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ETRISE Top MSMEs Ranking: As GST collections slip, compliance cost increases

A slowdown in consumption is also hurting tax collections and a prolong period of economic uncertainty will further pressure.

ET Online|
Jan 14, 2020, 12.31 PM IST
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As GST collections come in lower than the targeted number, tax authorities have been under increasing pressure to curb evasion.
By Anmol Nagpal

As monthly GST collections come in lower than the targeted number, tax officials are under increasing pressure to curb evasion, which in turn is making things difficult for business and industry.

Consider this. Meant as a measure to curb GST evasion, the e-Way bill system for all inter-State movement of goods was rolled-out on April 1, 2018 with the State of Karnataka being the first to make it operational. However, almost two years after its introduction, e-way bills continue to be a pain-point for the industry.

The transit of goods from one place to another either interstate or intra state and of value more than Rs 50,000 is facilitated by the filing of ‘E-Way Bills’ on the common GST portal.

Highlighting the issues related to the E-way Bill at the recently held ETRise Dialogues, Rajiv Chawla, Chairman Jairaj Industries & IamSMEofIndia states that the process is a major dampener and should be removed with the introduction of e-invoicing.

This event was hosted under the aegis of ETRise Top MSME Ranking, which will be a definitive ranking of businesses basis a rigorous evaluation of their performance across innovation, financial health, and financial growth. For details visit here.

“With the introduction of GST, the cost of compliance should have gone down, but practically the cost of compliances has gone manifold. With e-way bill, there is a huge requirement of opening warehouses in different areas because e-way bill gets expired. It’s only one day per 100 kilometers,” said Chawla.

Though e-way bill can be rectified or revised, the process is quite cumbersome. “The extension of the e-way Bill is done when the transporter applies. But, in reality thousands and millions of buyers are still lifting goods after the e-way bills have expired”, Chawla further added.

Recently, exporters have been facing scrutiny over claiming excessive input tax credit and the tax authorities identifying people who have probably evaded tax. Rajesh Rawat, Joint Director, Export Promotion Council for handicrafts, said, “The government has come out with a risky exporters list and they have around 5000 odd exporters listed in that. According to the government, these exporters have done some malpractices and have evaded tax.”

Rawat adds that even customs officials have become overtly active because of the risky exporter list, which has resulted in shipments getting stuck, said Rawat. “It’s a big challenge, especially in the handicraft sector where you need to innovate constantly, you need to come out with new products, because the buyer wants new product every time. If the shipment gets stuck it is difficult for the exporters to survive. When the shipment gets stuck, it stops the entire cycle”, affirmed Rawat.

As GST collections come in lower than the targeted number, tax authorities have been under increasing pressure to curb evasion. “It may be two or three months in a year when the collections crossed Rs one lakh crore. These are typically around the festive season and around April. However, this year’s performance has been better than the previous one in terms of GST collections,” says Saloni Roy, Senior Director, Deloitte India. Roy also believes the target setting for GST collection was ‘over ambitious’.

A slowdown in consumption is also hurting tax collections and a prolong period of economic uncertainty will further pressure. "We should encourage people to spend and consume more and there is a philosophy that if you have lower tax rates the compliance goes up, prices are lower so people also consume”, said Roy.

Discussing the reasons behind the shortfall of GST collected, Chawla said, “A nation’s tax collection is the objective assessment of its market. If the markets have actually shrunk, you can call it a downturn and not a recession. The fact is the consumption has gone down and therefore, there is lesser tax collection”.

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States seek pruning of GST exemptions

Govt revises target for GST collections again

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