Skip to main content

GST composition scheme may come under reverse charge mechanism to curb evasion

By
GST composition scheme may come under reverse charge mechanism to curb evasion
Worried by apparent goods and services tax (GST) evasion, India is likely to bring the composition scheme under the reverse charge mechanism right away. The government will move an amendment to the GST law in the budget session to introduce an enabling provision to prescribe the mechanism where it deems necessary. The GST Council has already approved about 40 changes to the law.
The law will be changed to introduce an enabling provision for you to bring in reverse charge mechanism wherever you want," said a person aware of deliberations in the GST Council. "The thinking is that at least in the case of composition scheme the reverse charge should be done."
Under the reverse charge mechanism, a person receiving goods or services collects the GST levied and deposits the tax with the government. The provision, which is suspended for now, was only meant for an unregistered entity supplying goods or services or both. In such a case, those taking the goods or services would levy and collect the tax on a reverse charge basis, ensuring that it's paid.
The government feels that the law needs to be amended to allow for the imposition of reverse charges wherever it feels there may be significant evasion. "It will not be compulsory but where it is needed it will be done," the person said, adding it may be implemented for the composition scheme to begin with. "This will create a disincentive for remaining in the composition scheme and they will move to the regular scheme."
Under the composition scheme, those with turnover of up to Rs 1 crore can pay 1-5% of that as tax and need not file detailed GST returns. This is set to be raised to Rs 1.5 crore. The rate of tax is 1% for traders and manufacturers and 5% for restaurants.The council has expressed concern that collections under the composition scheme were low
Large-scale evasion is suspected as the tax paid under the composition scheme is just Rs 300 crore so far by more than 1.6 million businesses that have registered for it. If businesses are claiming turnover is less than Rs 20 lakh, why have they sought registration at all, the person asked. They would be exempt anyway.
"The government perhaps believes that in the absence of the reverse charge and with the increase in composition limit, it is being used as a route to evade tax," said Pratik Jain, indirect taxes leader, PwC. "Also, the tax collected from composition dealers is very low with many of them declaring less than `20 lakh annual turnover. Reverse charge will help the government to monitor the purchases of composition dealers and help plug the leakage."
The Economic Times , New Delhi, 22th January 2018

Comments

Post a Comment

Popular posts from this blog

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the...
Post a Comment
Read more

SFBs should be vigilant, proactive to mitigate risks: RBI deputy guv

By
  The Reserve Bank of India’s Deputy Governor Swaminathan J on Friday instructed the directors of small finance banks (SFBs) to be vigilant and proactive in identifying emerging risks in the sector.Speaking at a conference for directors on the boards of SFBs, Swaminathan highlighted the role of governance in guiding SFBs towards sustainable growth with stability. He also emphasised the importance of sustainable business models.Additionally, he highlighted the need for strengthening cybersecurity to protect the entities against digital threats and urged for a stronger focus on financial inclusion, customer service, and grievance redressal to ensure a broader reach of banking services.Executive Directors S C Murmu, Rohit Jain, and R L K Rao, along with other senior officials representing the Supervision, Regulation, and Enforcement Departments of the RBI, also participated in the conference.   -  Business Standard  30 th  September, 2024
Post a Comment
Read more

Brigade Hotel Ventures files draft papers with Sebi for Rs 900 crore IPO

By
  Brigade Hotel Ventures Ltd, owner and developer of hotels in South India, has filed draft papers with capital markets regulator Sebi to raise Rs 900 crore through an initial public offering (IPO).The proposed IPO is entirely a fresh issue of equity shares with no Offer-for-Sale (OFS) component, according to the draft red herring prospectus (DRHP).Proceeds from the issue to the tune of Rs 481 crore will go towards payment of debt, Rs 412 crore will be allocated to the company and Rs 69 crore to its material subsidiary, SRP Prosperita Hotel Ventures Ltd.Additionally, Rs 107.52 crore will be used to purchase an undivided share of land from the Promoter, BEL, and the remaining funds will support acquisitions, other strategic initiatives, and general corporate purposes.The company may raise up to Rs 180 crore through a Pre-IPO Placement.   If the placement is undertaken, the issue size will be reduced.Brigade Hotel Ventures Ltd is a wholly-owned subsidiary of Brigade Enterprises ...
Post a Comment
Read more