New Delhi: Union Finance Minister Nirmala Sitharaman chairs the 53rd GST Council meeting, in New Delhi, Saturday, June 22, 2024.

The story so far: On June 22, the GST council recommended introducing biometric-based Aadhaar authentication for GST registrations, in a phased manner. In a media interaction after the conclusion of the council meeting, Finance Minister Nirmala Sitharaman stated that the measures endeavour to combat fraudulent input tax credit (ITC) claims made through fake invoices. She highlighted that the measure was formalised based on “good inputs” received from pilot projects run in Gujarat and Puducherry, in addition to a study in Andhra Pradesh. This is soon expected to be implemented across India.

What fraud the measure is trying to mitigate?  

Input tax credit (ITC) claims are a means to reduce tax liability by indemnifying the tax already paid on inputs for the tax liability computed on the output. Let us say, a manufacturer pays Rs 120 as tax for purchasing certain inputs or raw materials for their business. Now, their direct tax liability – which is based on the production incurred, is Rs 300. This is where the manufacturer can make an ITC claim. Since s/he has paid a certain portion in taxes for the input procurement, the difference of Rs 180 would be the net payable tax. Rs 120 is offset by claiming ITC.  

Since the rollout of the GST regime, a large number of GST frauds involving the use of fake invoices to fraudulently avail an ITC claim, inflate turnovers and/or assist in money laundering have been observed. These frauds are facilitated with the use of fake invoices, that is, invoices generated without the actual supply of goods or services.

Central Board of Indirect Taxes and Customs (CBIC) in a 2019 office memorandum had noted three ways in which this was executed. The first is more direct, wherein the invoice is used, without receiving any goods or service, to show payment of tax. This is then used to avail an ITC claim translating to a loss for the exchequer.

The second entails issuing an invoice to one entity and the goods being diverted to some other entity. The purchaser in this case may actually not be involved in creating an output product or service – a prerequisite of an ITC claim. However, they too may avail a claim on their tax liability which could be unrelated to the transaction incurred. All in all, it may potentially entail shifting ITC from exempted supplies to taxable supplies. 

Finally, the last of these observed methods entails routing of invoices through a series of shell and/or dummy companies and transfer of ITC from one company to another in a circular fashion to increase the turnover. Again, there is no supply of goods or services but the credit is availed based on fake invoices. In such instances, utilising inadmissible credit alongside the utilisation of credit emanating from actual regular supplies results in a loss to the exchequer.

In May last year, CBIC had launched a drive against bogus registrations and issuance of fake invoices. Over a seven-month period since its initiation, the drive had detected a total of 29,273 bogus firms involved in suspected ITC evasion totalling to Rs 44,015 crore, a report in January 2024 noted. The CBIC further informed that the discovery translated to savings of Rs 4,646 crore, of which Rs 3,802 crore was because of the blocking of ITC claims. Rs 844 crores were saved by way of recovery. Lastly, 121 arrests were made in this regard.  

What is the motive of such frauds?  

Other than GST evasion, CBIC has observed that the frauds facilitate money laundering and showing fake purchases for getting income tax benefits. About the latter, showing reduced profit margins and higher expenses helps in reducing net profits while accounting. This helps entities acquire income tax benefits. On the other hand, those seeking to present an inflated turnover could benefit from a higher credit limit or overdraft from banks, obtain bank loans and improve their valuations for a stake sale or an IPO, among other things. The fake invoice paradigm could also be utilised to divert for company funds in a manner that helps the entity save up on taxes from the conventional route.  

Would these measures help?  

Shashi Mathews, Partner at INDUSLAW with a practice focussed on tax-related issues, states that the intent and objective of the measure might be “progressive in nature” and would help achieve its stated endeavour. However, he adds, “A lot does depend on each state government’s readiness including but not limited to ensuring adequate resources and training for GST officials to seamlessly carry out such functionalities to keep a check on GST frauds on a larger scale.” Further, Mr. Mathews states that, when the functionality is released on a large-scale, it must be user-friendly for it to be successful. 

Mahesh Jaising, Partner at Deloitte India observed that the focus on high-risk applicants, particularly those with a history of cancelled or suspended registrations underscores the commitment to institute a “credible and transparent GST system.” The measures, supported by the Directorate General of Analytics and Risk Management (DGARM) and GSTN, would enhance the security and integrity of the registration process, Mr Jaising states. Additionally, he observed, “Industry hopes for a single biometric authentication across India, allowing one-time verification in any State for companies with a presence in multiple States.” In this context, he believes that this move would help streamline the process further and reduce redundancy.

While stating that the measures would avert fake invoicing to a large extent, Mr Mathews noted, “One cannot rule out discrepancies in the Aadhaar information itself. But that does not take away the fact that a majority of registrations in the future would have credibility due to this exercise.”  

Share of personal income tax and indirect tax shows increase

Over the last week, during the election campaign, the Congress’ manifesto and the party’s emphasis on social justice and welfare were suddenly thrust into the limelight. Prime Minister Narendra Modi sought to give the Congress’ demand for a caste census and its plans to study distribution of surplus government land to the poor, among others, a communal turn. The Congress defended its manifesto saying the rising wealth inequality in the country needs to be addressed and dismissed Mr. Modi’s claims that its plans intended to favour a particular religious group. In the midst of this political controversy, the chairman of the Indian Overseas Congress, Sam Pitroda, floated the idea of an inheritance tax, which is not in place in India and is also not mentioned in the Congress’ manifesto.

Almost concurrently, as this political debate was playing out, the Finance Ministry released provisional data that showed an uptick in net tax collections. This is mostly driven by an increase in personal income tax and securities transaction tax collections. On the other hand, collections from net corporate taxes have reduced marginally. The data also show that revenues from personal income tax and securities transaction tax grew at almost double the pace compared to revenues from corporate taxes last year.

We look at some numbers to provide context to the ongoing debate and the recent release of tax data.

Chart 1 | the chart shows corporate tax and personal income tax as a share of gross tax revenue, as of February every year.

Chart appears incomplete? Click to remove AMP mode

As can be seen from the chart, the share of corporate tax has been on a decreasing trend, while that of personal income tax has been increasing. As of February 2024, the gap between the two tax shares further increased, with income tax forming 28% of the gross tax — a new peak. The sharp fall in corporate tax after FY19 can be attributed to the deep corporate tax cuts introduced by the Bharatiya Janata Party-led government in September 2019.

The data also show that the share of direct taxes has been decreasing, while that of indirect taxes has been increasing. Direct taxes, which include taxes levied directly on the incomes of corporations and individuals, are said to be “progressive” because those who earn less are taxed less and vice-versa. On the other hand, indirect taxes, which include union excise duties and the Goods and Services Tax are considered “regressive” as all consumers, regardless of their income levels, pay the same amount.

Chart 2 | The chart shows the share of direct and indirect taxes in the combined tax revenue receipts of the Centre and the States across years.

As can be seen from the chart, the share of indirect taxes, which had been falling steadily since the 1980s, has increased in the past decade. On the other hand, the share of direct taxes, which had been increasing, has consistently recorded a downturn in recent years.

Chart 3 | The chart shows the annual income bracket-wise share in total income tax returns filed (blue) and the share in total amount of income tax paid (red). Figures in %

Importantly, Chart 3 shows that a bulk of those who file personal income tax earn an annual income of ₹1 lakh-₹5 lakh. Richer individuals who earn more than ₹50 lakh are few and far between.

Moreover, a comparison with BRICS economies, for which data are available, shows that the effective personal income tax rate in India is among the highest (Chart 4).

Chart 4 | The chart compares the effective personal income tax rate in India with other BRICS countries which had data. 

Note: In case a country had two tax regimes, the highest effective tax rate was considered for comparison

Put together, the data show that poorer citizens and those in the middle-class category are increasingly shouldering a higher share of the tax burden. This is due to the combination of the rising share of personal income tax and indirect taxes in total revenue.

Rachita Rabboni is interning with The Hindu Data Team

Source: Centre for Monitoring Indian Economy, Controller General of Accounts, PricewaterhouseCoopers (PWC)

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Watch | P. Chidambaram: ‘When we come to power GST will be reformed; States will be empowered’

Former Union Finance Minister P. Chidambaram says no structural reforms have been carried out in the country since 2014.

He says there is no credibility to the government’s numbers and the claim of a V-shaped economic recovery after the pandemic is flawed; in actual fact it is a K-shaped recovery where a small section of the population has recovered sharply, but the big section has declined.

Mr Chidambaram questioned the Modi government’s promises of making the economy a $5 trillion one. He questioned the lack of world-class economists in the ruling party, said the government has mentally reconciled its self to 6% growth. He said the tax structure needs an overhaul.

Read more: Modi government has lost the plot on structural reforms: P. Chidambaram

Interview: Prashanth Perumal

Videography: Thamodharan B. and Siddharth Mathew Cherian

Production: Shivaraj S

An Indian consumer goods trader shows letters GST representing “Goods and Services Tax” (GST)at his shop in Hyderabad on August 3, 2016. Growth in India’s gross Goods and Services Tax (GST) revenues bounced back in October with tax collections rising 13.4% to the second-highest monthly tally of ₹1.72 lakh crore.
| Photo Credit: AFP

Growth in India’s gross Goods and Services Tax (GST) revenues bounced back in October with tax collections rising 13.4% to the second-highest monthly tally of ₹1.72 lakh crore.

October’s revenue growth marks the sharpest year-on-year uptick since December 2022. In September, the growth in the indirect tax collections had slowed to a 27-month low of 10.2%. Domestic transactions and services imports yielded a 13% uptick in October’s kitty. The Finance Ministry did not disclose the revenue growth from goods imports.

GST Compensation Cess collections hit a record high of ₹12,456 crore in October, surging past the previous high of ₹12,025 crore collected in April this year from the levy that will persist till at least March 2026.

Back-of-the-envelope calculations by The Hindu indicate that GST levies on imports of goods rose 13.9% in October, which is faster than the growth from domestic transactions.

The highest-ever revenue from GST was recorded in April 2023 at ₹1.87 lakh crore.

The average gross monthly GST collection in the FY 2023-24 now stands at ₹1.66 lakh crore, 11% higher than the year-ago period.

With inputs from PTI.

New Delhi:

The Congress on Thursday accused the Narendra Modi government of imposing an 18 per cent GST on the water of the holy Ganga river and termed it the height of “loot and hypocrisy”. The Central Board of Indirect Taxes and Customs, however, dismissed the Congress claim and said no such tax has been imposed on Gangajal, used in puja and other ceremonies.

With Prime Minister Narendra Modi undertaking a day-long visit to Uttarakhand on Thursday, the Congress also asked when will he visit the violence-hit Manipur.

“Modi ji, the importance of Mother Ganga, the provider of salvation, is very high for a common Indian from birth till the end of their life. It is good that you are in Uttarakhand today, but your government has imposed 18 per cent GST on the holy Ganga water itself,” Congress president Mallikarjun Kharge said in a post in Hindi on X.

“Not even once did you think what would be the burden on those who order Ganga water to be kept in their homes. This is the height of loot and hypocrisy of your government,” he also said.

The Congress also put out an animated video on the situation in the ethnic violence-hit Manipur on its social media handle and said, “The country is asking – when will PM Modi go to Manipur.”

In a clarification, the CBIC said there was no GST (Goods and Services Tax) on Gangajal.

“Gangajal is used in pooja by households across the country and puja samagri is exempt under GST… All these items have been exempt since the introduction of GST,” the CBIC said in a post on X.

The CBIC said that GST on ‘puja samagri’ was discussed in detail in the 14th and 15th meetings of the GST Council held on May 18-19, 2017 and June 3, 2017, respectively and it was decided to keep them in the exempt list. 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

New Delhi:

Life Insurance Corporation on Wednesday said the GST Authority has imposed a fine of Rs 36,844 on LIC for lower payment of taxes.

The corporation has received a communication/demand order for collection of GST, along with interest and penalty for Jammu & Kashmir state, LIC said in a regulatory filing.

As per the notice dated October 9, 2023, by the State Taxes Officer, Srinagar, LIC paid 12 per cent GST instead of 18 per cent on certain invoices.

The tax authority has raised a demand order cum penalty notice for 2019-20– GST – Rs 10,462, penalty Rs 20,000 and interest Rs 6,382.

There is no material impact on financials, operations or other activities of the corporation, it said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Finance Minister Nirmala Sitharaman with Union MoS for Finance Pankaj Chaudhary, Revenue Secretary Sanjay Malhotra and others during the 52nd Goods and Services Tax (GST) Council Meeting, in New Delhi, on October 7, 2023.
| Photo Credit: PTI

The Goods and Services Tax (GST) Council has decided to raise the maximum age limit for the president and members of the GST Appellate Tribunals, Finance and Corporate Affairs Minister Nirmala Sitharaman announced after the 52nd Council meeting.

The president can have a tenure up to the age of 70, raised from 67 earlier, while the cap for members has been raised from 65 to 67. The minimum age of appointment, which was not specified earlier, is now recommended to be 50 years.

“We wanted it to be clear that advocates with up to ten years of experience must be minimum for consideration to become judicial members of the tribunals,” said Ms. Sitharaman.

The GST Council also decided that food preparations of millet flour in powder form, with at least 70% of the composition as millets in the blend, will have a 0% GST if sold loose or packed without any branding and labelling, and 5% only if sold pre-packaged and in a labelled form.

Taxing extra-neutral alcohol

Another critical decision taken that Ms. Sitharaman said would have major implications in Centre-State ties was that though the GST Council had, by law, the right to tax the extra-neutral alcohol (ENA), the Council has ceded that right to tax ENA to the States.

“It’s States’ decision now to tax it or not to,” she said. “This has been done in the interest of the States.”

The Allahabad High Court had earlier ruled that States had lost their competence to levy a tax on ENA.

The GST on molasses has been reduced from 28% to 5%, which the Minister said would benefit sugarcane farmers and will enable them to get paid faster from the sugar mills.

“We also believe that it will reduce the cost of cattle feed. The GST rate notification will be amended to create a new entry for extra-neutral alcohol for industrial use and that shall attract 18% tax,” she said.

On services, in order to promote tourism, the Council has given a conditional exemption to foreign-flag, foreign-going vessels, from the levy of Integrated GST, if they convert temporarily for a coastal run.

“In other words, for the next couple of months, in the winter, let’s say foreign run vessels do cruise tourism along India’s coast, we have decided to exempt them from 5% IGST normally levied. This will promote tourism particularly on the Western coast, from Mumbai to Kochi, and even the eastern coast,” said Ms. Sitharaman.

New Delhi:

The Federation of Indian Fantasy Sports (FIFS) on Wednesday urged the government not to impose a 28% GST on online gaming with retrospective effect, as it is discouraging investors from putting their money into this booming industry.

The GST Council in its meeting in August held that online gaming would attract 28% GST on the face value of bets at entry level. Pursuant to the decision, the GST authorities have sent notices to several online gaming companies for recovery of taxes.

Speaking at the ‘TIOL Tax Congresss 2023’, Federation of Indian Fantasy Sports (FIFS) Director General Joy Bhattarcharjee said the issue of GST rate is more or less settled and the only issue that the industry have is retrospective provision of the law because it is discouraging investors to put in their money into this booming industry,” he said.

“However, retrospectivity of GST provisions is a very difficult blow for us. Having ‘contingent liability’ will spook away the investors whom we need during this growth phase,” he said.

Also, speaking at the occasion, Directorate General of GST Intelligence (DGGI) Principal DG Anil Kumar Gupta said that the government’s intention is not to discourage a rising industry, but to settle an issue lingering for a long time and the government is quite open to looking into the progress after some time. 

“It was not an easy decision… moreover, it will be up for review after six months, wherein depending on the scenario, the government will take a call,” Mr Gupta said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Women take part in a candlelight vigil against the “killing” of two missing students by unknown miscreants and demand peace in Manipur, Imphal. File
| Photo Credit: PTI

Four arrested in Manipur for abduction, killing of two Meitei students

The Central Bureau of Investigation (CBI) on Sunday arrested four people, including two women, for their alleged role in the abduction and killing of two Meitei students in Manipur in July. They were arrested from the hill district of Churachandpur. The suspects were identified as Paominlun Haokip, S. Malsawm Haokip, Lhingneichong Baite, and Tinneilhing Henthang. They were flown to Guwahati from Imphal by a joint team of the CBI and Manipur Police.

No shortage of TB drugs in India: Union Health Ministry

There is no shortage of anti-tuberculosis medicines in India, the Union Health Ministry said on Sunday, slamming media reports claiming that such a shortage exists as “false, motivated and misleading”. In a sharp statement, the Ministry asserted that there is a sufficient stock of all anti-TB drugs in the country. The Centre proactively undertakes regular assessments to evaluate the stock positions at various levels, from central warehouses to peripheral health institutes, it said.

Over 9.2 lakh sites host cleanliness drive; PM appeals for swachhata

More than 9.2 lakh sites across the country hosted a mega cleanliness drive on Sunday in which people from across the spectrum, including politicians, celebrities, and students participated. Prime Minister Narendra Modi also took part in this cleanliness drive along with fitness influencer Ankit Baiyanpuria.

AFSPA extended in four districts of Assam, withdrawn from four others

The Assam Police on October 1 said the Armed Forces (Special Powers) Act or AFSPA has been extended in four districts of the State for six more months. At the Assam Police Day 2023 celebrations in Guwahati, DGP Gyanendra Pratap Singh said the ‘disturbed area’ tag, which allows enforcement of the AFSPA, has, however, been withdrawn from four other districts.

Congress, AAP back protest seeking restoration of old pension scheme

Delhi Chief Minister Arvind Kejriwal on Sunday said that he has requested the Union government to implement the old pension scheme (OPS) for Delhi government employees. He voiced his support on a day when thousands of protesters gathered at Ramlila Maidan in the capital for an agitation against the new pension scheme (NPS). Delhi Congress chief Arvinder Singh Lovely also participated in the rally and offered his support to the protesters.

Students make 154 sculptures of Mahatma Gandhi

To observe the 154th birth anniversary of Mahatma Gandhi, Chembrakanam Chitra Shilpakala Academy and Thrikaripur St. Paul’s School are jointly conducting a four-day Chitra Shilpakala Camp, which began on Saturday. The camp saw the creation of 154 sculptures of Gandhi, each meticulously crafted from 1 kg to 5 kg of clay by students. As many as 154 students from over 17 schools participated in the camp.

Demand for inquest into Khalistan activist’s death in Birmingham likely on October 2

The Sikh Federation UK (SFUK) plans to make a formal demand, likely on Monday, for a coroner’s inquest into the death of Khalistani activist Avtar Singh Khanda in Birmingham last June, according to sources aware of the plan. Pro-Khalistani Sikhs also plan to hold a demonstration outside the Indian High Commission in London on October 2, accusing the Indian government of involvement in the death of a pro-Khalistan activist, Hardeep Singh Nijjar, in Canada. The protest is part of a coordinated strategy by Sikh separatists in various countries.

Biden says there’s ‘not much time’ to keep aid flowing to Ukraine and Congress must ‘stop the games’

President Joe Biden said Sunday that American aid to Ukraine will keep flowing for now as he sought to reassure allies of continued U.S. financial support for the war effort. But time is running out, the President said in a warning to Congress. “We cannot under any circumstances allow American for Ukraine to be interrupted,” Mr. Biden said in remarks from the Roosevelt Room after Congress averted a government shutdown by passing a short-term funding package late Saturday that dropped assistance for Ukraine in the battle against Russia.

Turkiye strikes suspected Kurdish militant targets in northern Iraq after suicide attack in Ankara

The Turkish Defence Ministry says its warplanes have carried out raids on suspected Kurdish rebel targets in northern Iraq on Sunday following a suicide attack on a government building in the Turkish capital. A Ministry statement said some 20 targets of the Kurdistan Workers’ Party (PKK) were “destroyed” in the aerial operation, including caves, shelters, and depots. Earlier, a suicide bomber detonated an explosive device near an entrance of the Ministry of Interior Affairs, injuring two police officers. A second assailant was killed in a shootout with police on Sunday, the interior minister said.

Indonesia to launch China-funded high-speed rail, first in Southeast Asia

Indonesia is set to launch Southeast Asia’s first high-speed railway on Monday, a delayed multibillion-dollar project backed by China that will cut travel between capital Jakarta and another major city by hours. The Chinese-made bullet train named “Whoosh” is built to take more than 600 people to and from Jakarta and the Javan city of Bandung in 45 minutes and is part of China’s Belt and Road infrastructure initiative.

GST revenue growth slowed to 10.2% in September

Growth in India’s gross Goods and Services Tax (GST) revenues slowed to a 27-month low of 10.2% in September, from around 10.8% in the previous two months. However, collections improved 2.3% over August revenues to touch ₹1,62,712 crore. Revenues from domestic transactions, including services imports, were 14% higher than the tax collected from these sources during September 2022. This is the fourth time that the gross GST kitty has crossed the ₹1.60 lakh crore mark in 2023-24, the Finance Ministry said. 

Hangzhou Asian Games | Abhay’s performance in the final is one for the history books

Abhay Singh is a proud product of the Indian Squash Academy in Chennai. The 23-year-old made his alma mater proud by rising from the ashes to help India regain the men’s team gold medal in Hangzhou with a dazzling performance in the third and final rubber against Pakistan in the summit clash. It was an outstanding performance that will go down in history books as one of India’s finest wins in the Asian Games.

Teams deal with warm-up games conundrum

Not much to gain for us. Priority is to look after the players. Just a formality.” That was the crux of India captain Rohit Sharma’s brief chat with the host broadcaster after winning the toss against England in Saturday’s World Cup warm-up match. No wonder then that India would not have been too disappointed when a thunderstorm that started minutes before the start of play washed the game out. As a result, India left for Thiruvananthapuram for its last warm-up game with only four players training on the pre-match day.

New Delhi:

Gross GST collection rose 10 per cent to over Rs 1.62 lakh crore in September, crossing the Rs 1.6 lakh crore mark for the fourth time during current financial year.

Gross GST revenue collected last month was Rs 1,62,712 crore. Of this, Central GST was Rs 29,818 crore, State GST was Rs 37,657 crore, Integrated GST was Rs 83,623 crore (including Rs 41,145 crore collected on import of goods) and cess was Rs 11,613 crore (including Rs 881 crore collected on import of goods).

The revenue in September 2023 was 10 per cent higher than the GST revenue of Rs 1.47 lakh crore in the same month last year, the finance ministry said in a statement.

“During the month, revenues from domestic transactions (including import of services) are 14 per cent higher than the revenues from these sources during the same month last year. It is for the fourth time that gross GST collection has crossed Rs 1.60 lakh crore mark in FY 2023-24,” it said.