Indian Economy seems to be on way to recovering from Demonetisation Disruptions, says IMF

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India’s economy has expanded strongly in recent years, said Tao Zhang, Deputy Managing Director of IMF.

IMF has underscored the significance of reforms in other key sectors like education, health and improving the efficiency of the banking and financial systems.

 

The Indian economy now seems to be on its way to recovering from disruptions caused by demonetisation and roll-out of goods and services tax, the IMF said today. At the same time, the IMF has underscored the significance of reforms in other key sectors like education, health and improving the efficiency of the banking and financial systems.

India’s economy has expanded strongly in recent years, thanks to macroeconomic policies that emphasise stability and efforts to tackle supply-side bottlenecks and structural reforms. Disruptions from demonetisation and the rollout of the goods and services tax (GST) did slow growth,” Tao Zhang, Deputy Managing Director of IMF, told PTI in an interview.

“However, with the economy expanding by 7.2 per cent in the latest quarter, India has regained the title of the fastest-growing major economy, Zhang said.

Calling this development a “welcome change”, Zhang said the growth prospects remain positive.

“That said, the Indian economy would benefit from further reforms, such as enhancing health and education, encouraging private and public investment, and improving the efficiency of the banking and financial system. This would support durable and inclusive growth and enable India to move toward the income levels of wealthier countries, the top IMF official said ahead of his visit to India.

Given the dominance of cash in everyday transactions in the Indian economy it was inevitable that demonetization would temporarily affect economic activity, said Zhang who is travelling to India and Bhutan from March 12 until March 20.
The rollout of the GST last year was a landmark accomplishment that can be expected to enhance the efficiency of intra-Indian movement of goods and services, create a common national market, enhance tax buoyancy, and boost GDP growth and job creation, he said.

 

Yet the complexities and glitches in GST implementation also resulted in short-term disruptions. As I mentioned earlier, the economy now seems to be on its way to recovering from those disruptions, Zhang said in response to a question.

When asked about the latest Indian budget, which many critics say is protectionist in nature, Zhang said IMF research indicates that tariffs are broadly contractionary, reducing output, investment, and employment.

Trade tariffs may give limited relief to industries and workers that directly compete with affected imports. However, they can raise costs to consumers and other businesses that use the protected products. Tariffs also would reduce incentives for businesses to compete and improve efficiency, he cautioned.

Since the opening of the economy starting in the early-1990s, India has benefitted from trade liberalization, he observed.

Further supply-side reforms aimed at improving the business climate could enhance these benefits, the top IMF official asserted.

Noting that the IMF and India have close relations, and the two have always been good partners, Zhang said his visit is a reflection of this partnership, as is the newest regional capacity development center, SARTTAC, based in New Delhi.

The center partners with India and its South Asian neighbors to build strong institutions and implement policies that promote growth and poverty reduction in the region, he said.

My visit is an opportunity to exchange views with the Indian authorities, senior RBI officials, and representatives from the Indian business community, civil society, and others, he said.

Zhang will also have a presentation on financial technology that will take place on Monday at the National Stock Exchange of India.

We will go over the latest trends in financial technology and their effects on the global economy and India, said the top IMF official.

Source: NDTV

GSTR-3B may be extended till June, simplified return forms on cards

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The last date for filing initial GSTR-3B returns for a month is the 20th of the subsequent month.

The GST Council in its meeting on Saturday is likely to extend the deadline for filing of simplified sales return GSTR-3B by three months till June.

The Council, chaired by Finance Minister Arun Jaitley and comprising his state counterparts, is also expected to finalise a simplified return filing procedure for businesses registered under Goods and Services Tax (GST) regime.

“The new return filing system, if agreed upon by the Council, would take about 3 months to be implemented. Till then GSTR-3B could continue,” an official told PTI.

The 26th GST Council meet is slated on March 10.

Simplified sales return GSTR-3B was introduced in July, the month of GST roll out, to help businesses to file returns easily in the initial months of GST roll out. This was to be followed with filing of final returns — GSTR – 1, 2 and 3.

With businesses complaining of difficulty in invoice matching while filing final returns as well as complications in GSTN systems, the GST Council in November last year extended GSTR-3B filing requirement till end of March, 2018, and did away with filing of purchase return GSTR-2 and final return 3.

“GSTR-3B filing system has stabilised and businesses are comfortable. So, businesses can continue to pay taxes by filing 3B till the time new return filing system is put in place,” the official added.

The last date for filing initial GSTR-3B returns for a month is the 20th of the subsequent month.

The GST Council had in January entrusted Bihar Deputy Chief Minister Sushil Kumar Modi led GoM to work out a simplified return filing process so that businesses can fill up only a single form to file returns under GST.

The group of ministers met last month to work out a simplified return form, but the meeting remained inconclusive.

In the GoM meet, the Centre and state officials presented their model for return simplification, while Nandan Nilekani also made his presentation. The idea is GST return form should be simplified, it should ideally be one return every month, Modi had said.

About 8 crore GST returns have been filed so far on GST Network portal since implementation of GST on July 1.

In absence of anti-evasion measures and invoice matching, the GST collections have declined since July.

As per official data available, in January 57.78 lakh GSTR-3B returns were filed, which fetched Rs 86,318 crore revenue to the exchequer.

For December 56.30 lakh GSTR-3B were filed which fetched Rs 86,703 crore revenue to the exchequer, while in November 53.06 lakh returns were filed with total revenue of Rs 80,808 crore.

Collections topped Rs 95,000 crore in the initial month of July.

Source: The Economic Times

IGST payout: Govt refunds Rs 4,000 crore to exporters; asks them to clear mismatch issues

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Even as the government grapples with incomplete details and mismatch errors in refund claims by exporters, it has refunded Rs 4,000 crore out of verified claims of Rs 5,000-6,000 crore on account of payment of Integrated GST (IGST) on exports under the goods and services tax (GST) regime. Incomplete details in refund claims and mismatch errors by exporters are creating a hurdle in processing the remaining refund amount, Central Board of Excise and Customs (CBEC) Chairman Vanaja N Sarna said, adding that the exporters should come forward to rectify the errors as officials are working overtime to ensure a smooth payout of the refunds. “There are mismatch issues for which exporters should come forward and sort out. They are being requested to come forward through SMS/emails to sort out issues which are remaining. We are working 24×7 to allow refunds to exporters. They have to come and rectify their mistakes to get the refund,” Sarna told The Indian Express.

Government officials said that the total refund claims received by GST Network (GSTN) are approximately of Rs 13,000 crore, out of which claims worth only Rs 5,000-6,000 crore have been verified so far and forwarded to CBEC for facilitating disbursement of refunds. Separately, the government has also refunded Rs 2,000 crore as input tax credit to exporters, Sarna said.

Under GST, exporters are required to pay IGST on exports and then claim refunds. The second type of refunds to exporters under GST involve refund of GST paid on purchase of inputs.

For refund of IGST paid on exports, the exporters are required to file GSTR 3 B and table 6A of GSTR 1 on the GSTN portal and shipping bills on the customs EDI (electronic data interchange) system. For refund of the unutilised input tax credit on inputs used in making exports, the exporters are required to file Form GST RFD- 01A on the GST portal. In instructions issued to Customs authorities by CBEC on October 9, the CBEC had said that filing of correct EGM is a must for treating shipping bill or bill of export as a refund claim.

Explaining the errors filed in the refund claims, Sarna said that in some instances, exporters have filled metric tonne (weight) of exported goods instead of the refund amount. Or, in some cases, the shipping bill has a number in place of an alphabet. “Some things are missing, there are some blank spaces, the system won’t accept until that gets corrected. That rectification has to be done by the exporters,” she said.

Similarly, there are EGM (Export General Manifest) mismatches or invoice mismatches in the refund claims by exporters. “I have been asking CBEC officials to reach out to exporters. I recently visited Hyderabad, there we have started sending e-mails to exporters that this is the flaw, please come forward and repair it, so that we can give the refund. CBEC officials are calling people and asking them to come and rectify their mistake,” Sarna said.

As per a CBEC release dated November 29, the quantum of IGST refund claims as filed through shipping bills during July to October 2017, was approximately Rs 6,500 crore and the quantum of refund of unutilised credit on inputs or input services filed on GSTN portal, was about Rs 30 crore. The refund claims have subsequently been revised upwards to around Rs 13,000 crore, but only about half of them have complete details to facilitate complete verification, officials said.

A study as part of RBI’s Mint Street Memos series had earlier this month had stated that the implementation and refund delays under the new indirect tax regime of GST seem to have led to working capital constraints for firms, which in turn might have hurt their exports in October 2017. However, the subsequent initiatives taken by the government since then appear to have significantly alleviated exporters’ concerns which got reflected in the exports growth pick up in November and December 2017, it had said.

The study had indicated that a short-term liquidity shock impacted firms in the export sector, with the firms with high working capital/sales ratio such as such as, petroleum and gems and jewellery sectors hit the most due to the liquidity constraints.

Source: Indian Express

Qatar economy resilient, continues to perform well, says Seetharaman

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Qatar’s economy has proven its resilience and continues to perform well amid the blockade, improving local liquidity and gaining the confidence of international investors, said Doha Bank CEO Dr R Seetharaman.

“The blockade (on Qatar by a quartet of nations) came as a rude shock to us. But Qatar has withstood… it has proven to be a resilient model. Qatar’s economy was performing around 2.5% last year.

This year we are not expecting less than 3.1% growth,” Seetharaman told Gulf Times in an interview.

He said Qatar improved local liquidity by disinvestment last year.

“If you look at Qatar economy, liquidity was under stress to start with. The government improved local liquidity. Now international investors have reposed confidence in Qatar. The banking system as a whole is improving.

“The loan to deposit ratio in the Qatari banking system has significantly improved and now stands at 112%. This is an improvement of the level, immediately post blockade, which was at 116%.”

Qatar’s banking sector had witnessed credit expansion of around 9%, the deposit book has grown of more than 10.4%, he noted.

He said in the days that followed the blockade, there were challenges in terms of international investors slowing down on Qatar.

“They were concerned about the Qatar economic momentum. Even the rating agencies looked sceptical, which explains the negative outlook on the sovereign.”

But, Seetharaman said, Qatar’s ‘AA’ rating, which is still very high, has not been challenged although the international rating agencies have changed the sovereign outlook to negative. The high rating (A) of Qatar’s banks is also not challenged.

Currently, Qatar holds Aa- by Fitch, AA- by S&P and Aa3 by Moody’s.

“With strong exports, positive economic outlook, and natural gas markets unaffected by the economic blockade, the overall growth for Qatar remains sustainable,” Seetharaman noted.

The International Monetary Fund (IMF) in its latest World Economic Outlook revised up its forecast for world economic growth in 2018 and 2019, saying sweeping US tax cuts were likely to boost investment in the world’s largest economy and help its main trading partners.

Seetharaman also said new global forecast has a 3.9% growth this year and next. The advanced economies are expected to grow by 2.3% in 2018 and 2.2% in 2019.

The emerging and developing economies are expected to grow by 4.9% in 2018 and 5% in 2019.

India is projected to grow at 7.4% of its gross domestic product (GDP) in 2018 making it the fastest growing economy among emerging economies following last year’s slowdown due to demonetisation and the implementation of goods and services tax.

China, which is spearheading the ‘Belt and Road’ concept is expected to grow up to 6.6% this year, he added.

Source: Gulf Times

GST mop up could top Rs 1 trillion a month post anti-evasion steps

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Highlights
Once the GST return filing process stabilises, the DGARM will be put to action for 360 degree profiling and matching the database of people filing GST with I-T returns filed
Officials said the revenue estimates for next fiscal are conservative and could go up depending on enforcement actions taken by the government

Revenues from the Goods and Services Tax could cross Rs 1 lakh crore a month towards the end of next fiscal once anti-evasion measures like matching of tax data and e-way bill are put in place, finance ministry officials said on Tuesday.

Once the GST return filing process stabilises completely, the Directorate General of Analytics and Risk Management (DGARM) will be put to action for 360 degree profiling and matching the database of people filing GST with Income Tax returns filed, they said.

The government has budgeted about Rs 7.44 lakh crore from GST in the 2018-19 fiscal beginning April 1. The estimated collection for 8 months (July-February) of the current fiscal is Rs 4.44 lakh crore. The March collection will take place in April, the start of new financial year, 2018-19.

Officials said the revenue estimates for next fiscal are conservative and could go up depending on enforcement actions taken by the government.

Collections under the GST, implemented from July 1 last year, were over Rs 95,000 crore for the first month, while in August the figure was just over Rs 91,000 crore. In September, it was over Rs 92,150 crore, October (Rs 83,000 crore), November (Rs 80,808 crore) and December (Rs 86,703 crore).

As of December 2017, 98 lakh businesses were registered under the GST regime.

“We will soon start matching of the turnover shown in GST returns with the income returns filed with the I-T department. It could begin by second half of next financial year,” a senior finance ministry official said.

“Once these measures are put in place, there is no reason why GST revenues would not average Rs 1 lakh crore every month,” he added.

Another official said that the focus of the department will also be on plugging the gaps in the gold and jewellery industry.

“Gold imports have been rising every month despite a 10 per cent customs duty. But where is this imported gold channelled to? With GST in place, the revenue authorities now have the power to seek details about end supplies,” the official said.

Import of gold attracts a 10 per cent basic customs duty. On top of that, a 12.5 per cent countervailing duty (CVD) was levied prior to GST. Since GST subsumed CVD, the GST rate on gold at 3 per cent has to be paid at the time of imports in the form of Integrated GST with effect from July 1.

India is the world’s second biggest gold consumer after China. The import mainly takes care of the demand of the jewellery industry.

The official said that once the system stabilises, the intelligence agencies within the revenue department could better monitor end usage of the imported gold.

“DGARM would be utilised to provide intelligence inputs and do big data analytics for taxmen for better policy formulation and taking action against tax evaders,” he said.

Set up under the Central Board of Excise and Customs (CBEC), DGARM will use internal and external sources for detailed data mining and risk management.

As per data on GST returns filed by companies opting for composition scheme, as many as 5 lakh firms reported such a turnover which works out to annual sales of Rs 5 lakh only.

Out of 10 lakh businesses that opted for the composition scheme during the July-September period, about 7 lakh have filed GST returns for the quarter.

The official further said that currently, there is little tracking of goods movement from one state to another and the e-way bill would act as a tool to check tax evasion as then movement of stock and its end use would be monitored.

E-way or electronic way bill is for the movement of goods and can be generated on the GSTN (common portal). Movement of goods of more than Rs 50,000 in value cannot be made by a registered person without an e-way bill.

Source: Times of India

GST mop-up on track; fisc not under threat

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A monthly collection of around ₹80,000 cr appears sufficient to meet the Centre’s and States’ needs

The Goods and Services Tax (GST) collections for December 2017 show an increase, but despite this there are concerns that the tepid collections since July could pose a problem on the fiscal deficit front.

However, a closer look at the numbers shows that these fears are misplaced. The Centre’s tax collection, as per the CGA (Controller General of Accounts), appears to be on track to achieving the Budget estimates for 2017-18. There are, however, many trouble spots in the new regime.

The complexity of the GST, which combines many of the indirect taxes of the Centre and States, has made it quite difficult to estimate the expected monthly collection target.

At a press conference in August 2017, Finance Minister Arun Jaitley said that the collections in July were better than the target of ₹91,000 crore for that month. This figure has been used since then as a ball-park figure for measuring monthly GST collections.

If we use this figure, GST collections in October (₹83,346 crore), November (₹80,808 crore) and December (₹86,703 crore) are well short of the target. But that may not really be the case.

To estimate the targeted monthly GST collection, we worked backward to see the projected revenue in the Budget estimate for 2017-18 from goods and services that have been put under GST. While service taxes have mostly moved under GST, only about a third of excise duty collections are under GST since the taxes on many petroleum products are still outside the new regime. Under Customs duty, almost 64 per cent of the collections are now under GST.

Using this basis, around ₹43,000 crore of GST need to be collected by the Centre monthly towards its indirect tax collections. A portion of this will devolve to the States as part of their share in the Centre’s revenue.

States totally have to be disbursed ₹43,000 crore every month, assuming 14 per cent annual growth from their 2015-16 revenue. Working with these numbers, a monthly GST collection of around ₹80,000 crore appears sufficient to meet the Centre’s and States’ needs.

Actual numbers

The fact that the Centre has not fallen short in its indirect tax collections is borne out by the numbers from the CGA. Gross tax revenue of the Centre for the period between April to November 2017 was ₹10,87,302 crore, up 16.5 per cent from the amount collected in the same period in 2016-17.

Interestingly, gross indirect tax collection of the Centre in this period was up 18.2 per cent, having risen from ₹5,08,924 crore to ₹6,01,904 crore.

While the devolution to States was 25 per cent higher, the Centre’s net tax revenue has managed to increase 12.59 per cent, showing that the Finance Minister will not have too much difficulty in balancing the fisc.

The catch

While the Centre’s collections are on track, allocations to States can pose a problem. “Due to the fact that IGST revenue is disbursed over a period of time, there is a thinking amongst States that there is a revenue shortfall,” explains Gautam Khattar, Partner, Indirect tax, PwC.

Disputes on input-tax credit claimed by businesses in the provisional GSTR 3B form are another issue that could impede calculations. “Definitely, this is the major concern for the Department because invoice matching is the backbone of GST,” says Vishal Raheja, DGM, Taxmann.

 

Source: Press Reader

 

Unexplained deposits in focus, taxmen ordered to go all out in the next three months

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About two months ago, tax offices were directed to accept only those revised tax returns where there is a “bonafide inadvertent error” or “a mistake” on the part of the assessee.

The income-tax department will in all likelihood go into overdrive in the next three months with the Central Board of Direct Taxes — the apex body — alerting all senior tax officials that their performance is being “monitored at the highest level.” It will also give a renewed push towards imposing and recovering tax on Rs 3 lakh crore deposit, which is suspected to be the quantum of unexplained cash parked with banks post demonetisation.

“There will be searches, surveys, information verification, and follow-ups. Explanations on ‘cash in hand’ amounts are being sought from different kinds of assessees, and not just from large establishments and jewellers… We will be knocking on many doors even if our respective targets are met,” a senior tax officer told ET.

This was broadly the message conveyed by the CBDT chief during a recent video-conference with tax officials.According to another person in the department, direct tax offices in various circles may be required to go full steam due to a drop in GST collection following cut in tax rates and refunds.

‘Dispose of Appeals Before March 31’
Till now many in the department were caught up with assessments pertaining to notices which were sent in September 2015 (for the financial year 2014-15) as these matters were getting time-barred in December 2017. Now, tax officers have the time to focus on recovery till March 31. “A possible slowdown in income tax refund, directing the CIT Appeal to dispose of appeals confirming the additions, investigating cases where assesses have deposited more than Rs 10 lakh in demonetised notes may push up gross collection. But does this really reflect the true state of tax collection in a slowing economy where the GDP growth rate is admitted to have come down,” said senior chartered accountant Dilip Lakhani.
In some of the large tax collection zones like Mumbai, the chief commissioner has written to several offices of the commissioner of income tax (Appeals), which is the first appellate authority, to dispose of many appeals before the close of the financial year.

1

Tax authorities technically have the power to come down heavily on those who are unable to explain their cash deposit by slapping 60% tax and penalty – even though the process could take some time.

About two months ago, tax offices were directed to accept only those revised tax returns where there is a “bonafide inadvertent error” or “a mistake” on the part of the assessee. This was to tax the unaccounted cash that was deposited after demonetisation (of high denomination currency bills in November 2016) and subsequently regularised through a revised return and payment of tax on it at the normal rate of 30%.

However, the communique to tax officers guidelines were only suggestive in nature as the law allows filing of revised return due to various reasons including an intention to conceal income.