Govt’s new GST compliance measures

General Studies Paper 3

• Government recently undertook two significant measures to curb tax evasion and increase compliance under the Goods and Services Tax (GST) regime:
  • Lowering the threshold for businesses to generatee-invoice for business-to-business (B2B) transactions, from Rs 10 crore to Rs 5 crore, and
  • Rolleing out the automated return scrutiny module for GST returns in a backend application for central tax officers.

More about the news

• The ‘Automated return scrutiny module’:
  • This will enable the officers to scrutinise GST returns of centre-administered taxpayers selected on the basis of data analytics and risks identified by the system.
    • Discrepancies on account of risks associated with a return will be displayed to the tax officers.
    • They will interact with the taxpayers through the GSTN common portal for communication of discrepancies noticed in returns and subsequent action in form of either issuance of an order of acceptance of reply or issuance of show cause notice or initiation of audit/investigation.
  • The automated return scrutiny module has already commenced with the scrutiny of GST returns for FY 2019-20, with the requisite data already with the tax officers.
• Changes changes for e-invoicing:
  • At present, businesses with turnover of Rs 10 crore and above are required to generate e-invoice for all B2B transactions.
  • 37th meeting of GST Council:
    • The GST Council in its37th meeting in September 2019 had approved the standard of e-invoice with the primary objective to enable interoperability across the entire GST ecosystem.
      • Under this, a phased implementation was proposed to ensure a common standard for all invoices, that is, an e-invoice generated by one software should be capable of being read by any other software and through machine readability, an invoice can then be uniformly interpreted.
    • New compliance:
      • The government now has lowered the threshold for businesses to generate e-invoice for business-to-business (B2B) transactions to Rs 5 crore from Rs 10 crore under GST.
        • The changes will come into effect from August 1.

Significance

• Amid rising instances of GST frauds and cases of fake invoices, these changes are expected to broaden the compliance mandate for more businesses, especially small and medium enterprises
• The measures are also expected to help boost the GST revenue collections.
• With a uniform invoicing system, the tax authorities are able to pre-populate the return and reduce the reconciliation issues.

Challenges

• While the reduction in the e-invoicing threshold is seen as an important factor for boosting GST revenue collections and checking frauds, it will also increase compliance requirements for smaller businesses.
  • Industry needs to ensure that any vendor supplying goods or services and crossing the threshold turnover of Rs 5 crore is necessarily issuing an e-invoice from August 2023 to avoid any dispute with respect to availability of input tax credit.