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Union Budget 2020 Expectations: GST

Amit Mundhra — Mon, 27 Jan 2020 06:15:54 +0000

Everyone is busy with financial planning for the year 2020 and the Finance Ministry is busy with the planning of the upcoming Budget 2020. The union budget for the fiscal year 2020-21 is scheduled on 1st February 2020 and Sitharaman is all set to present her second budget as a Finance Minister. There are many things on the plate of the finance minister such as low industrial output, slowing demand and the overall GDP growth fixed at 5% which is at an 11-year low.

Since the last budget presented on 5th July 2019, the finance minister has announced a lot of incentives for the economy. These incentives include a cut down in tax rates for corporates and new manufacturing companies, new reforms in Goods and Service Tax law, capital infusion for PSU banks and setting up a separate fund for real estate and infrastructure. However, all these are going in vain as the economic indicators haven’t shown any signs of growth revival. Moreover, the government’s tax collections have been low too for a long time.

The call of the hour for the benefits of economists and industrialists as well as the general public is to revive the demand in the economy. This demand revival is more likely to steer the economy back into progress.

So, here are some expectations from the Budget 2020 concerning GST and taxation. Let’s get started –

1. A boost in the cash flows of the middle-class taxpayers

The finance ministry is considering to relax the personal income tax rates in the upcoming budget for the fiscal year 2020-21. The present rates comprise of 5% for income slab from Rs 2.5 to 5 lakh, 20% for income slab from Rs 5 to 10 lakh and 30% for income slab from Rs 10 lakh and above. Hence, one can easily detect the significant tax outgo for the particular section falling in the category of earning income between Rs 5 to 10 lakh. A decrease in the tax rate from 20% to 10% would definitely increase the disposable surplus in the hands of the middle class who are the growth drivers for the economy.

2. New GST Returns

New GST Returns in form RET-1 or RET-2 or RET-3 along with annexures in ANX-1 and ANX-2 might tweak the GST laws to enable new GST Return filing system, w.e.t., April 1st, 2020. To accommodate all these altercations, the Union Finance Minister may tweak the GST laws.

3. Savings-booster for individuals

Most of the tax savings of individuals are accounted to Section 80C. These savings include investment in LIC, government securities, mutual fund ELSS along with payments for housing loan repayment and children’s tuition fee with a condition that all these must be under the overall limit of Rs 1.5 lakh. This limit of Rs 1.5 lakh under section 80C was last upgraded in the Budget 2014.

For an individual, education costs and housing loan repayments form an important part of the financial commitments. Hence, leaving a very little room for savings. This budget could experience an enhancement of the limit under section 80C by the government to provide with a much-needed boost for public savings.

4. Incentives as per the Sector

To have a better outlook for the upcoming budget 2020, the Union Ministry of Finance has been holding meetings with the representatives of various sectors and industries. Sectors like real estate, non-banking financial companies (NBFCs), infrastructure and power Discoms have been suffering from the lack of demand and finances. The government has outlined a plan for real estate and infrastructure but the actions are yet to be carried out. Furthermore, there are assumptions that the infrastructure plan could be aided through the issuance of long term tax-deductible infrastructure bonds by the government.

5. Lower tax-rate for Partnerships and LLPs

Some MSMEs are paying tax at 30%, excluding surcharge and education cess, which consist of partnership firms and Limited Liability Partnerships (LLPs). While the government has handed out a tax cut on corporates and manufacturing companies, the other forms of business enterprises are still paying high taxes at 30%. In this budget, the government could have a tax rate cut down for these business enterprises to balance out a fair play among MSMEs.

Moreover, the government could also aid capital intensive MSMEs for their investments in plant and machinery. The investments could be boosted through a deduction under section 32AC. Section 32AC was introduced in the union budget of 2013 to encourage investments in new plant and machinery by various companies. Hence, the companies were allowed the deduction in addition to depreciation allowance. The minimum investment threshold was set at Rs 25 crore. The Finance Minister could also revamp this section to grant deduction benefits to MSMEs which have a lower investment threshold with a time horizon of 1-2 years.

6. Goods and Services Tax rate cut down

GST rate cuts for over the last two years are the reason behind the dwindling revenue collections. Many economists have been favouring a phased increase in the GST rates. But, the automobiles sector is all set for and is looking forward to a rate cut 28 % to 18 %. Furthermore, there is a chance of exemption from customs duty of 5 % for lithium-ion batteries. With all this, the health care segment in the upcoming budget also expects to have ‘health care services zero-rated product’ under GST. There are speculations that this budget, various items which fall in between 18% and 28 % may be scrutinised for a single rate.

As we all are aware that the government, itself, is running on a tight fiscal situation due to the lesser than expected tax collections and disinvestment collections. So, if there is a possible increase in the disposable surplus in the hands of individuals that can help in reviving consumer demand. Apart from this, the government is also taking into consideration to mobilising public savings via section 80C along with the issue of corporate bonds by way of top-rated PSUs.

So, these were some speculations from our side. if you have some more, do let us know!

Stay tuned for more blogs on GST.

The post Union Budget 2020 Expectations: GST first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

Offences and Penalties under the GST Act

Amit Mundhra — Thu, 19 Dec 2019 09:38:15 +0000

What is an offence under GST? An offence under GST is the breach of GST rules and violations of provisions of the GST Act. There are severe penalties for the lawbreakers and to avoid such penalties you must have the information about these offences. There are 21 offences in total that come under the GST Act in India. The list of these offences with the appropriate penalties is given below.

Read the whole article to know more about such offence and penalties under GST in India.

Offences under the GST Act –

Under the GST act, there are 21 distinct offences, if broken, can result in penalties. Obviously, there are more offences, apart from these 21 offences, which attract GST penalties depending upon the case. We are providing you with the list of offences, bifurcating them under various sections to ease it up, along with specific details of the 21 GST offences under GST regime.

Invoicing and Documentation related offences under the GST Act –

Supplying goods and services without issuing an invoice or with issuing a false or incorrect invoice.
Using GSTIN of a different GST registered person or entity for issuing invoice or document.
Transporting taxable goods without the appropriate or correct documentation.
Issuing a GST invoice without supplying goods or services in reality.
Failing to maintain relevant documents and records as per the requirements of the GST Act.

Tax Evasion related offences under the GST Act –

Tax evasion by deliberately under-reporting or suppressing overall turnover.
Collecting the tax from a receiver of goods/services but failing to pay tax to the government within three months of the due date.
Collecting the GST in contravention of provisions specified by the GST Act but failing to pay tax to the government within three months of the due date.
Trying to take and utilise the Input Tax Credit (ITC) without the actual receipt or supply of goods or services.
Avoiding tax liability under subsection 2 of Section 52 of GST Act, i.e., Failing to deduct tax, or even if deducting tax, the amount deducted is less than the actual amount or not paying the tax owed to the government.
Avoiding tax liability under subsection 3 of Section 52 of GST Act,i.e., Failing to deduct tax, or even if deducting tax, the deducted amount is less than the actual amount deducted or not paying the tax owed to the government.
Breaching Section 20 and its sub-sections of GST Act by taking and utilising Input Tax Credit(ITC).

Fraudulent Intent related offences under the GST Act –

Submitting false information at the time of GST registration or a later date.
Supplying fraudulent information to obtain a GST refund.
Fabricating documents or records and provide incorrect information with the intention of tax evasion.
Avoiding registration under GST when it is necessary to do so as per the GST Act.
Damaging and disposing of the goods that have been seized or detained under the GST Act.
Intentionally, supplying, transporting and storing the confiscated goods as per the GST rules.

Obstruction related offences under the GST Act –

Obstructing any official from performing his/her duties as per the GST Act. For instance, hindering an officer during the audit by tax authorities.
Meddling with or destroying material pieces of evidence or documents.
Providing fabricated or false information to an officer during proceedings.

GST Tip – The cases involving Fraud amounts to 100% penalty. The minimum of this type of penalty is 10,000 INR.

GST Act – Minor Breach and Major Breach

According to the existing rules regarding GST Penalties, a minor breach situation can be detected when the amount of tax involves a sum of less than Rs. 5,000. Furthermore, easily rectifiable documentation errors/omission is also included in a minor breach. As per the current rules under GST Penalties, minor breaches are not accountable to severe GST penalties and the tax authorities may only issue a warning without any monetary penalty depending on them.

But if the situation arises where the tax amount involves a sum of more than Rs. 5,000, then this is the case of a major breach under the GST Act. The major breach cases can attract the penalties including jail sentences depending and considering the tax amount.

GST Tip – The minor versus major breach clause under the GST Act is added to help especially help those businesses which have small turnovers and SME so that these businesses are not penalised for genuine errors.

GST Penalties for the offences under the GST Act –

GST Penalties for the offences under the GST Act, 2017 are accountable to fines depending on the number of various factors rather than limiting it to the severity of the offence. Below are the penalties under the GST Act for some key offences –

In Case Of Fraud –

The offenders committing fraudulent activities intentionally then under the provisions of GST, they shall be liable to pay 100% penalty. Resulting in an amount equivalent to the amount of tax evaded or short deducted, subject to a minimum of Rs. 10,000/-.

But if the fraud has been committed without any fraudulent intent or the tax evasion is unintentional then the penalty to be paid in this case will be 10%, subject to a minimum of Rs. 10,000.

The penalty applies to those as well who is not a taxable person but have:

Abated someone in committing the fraud.
Acquired goods or services which are against the provisions of GST, even after having the information in this regard.
Failed in/to issuing/issue a genuine invoice.
Failed to maintain the proper records or the books of accounts.
Failed to appear before the ad rem authority upon a summon issued to his/her name.

When the above-mentioned situations arise then the offender will also be liable to pay a penalty of Rs. 25,000.

There are also provisions under GST for the case of fraud is deemed ascertained. For such cases, apart from the fore-mentioned amount of penalty, the following shall also apply:

If the amount of tax involved is up to Rs. 50 lakhs, then the person has to serve a jail term of 1 year along with paying the penalty.
If the amount ranges between Rs. 50 lakhs to Rs. 1 crore, then the jail term shall rise up to three years with the penalty.
If the amount is more than Rs. 1 crore, then the person shall face a jail term up to 5 years plus the penalty.

Prosecution –

The criminal proceedings shall be held against the offender if the person commits the below-mentioned offences intentionally and deliberately to cause fraud.

Issuing an invoice without making a supply of goods or services.
Claiming a refund of CGST/SGST by fraud.
Abetting in the fraud under GST.
Submitting fake documents or returns.

The offender can go through Inspection, Search or Seizure under GST if –

The Joint Commissioner of CGST/SGST has enough reason to believe that the taxpayer is purposely hiding and suppressing the transactions in order to evade taxes or has claimed disproportionate Input Tax Credit, then the order can be passed to inspect the whereabouts of such person.

In the same manner, the Joint Commissioner can also order for search and seizure of the premises of a taxpayer if he has enough reason to believe that there are goods, which needs to be confiscated or the person is hiding some important documents somewhere.

These are the GST offences and penalties for fraud, to know more about it stay tuned to our series of blogs!

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Auto Industry will have to “find its own balance” – says president SIAM

Amit Mundhra — Fri, 27 Sep 2019 06:25:23 +0000

Following the slowdown in the automobile sector, president of Society of Indian Automobile Manufacturers (SIAM) said that the auto industry will have to “find its own balance” to boost demands. The auto industry was very hopeful of GST reduction but the GST Council is clearly declining to cut rates for the auto sector.

The industry had been demanding a GST rate cut from the current 28 percent to 18 percent in order to revive sales which have been facing a prolonged slowdown. The auto components industry demanded a uniform GST of 18 percent also. At present, 60% of auto components are taxed at 18 %, while the rest are in the 28 % slab. “The festive season would help in ushering in positive consumer sentiments,” said, president Rajan Wadhera of SIAM. They also requested abolition of compensation cess for the whole segment of 10-13 seaters vehicles, however, the benefit has been partially met.

Wadhera said the reduction of GST compensation cess for the sub-segment of 10-13 seaters with length less than 4 metres is a positive step as the industry had been demanding it for a long time. He expressed hope that the recent measures taken by the finance minister will support growth and once the market stabilizes and revenue rises to comfortable levels, the government would be able to rationalize GST levels and reduce rates on vehicles.

The post Auto Industry will have to “find its own balance” – says president SIAM first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.