The Group of Ministers (GoM) to look into the implementation of information technology for the Goods and Services Tax Network (GSTN) has raised concerns over the increase in shortfall in average revenue for states under the GST regime. This, coupled with subdued collections under the composition scheme, indicated that traders may be continuing to evade taxes or under-report revenues. Average revenue shortfall for states in December stood at 20.7 per cent and 20.9 per cent in November, the two recent months when the Narendra Modi government brought in several measures, such as tweaking tax rates, increasing incentives, providing relief to small and medium enterprises and improving the IT system to help traders file returns smoothly. In comparison, the revenue shortfall in October was 17.5 per cent, which was lower than the 28.3 per cent in August, the first month after the government brought in the GST regime. The shortfall is calculated on the basis of 14 per cent growth on the base year of 2015-16. “The concern really is the tax revenue going down,” said Karnataka Agriculture Minister Krishna Byre Gowda, who represents the state in the GST council. The GoM’s red flag on lower tax collections comes a day ahead of the crucial GST Council meeting to be held in Delhi on Thursday, chaired by Finance Minister Arun Jaitley. “We were expecting a buoyancy with the implementation of GST. It is unfortunate that there is evasion, leakage and suppression. It is a fact, the kind of figures we are seeing in revenue, I have to make a subjective statement, it indicates that all three are happening,” said Gowda, who is also a member of the empowered GoM on IT. The revenue shortfall could also affect the average compensation from the GST cess of Rs 76.15 billion for loss of revenue to states. “If it goes below, then the Centre will have to pay from its own kitty,” he said. The biggest concern looking at the data that the GSTN has generated is the low revenues of Rs 3.1 billion from 750,000 dealers under the composition scheme who have paid taxes in the last quarter.
Under the composition scheme, a trader whose turnover is up to Rs 10 million can opt to pay one per cent as a composition tax and not take input credit. Tax on manufacturers is two per cent and at restaurants is five per cent under the scheme. “When you analyse the data, we are surprised that it means most of the traders have less than Rs 20 lakh (Rs 2 million) as turnover. With that turnover, these taxpayers need not register for GST,” said Sushil Kumar Modi, Bihar’s deputy chief minister who chairs the empowered GoM on IT. “There is suppression of turnover. The traders (who have registered for) composition scheme are not paying taxes as required.” The lower taxes being generated by the GST had also prompted the government to roll out the e-way bill, which experimented as a pilot in Karnataka, nationally effective February 1 for inter-state movement of goods and in a phased manner for intra-state goods movement. So far, 14 states have signed up for implementing the e-way bill, which is being executed by the National Informatics Centre, said Modi after reviewing the progress of the programme with the government-run IT body. NIC has implemented the e-way bill system in Karnataka, which had pioneered it to track vehicles that transport goods for its VAT system five years ago. The GSTN has seen over 50.25 million returns filed since July and has processed over 1.54 billion invoices. 