india

Updated: Apr 15, 2019 07:08 IST

The Union government plans to offer cash incentives or discounts to consumers who seek bills for purchases of goods and services from dealers, as part of attempts to expand the Goods and Services Tax (GST) base and increase compliance, according to two officials familiar with the matter.

Better compliance, leading to enhanced collections, is being seen as the way forward for the indirect tax regime that was introduced in July 2017, and the proposed move is in line with that, the officials added.

No major policy announcement is expected immediately due to the ongoing general elections. But the GST-related proposals are being processed in advance so that the new government can take a view expeditiously after the counting of votes on May 23.

One of the officials cited above said that under the proposed move, consumers may be offered discounts amounting to a certain percentage of the total value of the invoice. This will give consumers an incentive to ask for bills. The quantum of incentives is yet to be determined, said the official who asked not to be named.

The second official said that the discounts may also be offered upfront or get credited into the accounts of the consumers if the payments are made through digital modes, including debit and credit cards. This will also encourage digital payments, and have a ripple effect on business units outside the GST net, he added.

The government has been promoting digital payments after banning high-value currency notes in November 2016 as part of efforts to curb black economy.

The Union finance ministry and the Central Board of Indirect Taxes and Customs (CBIC) did not respond to an email with queries about the proposed incentives.

“This will lead to a further formalisation of the unorganised sectors as they will need to report their purchases also in order to make a taxable sale invoice,” said MS Mani, partner at professional services firm Deloitte India.

“In addition to an incentive/discount for invoice documented sales, tax authorities could also explore fixing a low threshold beyond which cash sales cannot be made,” he added.

Pratik Jain, partner and leader, indirect tax, PwC India, said the proposed move is in the right direction. “Cases of tax evasion are rampant, particularly in the B2C [business-to-consumer] segment. Incentives to consumers help in better compliance. The room for increasing taxes on goods and services are limited and enhanced tax targets can be met only through enhanced consumer awareness and incentives to pay tax,” he said.

The GST collection target for 2019-20 is about 20% higher than about ~11.7 lakh crore collected in the last financial year.

The GST collection for March 2019 was a record ~1,06,577 crore. It marked a 15.6% jump over ~92,167 crore collected in March 2018 mainly because of better compliance and widening of tax net even as the government slashed rates on several items.

The monthly average of GST revenue during 2018-19 is ~98,114 crore — 9.2% higher than 2017-18. “These figures indicate that the revenue growth has been picking up in recent months, despite various rate rationalization measures,” the Union finance ministry said in a statement on April 1.

The finance ministry data also shows that the GST net has been widening gradually. The number of returns filed up to March 31 for the previous month has been 75.95 lakh, 3.36% up from 73.48 lakh until February 28.

In March, Union finance minister Arun Jaitley told an industry delegation that the thrust of the government was to lower the rate and increase the tax base and keep the revenue collections moving up.

India Ratings & Research chief economist Devendra Kumar Pant said despite monthly fluctuations, GST collections since August 2018 had been gradually increasing. “A higher GST collection would reduce pressure on the central government emanating from compensation paid to states for any revenue loss. Any surplus in the compensation cess account would be a bonus, both for the central and state governments,” he said.

The industry has demanded that the GST regime be made simpler and efficient. Bimal Jain, chairman, indirect taxes committee, PHD Chamber of Commerce and Industry, said on the export front, the process for refund disbursement has smoothened, but on input tax credit front lot more needs to be done.

Speaking at a GST conclave on Friday, he proposed a simple and hassle-free two-page GST form “so that trade and businessmen are able to fill in the respective information with ease and it also becomes convenient for the bureaucracy to assess the details filled in the forms with equal ease”.