Poor collection mars GST flat-rate scheme

The composition scheme has yielded just Rs 215 crore in the first quarter since the goods and services tax (GST) was introduced. The number has accentuated the worries of falling GST tax collections that declined to the lowest in November, prompting tax officials to pin their hopes in the upcoming electronic-way (e-way) bill that will track movement of goods. 

The composition scheme allows small enterprises to file a flat tax rate without input tax credit once in a quarter. Of the 1.1 million assessees in the scheme between July and September, only 600,000 submitted returns, sources said.

This roughly translates into less than Rs 2-lakh turnover in the quarter for each assessee under the composition scheme or Rs 8 lakh in a year, if average tax rate of two per cent is assumed.

This has perplexed tax officials because assessees with annual turnover of up to Rs 20 lakh are not required to secure the GST registration. 
 

Between July and September, assessees with an annual turnover of up to Rs 75 lakh were allowed to opt for the composition scheme. The limit was raised to Rs 1 crore in October and Rs 1.5 crore in November.   

A five per cent tax is levied on restaurant owners, two per cent on traders and one per cent on manufacturers under the composition scheme. There are 1.5 million assessees in the composition scheme now. 

Sources in the GST Council said the upcoming e-way bill would plug these kinds of loopholes. They expect that the mechanism would lead to a 15-20 per cent increase in the GST revenues, which had fallen short of their Rs 91,000-crore monthly target in October and November.

      Taking Stock Of The Numbers

• Of the 1.1 million assessees in the scheme between July and September, only 600,000 submitted returns
• This roughly translates into less than Rs 2 lakh turnover in the quarter for each assessee
• There are 1.5 million assessees in the composition scheme now

E-way bills will be introduced for inter-state movement of goods from February 1 and for intra-state movement of goods by July 1. By the time the e-way bill is introduced, the Budget for 2018-19 will be tabled and any increase in the GST revenue on account of this is likely only in 2018-19. 

The sources pointed out 17 states had introduced e-way bills for value-added tax (VAT) and had witnessed a 25 per cent rise in revenue after the move. According to sources, a pilot project on the GST e-way bill in Karnataka generates 110,000 bills every day. 

E-way bill generated on the phone would be linked to supply returns and if a few more details were provided there would be no need to separately file the GSTR-1, sources said. Assessees with annual turnover of up to Rs 1.5 crore would need to file two-digit Harmonised System of Nomenclature (HSN) codes, and not 10-digit HSN codes, for the goods carried, the sources added. 

These bills can be generated by the seller, buyer or transporter. If a vehicle is inspected for more than half an hour, the transporter can complain to the authorities. Aggregate way bills can be generated if a transporter carries goods from multiple sources. 

Finance Secretary Hasmukh Adhia has asked traders and transporters to generate way bills. “Let us all prepare for the February 1 deadline for e-way bill for inter-state transportation of goods,” he said in a tweet.

Along with the e-way bill, the reverse charge mechanism is expected plug leaks in the GST. GST collections fell to their lowest at a little over Rs 80,000 crore in November. There is also a pre-GST stock claim of Rs 130,000 crore.

While the states' revenues are protected, the Centre could take a Rs 50,000 crore hit because cess and surcharges imposed by it have been subsumed in the new indirect tax.