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

New income tax slab and rates for new tax regime FY 2023-24 (AY 2024-25) announced in Budget 2023

By
  Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes   The income tax slabs under the new income tax regime will now be as follows: Rs 0 to Rs 3 lakh - 0% tax rate Rs 3 lakh to 6 lakh - 5% Rs 6 lakh to 9 lakh - 10% Rs 9 lakh to Rs 12 lakh - 15% Rs 12 lakh to Rs 15 lakh - 20% Above Rs 15 lakh - 30%   The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)   Income tax slabs under new tax regime Income tax rates under new tax regime O to Rs 3 lakh 0 Rs 3 lakh to Rs 6 lakh 5% Rs 6
Post a Comment
Read more

Jaitley plans to cut MSME tax rate to 25%

By
Income tax for companies with annual turnover up to ?50 crore has been reduced to 25% from 30% in order to make Micro, Small and Medium Enterprises (MSME) companies more viable and also to encourage firms to migrate to a company format. This move will benefit 96% or 6.67 lakh of the 6.94 lakh companies filing returns of lower taxation and make MSME sector more competitive as compared with large companies. However, bigger firms have shown their disappointment since the proposal for reducing tax rates was to make Indian firms competitive globally and it is the large firms that are competing globally. The Finance Minister foregone revenue estimate of Rs 7,200 crore per annum for this for this measure. Besides, the Finance Minister refrained from removing or reducing Minimum Alternate Tax (MAT), a popular demand from India Inc., but provided a higher period of 15 years for carry forward of future credit claims, instead of the existing 10-year period. “It is not practical to rem
1 comment
Read more

Don't forget to verify your income tax return in August: Here's the process

By
  An ITR return needs to be verified within 120 days of filing of tax return. Now that you have filed your income tax return, remember to verify it because your return filing process is not complete unless you do so. The CBDT has reduced the time limit of ITR verification to 30 days (from 120 days) from the date of return submission. The new rule is applicable for the returns filed online on or after 1st August 2022. E-verification is the most convenient and instant method for verifying your ITR. However, if you prefer not to e-verify, you have the option to verify it by sending a physical copy of the ITR-V. Taxpayers who filed returns by July 31, 2023 but forget to verify their tax returns, will get the following email from the tax department, as per ClearTax. If your ITR is not verified within 30 days of e-filing, it will be considered invalid, and may be liable to pay a Late Fee. Aadhaar OTP | EVC through bank account | EVC through Demat account | Sending duly signed ITR-V through s
Post a Comment
Read more