GST Council should meet to discuss Rs 1.56 lakh crore compensation for FY 22: WB FM to Nirmala Sitharaman

  • 13 May 2021
  • GST, GST Updates
  • Comments Off on GST Council should meet to discuss Rs 1.56 lakh crore compensation for FY 22: WB FM to Nirmala Sitharaman

GST Council should meet to discuss Rs 1.56 lakh cr compensation for FY 22: WB FM to Nirmala Sitharaman

With states implementing lockdowns as a result of the second Covid-19 surge, Mitra claimed in a letter to Sitharaman on Wednesday that their compensation could be much higher than what the federal government estimated earlier.

“According to the Government of India’s projections, the shortfall in 2021-22 will be Rs 1,56,164 crore, excluding the impact of Covid Wave-2. The payout would now be much higher than what was previously expected as a result of Covid Wave-2 and lockdowns,” he said. Mitra demanded a digital meeting with the FM to discuss solutions to the “deeply distressing” issue.

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The GST Council, which last met on October 5, 2020, is required by Article 279A (8) of the Structure to meet at least once every quarter. The assembly was moved again after the state elections.

Mitra said that the federal establishment was being undermined by not holding the Council assembly for the previous two quarters, even just barely.

“I’m concerned that not holding conferences on a regular basis could lead to a belief deficit,” he said.

For FY21, the Centre announced Rs 70,000 crore in compensation for states, with another Rs 30,000 crore announced in March 2021. In March, the Centre paid Rs 14,000 crore as an ad hoc settlement of built-in GST.



In addition, the Centre had given states Rs 1.1 lakh crore in back-to-back loans to cover the GST reimbursement shortfall in FY21. In March, the finance ministry announced that states and union territories were owed Rs 63,000 crore in GST compensation for FY21.

Mitra’s demand follows West Bengal Chief Minister Mamata Banerjee’s request for a complete exemption from GST, customs duty, and other taxes on Remdesivir injections, oxygen cylinders, concentrators, cryogenic storage tanks, and containers used to treat Covid-19 patients.

Govt Defers New GST Return Launch, but Enhances Old GST Return!!

The GST Network, the IT support of the GST regime, is working to modify and improve current returns and will announce an advanced version of the existing system soon

Instead of rolling out a new model, the Government aims to develop the current GST return filing system. Governments this move will make compliance much easier. It is Supposed to be launched on 1 October of this year.

GSTR 2B

The government will implement a new form GSTR 2B which, like the GSTR 2A, will have client or business purchase details with added input tax credit information. The existing GSTR 1 form, which collects information relating to sales, will be more comprehensive. Form GSTR 3B, which provides the tax computation, will be auto-populated.

New features likely to be added in the Updated version of the existing return system includes:-

  • A Matching tool to compare GSTR 2A with the register of purchases
  • The communication channel between buyer and seller
  • Improved Tax Liability and Input Tax Credit (ITC) comparison table since integrating ITC into IGST paid on imports.
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The GSTN also seeks to reduce taxpayers’ error by improving the process of linking GSTR1 to GSTR3B and GSTR2A data with GSTR3B for flow of ITC.

A Form of electronically-authenticated invoices will be introduced for companies with a turnover of Rs 500 crore or more from October 1. Earlier, it was proposed to introduce e-invoicing for companies with a turnover of Rs 100 crore or more in a year.

India’s Auditor Pulls Up Government For Not Doing GST Compliance Easier

India’s auditor has pulled up the government for failing to execute a “improved tax compliance regime” with the rollout of goods and services tax.

This is “one noteworthy area where the maximum capacity of GST rollout has not been accomplished”, the Comptroller and Auditor General of India said in its first review report of GST.

The auditor said that even following two years of GST rollout, a system approved input tax credit through an invoice coordinating framework, has not been implemented. Invoice coordinating system is used to match invoices issued by taxpayers, and their returns to check evasion.

The complexity of the return filing mechanism and technical glitches brought about the rollback of invoice matching, making the system inclined to input tax credit cheats, CAG said in its findings. “Without invoice coordinating and auto generation of discounts, evaluations on the whole, the visualized GST tax compliance system is non-functional.”

Invoice matching is the basic prerequisite that would yield the full advantages of this real tax change, the auditor said. It would ensure the tax incomes of both the Center and the states, and lead to legitimate settlement of incorporated goods and service tax, it said.

Absence of Coordination Among Departments

The review report by CAG said that suspension of key aspects of the system like invoice matching, changes presented in the GST system, point to lacking coordination among Department of Revenue, Central Board of Indirect Taxes and Customs, and GST Network.

It also indicates disappointment evaluate the system enough before the rollout, the auditor said.

Revenue Dipped, Compliance Dropped

The development of indirect taxes for the central government slowed to 5.8 percent year-on year in financial year 2017-18, with the government’s revenue from goods and services taking a 10 percent dip, the auditor said.

Indirect taxes in 2016-17 developed 21.3 percent over the earlier year. “While it was expected that compliance would improve as the system would balance out, all returns being documented demonstrated a declining pattern of filing,” the report said.

The filing percentage of GSTR-1 returns—month to month sales—were less in contrast with the filing of GSTR-3B returns. The presentation of GSTR-3B has brought about filing of returns with input tax credit claims which couldn’t be confirmed, the report said.

Accumulations from integrated GST—collected on between inter state transactions—were developed dependent on Finance Commission’s suggestions, which was in repudiation of the IGST Act, the CAG said. This, as per the auditor, affected the circulation of funds to states on a totally different basis rather than “place of supply” idea as conceived in the IGST Act. The government additionally did not transfer Rs 6,466 crore of GST remuneration cess to the public acccount during 2017-18, the report said.

The auditor also found that IGST settlement reports—intended to empower sharing of IGST between central government and states and created dependent on the calculation that keeps running on GST IT system—were not being produced. This, it stated, was expected to non-usage of corresponding GST modules, similar to imports and appeals. Mistakes in the settlement algorithm, and limitation of the GSTR-3B return in catching all the data required for settlement, had a heading on the settlement of funds between the Center and the states, the auditor said.

The fragmented IGST ledgers were partially in charge of Rs 2.11 lakh crore of IGST balance staying agitated during 2017-18.

The auditor has also pulled GSTN for not taking due consideration developed and in testing of the system before its rollout.

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