Why are GST revenues increasing?

In sports, milestones and records are typically monitored. Monthly GST revenues in India have practically become a gauge of the economy’s success. The Ministry of Finance distributes data on GST revenues for the preceding month on the first of each month.

The GST income for October 2022 was Rs 1,51,718 crore, the second-highest collection since the implementation of the Goods and Services Tax. In April 2022, it was only second to the collection. In addition, October recorded the second-highest collection from domestic transactions. This is the eighth month in a row that monthly GST earnings have surpassed the Rs 1.4 lakh crore threshold. In September, 8.3 crore e-way invoices were created, a considerable increase over the 7.7 crore bills generated in August.

One of the reasons for the high GST collections is that consumption soared over the recent festive season. Due to the Covid-19 outbreak, consumer spending has been subdued over the previous two years, prompting people to engage in “revenge buying” this year. An examination of the top five states in terms of GST income yields no surprises. Maharashtra, Karnataka, Tamil Nadu, Gujarat, and Uttar Pradesh have all retained their top five positions. These states are either manufacturing or service-oriented.

An examination of the percentage rise in GST collections in October 2022 over October 2021 provides an intriguing perspective. Ladakh (74%) topped the list, with percentage gains of more than 30% in Goa, Puducherry, and Goa. “Revenge tourism” has undoubtedly contributed to these gains in GST income. The surge, however, cannot be traced only to vengeance tourism and consumption. Other factors have also contributed to the increase in GST collections.

Section 16(2)(a) of the CGST Act has added nine months ago. For the eighth month in a row, GST collections have surpassed Rs 1.4 lakh crore. This might be more than a coincidence. Section 16(2)(aa) added a condition for the taxpayer to be eligible for an input tax credit: the details of the invoice or debit note must be furnished by the supplier in the statement of outward supplies and communicated to the recipient of such invoice or debit note in the manner specified in Section 37. In other words, the input tax credit could only be claimed if the counterparty reflected it in their return and the details appeared in GSTR 2B. This restriction on claiming input tax credit has also contributed to taxpayers having to pay extra when settling their GST obligations.

Extending the scope of e-invoicing to taxpayers with a turnover of more than Rs 10 crore contributes to enhanced GST revenues. The threat of fraudulent invoices, which was prevalent in the early days of the GST regime, has diminished as a result of e-invoicing. Tax officials’ aggressive assessment rounds out the list of contributing causes.

There is a chance that GST revenues will rise even more. The Central Board of Indirect Taxes and Customs (CBIC) is considering requesting the GST Council’s approval to decriminalize some GST-related offenses.
The objective behind this suggestion appears to be to distinguish between minor offenses and offenses committed with the explicit goal to dodge tax. The intention appears to be to raise the criminal procedures threshold limit from Rs 5 crore to Rs 20 crore. The prosecution may be initiated only in extreme cases where wilful GST evasion and misuse of an input tax credit can be established. If this provision is implemented, it will put GST legislation in line with the provisions of the Income Tax Act, which include monetary penalties and the authority to jail people in several areas. At the moment, the 12 crimes mentioned in Section 132 of the CGST Act are quite broad and can be interpreted in any way.

Any relief granted by the GST legislation is usually appreciated. However, decriminalization provisions would be effective only if the legislation’s other provisions were plain and explicit. GST notifications and assessments continue to be a source of tremendous anxiety for taxpayers – in some situations, notices are given for insignificant reasons, and assessments are more revenue-generating exercises than legal interpretations. Particularly concerning is the fact that some assessing officials are attaching taxpayers’ bank accounts to guarantee that the agency receives its pound of flesh.

The CBIC should provide certain rules for evaluation, which state governments can then follow. The GST Council is anticipated to approve the decriminalization measures at its November meeting. They should wait for the tribunals to be established so that taxpayers can appeal unwarranted criminalization rulings at the right forum.

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