The Goods and Services Tax, in its second year, is functioning much more smoothly with the stakeholders settling down in the new system. Prakash Kumar, CEO of Goods and Services Tax Network, in a chat with BusinessLine discusses the journey so far and how the challenges in tax evasion are being addressed through the GSTN.
Excerpts
There have been reports of detection of fraud and tax evasion in GST. How are these being traced?
Every quarter we generate a list and where the invoice level liability in GSTR 1 is higher than the consolidated liability in GSTR 3B, the tax departments send out notices. Thousands of notices are currently being sent to taxpayers regarding these mismatches. The government decides on the threshold above which notices need to be sent. We don’t go after smaller sums.
Since we have central data for the entire country, we can look through to see who is behaving properly and who isn’t, which was not the case earlier, because we were then divided in to 37 different systems — at the Centre and the State levels. These systems were not talking to each other.
Those evading taxes are suffering because we are checking from multiple sources. Another facility we have introduced is that all e-way bills are captured in the tax-payer’s GST account. In fact the Council has also decided that those who are not filing returns will not be allowed to generate e-way bills.
There is a separate team to look in to the data being generated by GST. We are in the process of recruiting more data scientists, who can identify patterns in tax evasion and catch them early. They will also check the data being given in GSTR 1, GSTR 3B, the ITC claims, if the e-way bills are backed by invoices, whether the values match.
How is the compliance in return filing under GST? There are about 1.2 crore registered tax payers but only about 75 to 80 lakh seem to be filing returns…
First, I would like to clarify that the 120 lakh is divided in to three buckets. One, there are about one crore regular tax payers who are supposed to file GSTR 1. Out of the remaining 20 lakh tax payers, 18 lakh are registered for composition scheme and they file GSTR 4. The remaining 2 lakh are other categories including foreign tax-payers, those who are temporarily in the country and so on. In the first bucket, we hit the one crore mark, few days ago. Every month, we add 1-1.5 lakh tax payers; the pace of additions was much higher earlier. The new taxpayers become liable to GST only from the month in which they are registered and not for the previous months.
If by compliance you mean filing of returns by due date, the compliance rate is 61-62 per cent. But by the end of one month, it becomes 73-74 per cent and in 3-4 months, it become 85-90 per cent.
There could be many reasons why people file their returns late such as the late receipt of the bank reconciliation statement; besides that the fee for late filing is not high… It needs to be noted that the compliance rate of GST is about 15 per cent better than the compliance under VAT and service tax. Also 100 per cent filing does not take place anywhere in the world.
Can you give a number on how many invoices are being uploaded currently on to the GSTN? What is the capacity utilisation of the GSTN now? What is the number of e-way bills being generated?
An average of 28 to 30 crore invoices are uploaded in the system every month. There are all business-to-business invoices.
Only four States were inputting invoice level data in the pre-GST era, in the VAT regime. The initial design of the GSTN was to handle 300 crore invoices per month. When we initially asked States for estimates, 200 crore invoices per month was indicated. We added 50 per cent safety margin and made the GSTN capable of handling 300 crore invoices every month.
The capacity is not the problem. The problem is that everyone decides to upload on the last day in the second half. That is why, in the new returns, the filing dates are being staggered. You will be surprised to know that in some countries, 10 different dates are given for filing; the entire tax payer base in these countries is divided in to 10 different groups based on the last digit of their registration numbers. This kind of staggered filing helps in preventing the infrastructure from remaining idle for extended periods.
Every day around 20-22 lakh e-way bills are generated between Monday and Saturday. On Sunday, the number reduces to 7-8 lakh. Some accounting companies have created a system that when the invoice is created, e-way bill is also generated.
It’s been two years since GST started, initially there were lots of glitches in the system. How is the experience now?
In the earlier days, people were just getting used to the system. Majority of our complaints were related to the inability to put the digital signature, but we ensured that every return was authenticated. Two, the interface was new. There was huge resistance, because all this is new. So there was no way we could do invoice matching.
But all the blame comes on the software. At times, the internet may not work, but the system is blamed. In fact, we had to tell the taxpayers, “please check if your google is working”, to see if the internet is working.
Now people have understood, consultants have also settled down, the laws have also been modified, where needed, and we have also made changes. Now in one click you can generate the challan, we have given offline tools for almost everything. We are learning from our experience and from suggestions of tax payers.
The law is also evolving and changing and with that the GSTN also has to change.
Do you think the manner in which the GST was initially introduced, with invoice matching and all that was too ambitious given the size of our economy?
See, you had to do it some day or the other. The invoice-matching as conceived under the GST was more innovative. If two tax payers enter the same invoice details, there are bound to be transcription errors and this can lead to mismatches. This was seen in Karnataka and Gujarat, where the errors were in double digits. Now, we cannot function with such high rates of mismatches. So we came up with the innovative idea that only supplier uploads and the buyer accepts it. Even the IMF and World Bank told us that this is a very smart way of doing things.
In many countries the invoices are centrally generated, which is accepted by the buyer. This system is being adopted by LATAM countries such as Brazil, Peru and Argentina. No one has gone for two-way matching. Our system is much simpler. Now we have started matching the figures in GSTR 1 and GSTR 3B. Those who thought they could game the system are now caught.
When is the new single page return going to be introduced?
We released the form on our portal few days ago but it is yet to be notified by the government.
We have released it so that all the stakeholders — accounting software companies and consultants can start working on it and make changes in their software. We can change our software only after the government notifies it.