E-way bill, data analytics may demystify lower-than-expected GST collection

With the newly launched indirect tax – goods and services tax (GST) – collection till now coming below its expectation, the government seems to be aggressively pursuing all the means to shore up GST revenues in the coming period.

Experts analysing the GST Council's meeting, held on Saturday, said that while introduction of the electronic-way (e-way) bill for interstate movement of goods worth over Rs 50,000 from April 1 was on expected line, the government's initiation of data analytics of GST numbers could also provide answers to the crucial question of why the new indirect tax revenue was not picking up as was expected.

"It is extremely important for businesses to understand that the government is analysing the GST data to determine sectors or areas that may not be paying the appropriate tax. This would be a key area of focus considering the less-than-expected GST revenues in the past few months in addition to the other anti-evasion measures such as e-way-bill," M S Mani, partner, Deloitte India told DNA Money.

After generating over Rs 90,000 crore of GST revenue in the first three months after it was launched in July last year, it has stubbornly hovered around Rs 85,000 crore in the recent months. It had dipped to Rs 80,808 crore in November 2017.

Last week, the government sought Parliament's approval to spend Rs 62,700 crore for compensating state governments' and union territories' revenue shortfall under the GST regime as specified in the guidelines.

Pratik Jain, partner and national leader – indirect tax at PwC India, also believes that "tightening the administration" and data analytics will help resolve GST collections issues to some extent.

"They (government) will tighten their administration. They have a lot of data now. They will use the data analytics to find out what are the problem areas, and then they will try and resolve that," he said.

According to a person in the know, who spoke anonymously, the government has already begun data analytics and has some clue as to where the revenue leakage was taking place. He said that it was on the instruction of finance minister Arun Jaitley that the press release on data analytic was issued separately.

"GST Council has been apprised of the fact that CBEC (Central Board for Excise and Custom) and GSTN (GST Network) have started detailed data analytics across a number of data sets available with them," said the statement issued by the ministry.

Stating the outcome of preliminary data analysis, the statement further added, "It has emerged that there is variance between the amount of IGST (integrated GST) & Compensation Cess paid by importers at Customs ports and input tax credit of the same claimed in GSTR-3B (temporary summary returns form). There are major data gaps between self-declared liability in FORM GSTR-1 and FORM GSTR-3B. It was deliberated that this information may be further analysed and adequate action may be initiated accordingly".

A tax expert, who spoke off-the-record, said tax evasion could be considered a major cause for lower-than-expected GST collection.

He is expecting the government to tackle the GST revenue issue one step at a time. "They are now going to evaluate whether the e-way bill can curb evasion. If it (e-way bill) results in significant increase in the collection then they may decide to possibly scrap Reverse Charge Mechanism (RCM) at some time but if it does not result in significant increase in the collection then there is a real need to relook at invoice matching. For that, RCM, TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) will be introduced and linked to returns," he said.

According to him, the launch of the e-way bill from next month will throw up some more data and could demystify GST numbers further.

"Right now, the issue is finding out which sector is paying and which sector is not paying. That will come out from e-way bill data because it has a tracking mechanism. This is because the invoice number is linked to the e-way bill and GSTN number is known," he said.

The tax expert expects these measures to shore up GST collections in coming months. "That is where revenue increases are going to happen in future," he said.

He wondered when GDP growth was reviving and tax compliance was improving, how come collections refused to move up?

"If you look at the initial months, it (GST revenues) was Rs 91-92,000 crore. Then it fell to around Rs 85,00 crore. (Drop in the collection in) those months, I can understand, was because people were using transition credit. But today, overall GDP is increasing and if the average rate of tax is 18%, then they should get reflected in tax collection month on month. GST rates revised downwards (in November) was one reason but rates coming down cannot be the absolute reason because rates were brought down to encourage more people to pay taxes. If you look at the compliance, in terms of the number of people filing, that has been increasing," he reasoned.