more specifically, to attract FDI,” Moody’s said, adding that a robust global environment is likely to amplify the positive impact of the reforms on the two countries’ attractiveness to foreign investors.

Moody’s Investors Service said the strengthening in global demand since the end of last year has buoyed Asia Pacific’s trade-reliant economies, but added that faster export growth has yet to feed into a sustainable acceleration in output growth.

Jurisdiction-free I-T assessment on the cards

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The identities of the taxpayer and his assessing officer will be hidden in a bid to check corruption and harassment assessees face at the hands of over-zealous officers.

To check corruption and harassment, the tax department will soon launch a pilot of “jurisdiction-free assessment” where a tax officer will not get to know identity of the assessee as allotment of cases will be done randomly by computers rather than on the basis of area.

The success of the pilot, to be first carried out in New Delhi and Mumbai, will determine if the plan has to be expanded all over the country, a senior revenue department official said.

The country is divided into 18 tax zones. Taxpayers are assessed by the officers of the region they are based in.

Under the new system, the assessment zones will be demolished and a special computer software will allocate a taxpayer to any officer anywhere in the country, he said.

The identities of the taxpayer and his assessing officer will be hidden in a bid to check corruption and harassment assessees face at the hands of over-zealous officers.

The tax department is working on a major reform initiative to make compliance taxpayer friendly and a 13- member committee of tax officers has been formed to look into implementation issues, the official said.

But before the country-wide launch, the pilot is being run to spot implementation issues.

“After you initiate jurisdiction-free assessment, a taxpayer might say he wants to meet the tax officer face to face and explain his case. What do we do in that case? Can we deny the taxpayer an option to meet his assessment officer (AO)? Say, we allow them to have video conferencing, then we will have to set up the facility in tax offices. These are issues we need to address,” he explained.

Among draft recommendations of a technical committee submitted to the CBDT, the apex policy-making body on income tax matters, the tax department wants to move to the jurisdiction-free I-T assessment where the taxpayer will not have to meet his assessing officer face to face.

The official also said the proposals were broadly reflected in the Prime Minister’s speech in Rajaswa Gyan Sangam earlier this month when he had said the relation between the tax department and an assessee should be that of an examiner and an examinee where either party does not know each other.

Modi, the official said, had also called for redrafting of the archaic income tax laws so that these become simpler. The humongous Income Tax Act has been in place since 1961 and the UPA government had proposed a Direct Tax Code to replace the Act.

However, since the government changed in 2014, the DTC could not be taken up.

Financials hit a new high in India

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Lending and borrowing money is now India’s fastest-growing segment, and the successful industry and lenders are the latest darlings of equity investors. The share of banks and non-banking finance companies (NBFCs) in the market capitalisation (market cap, or m-cap) of all listed companies is now at an all-time high, as manufacturing companies and non-financial services such as information technology (IT) battle demand slowdown.

Banks and NBFCs, including insurance companies, now account for 22.3 per cent of the combined m-cap — the highest in at least two decades, and up from 17.2 per cent in March 2014 and 17.3 per cent five-and-a-half years ago in March 2012.

In contrast, the m-cap share of manufacturing companies is now down to a 10-year low of 54 per cent, against 55 per cent at the end of FY14 and around 57 per cent five years ago.

The biggest decline has, however, been recorded by companies in the non-financial services sector, whose largest component is IT exporters such as Tata Consultancy Services, Infosys, and Wipro. Non-financial services sector companies’ share in m-cap has declined to an all-time low of 23.7 per cent, against 28 per cent three years ago.

The combined m-cap of banks and NBFCs is up 145 per cent in the last three years to ~30.4 lakh crore now, growing at an annualised rate of 29 per cent since March 2014. Public sector banks have not participated in this boom as they lend largely to businesses which are now shrinking due to a virtual freeze on fresh investment by the corporate sector.

In the same period, manufacturers’ combined m-cap is up 85 per cent to ~73.6 lakh crore, growing at an annualised rate of 19.2 per cent during the period.

Non-financial services have been the laggards with the sector, with m-cap up 61 per cent during the period to ~32.4 lakh crore now, growing at an annualised rate of 14.6 per cent since March 2014.

The analysis is based on the year end m-cap and revenues of actively traded companies for every year since 1994-95. This means that the sample gets bigger every year as more companies get listed. For example in FY17, the sample had 3,552 companies, while the FY95 numbers were based on a sample of 1,551 companies. However, the absolute numbers are not important, as the analysis is based on a percentage of total m-cap.

It may not show in the overall numbers, but the boom in retail finance has had a knock-on effect on related segments in manufacturing and services. For example, most of the growth is now occurring in segments such as consumer durables, including passenger cars and two wheelers, and organised retail, where purchases are loan financed.

Experts attribute this to the growing financialisation of the Indian economy and near stagnation in industrial growth and service exports. “Private lenders and retail NBFCs continue to grow, even as the rest of the economy is on the verge of stagnation. This has made financial stocks the darlings of investors,” says G Chokkalingam, founder and MD, Equinomics Research & Advisory.

It shows in the revenue growth of listed companies vehicles or homes. across various sectors. The In the last three years, personal core revenues (or interest loans or household debt income) of banks and non-bank has grown at a CAGR of 18 per lenders grew at a compound cent, against 10.2 per cent annual growth rate compounded growth in disposable (CAGR) of 7.3 per cent in the income (at current last three years, making the prices) net of taxes during the sector one of the fastest-growing period, according to the Reserve Bank of India data.

In the same period, the all, the total household debt combined revenues of manufacturers, is up 65 per cent cumulatively including utilities in the last three years, against and construction firms, grew 35 per cent rise in disposable at a CAGR of 2.8 per cent, income during the period. while net sales of companies This has translated into a in non-financial services contracted boom in retail lending and a at an annualised rate sharp rise in valuation of of 4.8 per cent during the retail lenders such as private period. sector banks and NBFCs,

Lenders have also gained including Housing from a growing propensity of Development Finance Indians to borrow for purchasing Corporation, consumer Bajaj Finance, goods, Indiabulls Housing, Equitas Holdings, Bharat Financial Individuals, in turn, are taking Inclusion, and PNB Housing. on more risks and leveraging.

“Financials are now the their income to keep up only growth industry in the consumption despite a slowdown country. This has led to a in their income growth bubble-like valuation in the in line with the slowdown in retail lending space, especially gross domestic product NBFCs,” says growth,” says Dhananjay Sinha.

He expects the trend to robust growth in industry last for a while, given the and exports. “Consumers’ growing reliance on private income growth is dependent consumption in the economy on the performance of the despite poor growth in jobs farm, industrial and service and income. sector, especially software.

For how long can encouraging consumption people continue to borrow through fiscal spending in a and keep up their consumption bid to push up economic if income growth growth in the face of a slowdown remains depressed?” asks in corporate investment Chokkalingam.

Source: Business Standard

I-T department goes after defunct companies for tax frauds

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It’s well within the law and powers of the tax office to review an old tax assessment if there is suspicion of tax fraud.

The tax office is reopening old records of many companies that have wound up and no longer exist in the books of the government — something the revenue department has rarely done in the past.

Former directors of such closely-held private companies, which have received tax notices along with the official liquidators, fear they could be suddenly saddled with unforeseen liabilities. While opening new private companies and shutting down old ones have often been a ploy to move unaccounted money, some of the companies set up to carry out bona fide businesses which subsequently failed have also come under the glare of the income tax department.

Till now, the department has typically stayed away from companies to which it had issued non-objection certificate prior to the winding process. But, it’s well within the law and powers of the tax office to review an old tax assessment if there is suspicion of tax fraud.”In case of private limited companies, the liability of directors continues even after liquidation. Here, these ex directors have to prove that any non-recovery of tax is not due to any gross neglect, malfeasance, or breach of duty on their part in relation to the affairs of the company,” said senior chartered accountant Dilip Lakhani.

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“But such reopening in case of companies which have been liquidated or struck off from the RoC (Registrar of Companies) records should be done very selectively — may be only in situations of tax fraud and not situations of plain vanilla income having escaped assessment,” said Mitil Chokshi, senior partner at Chokshi & Chokshi LLP.

The liquidator of a company going for ‘voluntary liquidation’ can approach the tax office to ascertain the outstanding tax liability, and set aside the amount before distributing the proceeds from asset sale to creditors and shareholders.

But even in such cases the department can (though rarely done) reopen old assessments if it later suspects fraud or fund diversion. The no-objection certificate, according to a senior tax official, is simply based on the outstanding tax claim on that date. According to him, if the department has to look into serious irregularities, then no NoC can be issued. “The provisions do provide powers to assessing officers to re-open and issue such notices,” said Chokshi.

“But is it really fair to re-assess based on some possible income having escaped assessment, especially when the companies are no longer in existence?” One of the closed companies to have received notice for reopening assessment was an outsourcing arm of a US bank. Some of the liquidated entities were engaged in marketing, realty and infrastructure development.

Significantly, even if the tax amount (approved by the I-T department) is set aside in the course of liquidation, former directors can be questioned if the company is ‘private limited’ in character. The companies have received reopening notices for assessment years 2011-12 and 2012-13.

The taxman can go back up to six years in reopening of old assessments. However, in covering undisclosed foreign assets — overseas bank accounts, properties etc — the I-T department can rake up 16-year old transactions in probing tax evasion. In the US, no-objection certificate from the Internal Revenue Service (the national tax collection agency) is required before final liquidation.

There are no provisions for reopening unless a tax fraud has been identified. According to another tax practitioner, while such a notice may be stayed by moving the high courts, the question is who will do it?”Liquidators were appointed for a limited period; erstwhile Indian directors may not have the authority, while foreign promoters and directors are least interested,” said the person.

Bankruptcy board to register 100 more insolvency professionals to add to 940

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The Insolvency and Bankruptcy Board of India (IBBI), which has so far registered 940 insolvency professionals (IPs), is in the process of granting registration to about 100 more such professionals, according to its whole time member Navrang Saini.

The Insolvency and Bankruptcy Board of India (IBBI), which has so far registered 940 insolvency professionals (IPs), is in the process of granting registration to about 100 more such professionals, according to its whole time member Navrang Saini. “It is a continuous process, the applications come to us through insolvency professionals agencies, we examine the applications and carry out due diligence and then we grant registration to them,” said Saini while addressing an Assocham conference on IBC and RERA. The IBBI had received three applications for registration as information utility (IU) out of which two applicants have been granted in-principle approval and it is in the process of examining the third one.

“We are in the process of giving approval to one of the IU, we may give the final registration if they meet all criteria, we have already given in-principal approval to two IUs and out of that I hope one will start functioning by end of this month, the third application is still under examination with the board,” Saini said.

As on September 12, 3,437 cases have been filed out of which 354 cases have already been admitted by the various benches of NCLT. Out of these, 337 have already been rejected. “To deal with such a large number of insolvency related matters, we need institutional infrastructure,” he said.

Rules for registered valuers are to be made by ministry of corporate affairs which is in the process of notifying and issuing the same.

The board has already invited suggestions on the regulations which have already been notified by the board and it will receive the suggestions up to December 31 and come out with the amendments based on the suggestions received and advisory committees constituted for this purpose by March 31, 2018.

Source: Financial Express

Tax authorities to scan GST transition credit claim of 162 companies

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As many as 162 companies that have claimed GST transitional credit of over Rs. 1 crore are under the scanner of tax authorities who would verify whether the claims are eligible.

In the transitional credit form TRAN–1 filed by taxpayers along with their maiden returns for July, businesses have claimed credit of over Rs. 65,000 crore for excise, service tax or VAT paid before the GST was rolled out from July 1.

In view of such huge claims, the Central Board of Excise and Customs (CBEC) in a letter to Chief Commissioners said that as per the GST law carry forward of transitional credit is permitted only when such credit is permissible under the law.

“The possibility of claiming ineligible credit due to mistake or confusion cannot be ruled out … It is desired that the claims of ITC credit of more than Rs. 1 crore may be verified in a time-bound manner,” CBEC said.

It asked the chief commissioners to send a report on the claims made by these 162 companies to the CBEC, which is the apex decision making body for indirect taxes, by September 20.

To ensure that only eligible credit is carried forward in the GST regime, the CBEC has asked field offices to match the credit claimed with closing balance in returns filed under the earlier law. They would also check if the credit is eligible under the GST laws.

Till last week, as many as 70 per cent of 59.57 lakh taxpayers had filed returns for July resulting in a maiden revenue of Rs. 95,000 crore under the Goods and Services Tax (GST) regime.

However, out of this, the input tax credit (ITC) data for Central GST (CGST) claimed in TRAN–1 has shown that registered businesses have claimed over Rs. 65,000 crore as transitional credit.

The government had, in late August, come out with form TRAN–1 for businesses to claim credit for taxes paid on transition stock. Traders and retailers had 90 days time to file for claim. Also businesses have been allowed to revise the form once till October 31.

PwC India Partner and Leader (indirect tax) Pratik Jain said that the Rs. 65,000 crore amount looks high particularly given the fact that lot of large companies have not yet submitted TRAN–1.

Under the transition rules, traders and retailers are allowed to claim credit of 60 per cent of taxes paid earlier against the CGST or SGST dues where the tax rate exceeds 18 per cent. In cases where the GST rate is below 18 per cent, only 40 per cent deemed credit will be available against CGST and SGST dues.

Further, the government would also refund 100 per cent excise duty for goods costing above Rs. 25,000 and bearing a brand name of the manufacturer and are serially numbered like TV, fridge or car chassis.

To avail this, a manufacturer can issue a Credit Transfer Document (CTD) as evidence for excise payment on goods cleared before the introduction of GST to the dealer. The dealer availing credit using CTD would also have to maintain copies of all invoices relating to buying and selling from the manufacturer to the dealer, through intermediate dealers.

Source: The Hindu Business Line