Informist, Monday, May 6, 2024

--Govt source: Mulling ways to streamline system-generated GST notices

--Govt source: May up GST return discrepancy threshold for notices

--CONTEXT: Govt sends cos notices on 5% discrepancy in GST returns

--Govt source: May up discrepancy threshold for GST return to 15-20%

By Priyasmita Dutta and Sagar Sen

NEW DELHI - In a bid to streamline the flurry of automated goods and services tax notices for discrepancies in companies' returns from the amount due as per the system, the government is considering raising the threshold for such demands to

15-20% from 5%, a senior finance ministry official said. The move will alleviate the stress on the tax administration, litigation, and the companies concerned as it will sharply bring down the number of notices, experts said.

"Currently, notices are being sent whenever there is a 5% difference between a company's GST return filing and the system's automated results. Raising this 5% to 15-20% will only flag cases with that much difference between the two," the official told Informist.

This is still being discussed, and the government is yet to take a final decision, the official added.

In the last seven to eight months, state and central GST authorities have issued a flurry of notices to some of the biggest public and private sector companies, including Life Insurance Corp of India, Maruti Suzuki India, ICICI Bank, Hindustan Unilever, UltraTech Cement, and Bharti Airtel.

"Accepting a tolerance limit on mismatches and accordingly issuing notices only on breach of mismatch threshold would go a long way in fostering ease of doing business and limiting unwarranted litigation," said Indirect Tax Head and Partner at KPMG Abhishek Jain.

This will bring a major relief to small companies and help the government streamline who the big fish are to go for, as it will filter out small offenders, said Bimal Jain, tax expert at A2Z Taxcorp.

Informist had reported in January that the sharp increase in the notices issued by GST authorities is mainly because of the deadlines for issuing show cause notices for the assessment years 2017-18 and 2018-19. Assessments for these two years were delayed due to the COVID-19 pandemic. Considering these were the first two years of the new taxation regime, there were a lot of discrepancies in the filing of returns due to lack of clarity, Informist reported.

"The issuance of notices is going to continue as long as there are gaps in the system-issued data and the details filed by the companies, that is for sure. But, with these kinds of improvements in the system, processes will become more efficient," the official said.

The GST department has been issuing notices for discrepancies in annual compliance, reversals of input tax credit, and reconciliation of form GSTR 2A with form GSTR 3B - essentially matching of input tax credits and reversal of common input tax credit in case of exempt supplies.

By raising the threshold of discrepancy of system-generated notices, there is a risk that big offenders with less than

15% discrepancy will be missed out, said Ankur Gupta, practice leader indirect tax at SW India. "In that case, the government should go for repeat offenders, identify risky traders, and manually notices will be sent to them."

Any discrepancy, which may be less than 15%, but is high in absolute terms should be taken up for a manual audit, Bimal Jain said. "The system-generated process is one layer of verification. Beyond that, there is also a manual audit that helps in identifying big ticket offenders."

To further streamline processes, Gupta said there is a case for the government to make e-invoicing mandatory for all GST taxpayers. E-invoicing was made mandatory from Aug 1 for all GST taxpayers with aggregate annual turnover exceeding 50 mln rupees. Earlier, the limit was 100 mln rupees. "In this way all the invoices will be available in the portal. That will ensure businesses are compliant, and you can verify if they have complied or not," Gupta said.

Central Board of Indirect Taxes and Customs Member Shashank Priya had in December said the department has been taking initiatives to put in place a mechanism through which no transaction involving GST is out of the system, including lowering the limit of mandatory e-invoicing for businesses. End

Edited by Vandana Hingorani

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