India’s 1st GST conference: GST revenue leakage tops the discussion

India’s first national GST conference was held on Monday, 25 November 2019 at New Delhi. The meeting saw a consensus among the attendees of zonal Chief Commissioners and Commissioners of State Tax from across India on various matters. 

The meeting was primarily convened to boost the synergy between the Central and state tax administration. Apart from this, the key reason for GST revenue leakage was identified as B2C sales. Often, the consumers are wooed to pay for the purchases by cash without taking a bill. The delegation concluded that incentivising digital payments would help curb revenue leakage by 15-20% as told to TOI by an officer.

Through B2C transactions, the tax officials fear that a parallel system may have developed whereby the entire supply chain (from raw materials to finished goods) could have evaded taxes. The leakage in these transactions was undetected by the GST. The government has actively been cracking down on businesses getting bogus input tax credits or vanish after claiming such tax credits.

Also Read: GST Rate Cut on Job Work-Related Services to Encourage Businesses

The group suggested potential payment modes to plug this revenue leakage such as using QR codes, lottery, loyalty programmes for credit cards. These sops will advocate digital payments among consumers and in turn, will help to curb the tax evasion menace.

The lottery system of earning points could be later redeemed on the government e-Marketplace (GeM) which will soon be launched for retail transactions. The meeting also concluded that there is a need to ensure uniformity in the decisions across the country since GST law is interpreted differently across states. Also, the progress made in the upcoming systems such as e-invoicing and new GST returns were elaborately discussed. 

A comprehensive analysis of revenue trend was also a part of the agenda that pointed out other reasons such as lower imports factored by the growth in the domestic market along with the slowdown in the auto sector.

The conference was scheduled within days after the meeting called by the Finance Minister with the Revenue Secretary, which discussed the solutions to ease the present GST return filing flow.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in