CAG has asked the Finance Ministry to identify high risk taxpayers in the GST composition scheme on a periodical basis and verify from other sources, including third parties, their declared value of sales to check tax evasion.
| Photo Credit: The Hindu

The Comptroller and Auditor General (CAG) has asked the Finance Ministry to identify high risk taxpayers in the GST composition scheme on a periodical basis and verify from other sources, including third parties, their declared value of sales to check tax evasion.

Based on an analysis of 8.66 lakh composition taxpayers under the central jurisdiction between 2019-20 to 2021-22 fiscals, the Comptroller and Auditor General (CAG) found that a significant number of GST taxpayers have a high risk of crossing the turnover threshold for composition levy scheme (CLS).

These high risk taxpayers were identified by audit from the data contained in GST returns viz. GSTR-4A, GSTR-7 along with third party data sources such as IT returns, ‘Vahan’ database etc.

The GST composition scheme is available to taxpayers whose aggregate turnover, in the preceding financial year, has not exceeded ₹1.5 crore. For taxpayers in special category states, this limit is ₹75 lakh.

The CAG said two major risk areas in respect of CLS taxpayers are under-declaration of the ‘value of outward supply’ by the taxpayers to continue in the scheme; and non-fulfillment of eligibility conditions for availing CLS.

The audit also observed that there were certain CLS taxpayers who were continuing in the Scheme despite not fulfilling the eligibility criteria prescribed in the Act and the Rules, and a substantial number of CLS taxpayers were not discharging their obligatory responsibilities of filing returns and payment of tax under reverse charge.

“The Ministry should identify high risk taxpayers in the CLS on a periodical basis using a risk-based approach and verify their declared value of outward supply from other sources including third parties to minimize the possibility of misuse by ineligible persons,” the CAG said in a report tabled in Parliament recently.

The official auditor also suggested that the Finance Ministry may develop a system of identifying ineligible taxpayers and take action to exclude them from the CLS in order to prevent misuse of the intended benefits of the scheme.

Rescuers and other stand amid debris after landslides hit hilly villages in Wayanad district, Kerala on July 30, 2024.
| Photo Credit: AP

The Finance Ministry on August 3 urged all Public Sector Insurance companies to extend all possible support to Kerala calamity victims so that their insurance claims can be expeditiously processed and paid.

“In view of the unfortunate landslide incident and heavy rains in Kerala, the government has mandated the Public Sector Insurance companies (PSICs), including Life Insurance Corporation of India (LIC), National Insurance, New India Assurance, Oriental Insurance and United India Insurance to extend all possible support to the victims of the calamity so that the insurance claims can be expeditiously processed and paid,” the Finance Ministry said in a post on X.

“The insurance companies have initiated efforts for reaching out to their policyholders through various channels [local newspapers, social media, company websites, SMS, etc.] to provide the contact details for assistance in the districts of Wayanad, Palakkad, Kozhikode, Malappuram, and Thrissur, where a significant number of claims are being reported,” it said.

“LIC has been asked to speedily disburse the claim amount in respect of the policyholders under the PM Jeevan Jyoti Bima Yojana. The documentation required for processing of claims has been relaxed comprehensively to ensure speedy dispersal of the claim amount,” it added.

The General Insurance Council will coordinate with the insurance companies to ensure that claims are processed and paid expeditiously and will host a portal for all insurers to report claim status daily, the Finance Ministry said.

“The Central Government and the Finance Ministry remain committed to supporting the victims of this calamity and ensuring they receive the necessary assistance without delay and trouble,” it noted.

Economists feel a prolonged conflict in West Asia could push crude oil prices beyond India’s comfort zone.
| Photo Credit: Getty Images/iStockphoto

The story so far: The Indian economy, measured in terms of the Gross Domestic Product (GDP) as well as Gross Value-Added (GVA), grew 7.8% between April and June (first quarter or Q1) this year, a four quarter-high. The Finance Ministry believes the momentum of economic activity was carried forward in the July-September quarter, despite retail inflation hardening to 6.4% from 4.7% in Q1 thanks to a spike in food prices. Growth estimates for Q2 will come in next month, but the Reserve Bank of India (RBI) expects GDP growth to moderate to 6.5%. A week into the second half of the year, the Israel-Palestine conflict erupted and a spate of fresh dark clouds now hover over the economy.

How have experts reacted to recent events?

Economists feel a prolonged conflict in West Asia could push crude oil prices beyond India’s comfort zone and if other countries join the fray, critical sea routes could face disruptions and spike transport and insurance costs. The government may not pass on higher petroleum prices to consumers ahead of critical elections, but producers’ costs may still rise. Airlines, for instance, have been hiking fares in line with aviation turbine fuel costs. Moreover, higher fuel import bills could pose implications on the exchequer as oil marketing companies may need support for under-recoveries. Finance Minister Nirmala Sitharaman, in her first remarks since the strife in Gaza, said it has brought concerns about fuel, food security and supply chains back to the forefront. She flagged concerns about the impact of any disruptions on inflation in the near future. In subsequent comments, she has also emphasised the need to ensure that global food, fertilizer and fuel supplies did not become an “instrument of war and disruption”.

The RBI Governor Shaktikanta Das, who chaired a monetary policy review hours before Hamas launched the first salvo in the conflict, summed up the emerging situation eloquently. “We all thought that the period of uncertainties is over, but as you would have seen in the last fortnight, new uncertainties have been thrown up while some that already existed, like oil prices and volatility in financial markets, have got more pronounced,” he said last Friday. Among the new uncertainties, he listed the spurt in U.S. bond yields that hit a 16-year high this month and mixed global data points amid fears of “higher for longer” interest rates. A cut in India’s interest rate is not on the cards, he emphasised. “Interest rates will remain high… how long… only time and the way the world is evolving, will tell.” Higher interest rates can impact investment flows in markets like India.

Is there a shift in the assessment of risks for the economy?

The International Monetary Fund (IMF) raised its 2023-24 GDP growth estimate for India to 6.3% this month from 6.1% estimated earlier. This is just slightly below the 6.5% GDP uptick the Finance Ministry and the RBI have penned in for this year, following last year’s 7.2% growth. In its monthly economic review report released last month, the Department of Economic Affairs (DEA) in the Finance Ministry said it was comfortable with the 6.5% hopes “with symmetric risks”. Bright spots of corporate profitability, private sector capital formation, bank credit growth and construction sector activity offset the risks at the time. These included steadily climbing crude oil prices (“but no alarms yet”) and an overdue global stock market correction, which it termed “an ever-present risk”. The RBI, this month, also asserted that risks from the uneven monsoon, geopolitical tensions, global market volatility and economic slowdown, were “evenly balanced”. The RBI expects GDP growth to slow to 6% in the current quarter, and further to 5.7% in January to March 2024 before picking up to 6.6% in Q1 of 2024-25. Governor Das has since exuded confidence in the overall macro fundamentals of the Indian economy, despite the uncertainties that have emerged this month.

Last Monday, in its latest economy review, the DEA noted that though domestic fundamentals are strong and improving, downside risks arise from global headwinds that have been compounded by recent developments in the Persian Gulf, and uncertainties in weather conditions due to El Niño effects. “Depending on how the situation develops, crude oil prices may push higher. Further, the relentless supply of U.S. Treasuries and continued restrictive monetary policy in the U.S. (with further monetary policy tightening not ruled out) could cause financial conditions to be restrictive,” it said. It was also prescient about the U.S. stock markets having a greater correction risk, which would have spillover effects on other markets. India’s stock markets clocked six straight days of sharp declines before a marginal recovery was seen this Friday. The DEA has flagged a broader worry about fraught geopolitical conditions triggering a surge in risk aversion. “If these risks worsen and are sustained, they can affect economic activity in other countries, including India,” it noted, even as it averred that India’s growth story remained on track. Inflation had eased to 5% in September from a 15-month high of 7.4% in July and the department highlighted higher upticks in industrial capacity utilisation levels, private consumption and investment, retail loans extended for vehicles and housing as bright spots in its economic outlook. The report also cited ‘optimistic’ findings from RBI’s forwarding-looking surveys on manufacturing, consumer confidence, employment and inflation expectations to stress all is well.

What are domestic factors to watch out for?

Inflation may have subsided last month, but could creep back up. The RBI, which expects average inflation of 5.4% through 2023-24, has penned in a 5.6% average uptick in prices for the October to December quarter and 5.2% for the first six months of 2024. While some vegetable prices have corrected, inflation in onions has shot up while for pulses and some cereals, prices are likely to stay high for a while. The IMF and World Bank expect inflation to average even higher at 5.5% and 5.9%, respectively. The RBI’s preferred 4% inflation mark remains elusive as do prospects of interest rate cuts. This doesn’t bode well for a sustained rise in consumption demand that is vital to revive private investments. A Bank of Baroda study on consumption trends shows that production of readymade garments, mobile phones, hair dye, shampoo, cookers and even ice cream, had declined between 12% to 20% in the first five months of this year. “Normally when inflation is high households tend to cut back on discretionary spending which is what is being seen today,” it noted. With pent-up demand effects fading, the next couple of months will determine whether consumption has actually picked up, the Bank’s economists said. Rural demand which has been lagging, will be important, and may come under more pressure if some crops’ output is affected. Last but not the least, an economist from a rating firm said, the upcoming election season could imply some slowdown in public capex in infrastructure that revved up the economy in recent quarters.

Photo used for representation purpose only.

Growth in India’s gross GST revenues slowed to 10.2% in September from around 10.8% in the previous two months, but collections improved 2.3% over August revenues to touch ₹1,62,712 crore.

Revenues from domestic transactions (including import of services) are 14% higher than the revenues from these sources during the same month last year, and this is the fourth time that the gross GST kitty has crossed ₹1.60 lakh crore mark in 2023-24, the Finance Ministry said.

The revenues included Central GST collections of ₹29,818 crore, State GST of ₹37,657 crore, and Integrated GST of ₹83,623 crore, which included ₹41,145 crore collected on import of goods. GST compensation cess collections were ₹11,613 crore (including ₹881 crore collected on import of goods).

“The government has settled ₹33,736 crore to CGST and ₹27,578 crore to SGST from IGST. The total revenue of Centre and the States in the month of September, 2023 after regular settlement is ₹63,555 crore for CGST and ₹65,235 crore for the SGST,” the Finance Ministry said.

Revenues in strife-torn Manipur, which recovered from a contraction in August, recorded the highest growth among States in September, rising 47%.

GST revenues in Telangana grew 33%, followed by Jammu and Kashmir (32%), Arunachal Pradesh (27%), Tamil Nadu (21%) and Karnataka (20%)

Bihar was the only State to report a contraction in GST collections in September, with revenues down 5%. The Union Territories of Lakshadweep and Andaman and Nicobar Islands clocked a sharp decline in revenues, which fell 45% and 30% year-on-year, respectively. By contrast, revenues shot up 81% in the Union territory of Ladakh.

Revenues from goods imports, which had recovered from two months of contraction to grow 3% in August, slipped back to shrink again in September, albeit by a fraction. While the Finance Ministry didn’t specify the extent of decline in its statement, back-of-the-envelope calculations show GST revenues from goods imports dropped 0.11% from last September.

Image for representation purpose only.
| Photo Credit: Reuters

The Finance Ministry has notified October 1 as the date for implementation of the amended GST law provisions for taxing e-gaming, casinos and horse racing.

According to the changes to the Central GST Act, these supplies will henceforth be treated as “actionable claims” similar to lottery, betting and gambling and subject to 28% Goods and Services Tax (GST) on full face value of bets.

The amendments to Integrated GST (IGST) Act makes it mandatory for offshore online gaming platforms to take registration in India and pay taxes in accordance with domestic law.

In its meetings in July and August, the GST Council, comprising finance ministers of Centre and states, had approved amendments to the law to include online gaming, casinos and horse racing as taxable actionable claims, and clarified that such supplies would attract 28% tax on full bet value.

Parliament last month passed amendments to the Central GST and Integrated GST laws to give effect to the Council’s decision.

Also Read | A tentative rethink: On the Goods and Services Tax Council’s move 

The Finance Ministry has now notified that October 1 will be the appointed date for implementation of these provisions.

The GST Council in its meeting in August had decided that the amended provision to classify these supplies as actionable claims and clarifying the taxation provisions would come into effect from October 1.

A review of the implementation was proposed to be carried out after six months, which is April 2024.

Finance Ministry exuded confidence that the country will achieve 6.5% growth in FY24 on the back of improved corporate profitability, private capital formation and bank credit growth, notwithstanding the risks of rising crude oil prices and monsoon deficit.

The Finance Ministry on September 22 exuded confidence that the country will achieve 6.5% growth in FY24 on the back of improved corporate profitability, private capital formation and bank credit growth, notwithstanding the risks of rising crude oil prices and monsoon deficit.

The ministry’s August edition of Monthly Economic Review said the 7.8% growth recorded in the first quarter (April-June) was on account of strong domestic demand, consumption and investment. The growth was also witnessed in various high-frequency indicators.

Flagging certain risks like steadily climbing crude oil prices in the global market, impact of monsoon deficit in August on Kharif and Rabi crops, the review said, “that needs to be assessed.” At the same time, it observed, the rains in September have erased a portion of the rainfall deficit at the end of August.

Furthermore, the review said, a stock market correction, in the wake of an overdue global stock market correction, is an ever present risk, and offsetting these risks are the bright spots of corporate profitability, private sector capital formation, bank credit growth and activity in the construction sector.

“In sum, we remain comfortable with our 6.5% real GDP growth estimate for FY24 with symmetric risks,” it said.

Observing that the strength of domestic investment is the result of the government’s continued emphasis on capital expenditure, the report said, measures implemented by the central government have also incentivised states to increase their capex spending.

The external demand has further complemented the domestic growth stimulus, it said, adding, the contribution of net exports to GDP growth has increased in Q1FY24, as services exports have performed well.

High Frequency Indicators (HFIs) for July/August 2023 reflect sustenance of growth momentum in Q2FY24, it said.

With regard to the banking sector, it said, a variety of indicators suggest increasing resilience of the sector through declining Non-Performing Assets (NPA), improving Capital to Risk-weighted Asset Ratio (CRAR), rising Return on Assets (RoA) and Return on Equity (RoE) as of March 2023.

Similarly, as of March 2023, data for Non-Banking Finance Companies (NBFCs) indicated improvements in their profitability and risk-taking behaviour, it said.

Further, it said, as per the July 2023 estimates by the RBI, there has been a consistent and broad-based growth in the non-food bank credit of Scheduled Commercial Banks (SCBs) since April 2022.

On retail inflation, the report said, it decreased in August, with both core inflation and food inflation easing from the July figure.

The calibrated measures taken by the government, including adjustments in the duties of many critical inputs and monetary policy tightening, helped reduce core inflation to a 40-month low level. Globally, food inflation remains high in many major economies, it said.

In India, it said, consumer food price inflation eased to 9.9 per cent in August due to the government intervention with targeted measures for specific crops, including build-up of buffer, procurement from producing centres and subsidised distribution.

New Delhi:

 The Ministry of Finance on Monday approved a series of welfare measures for the benefit of Life Insurance Corporation of India (LIC) agents and employees according to a release from the Ministry.

The ministry decided to enhance the gratuity limit from Rs 3 lakh to Rs 5 lakh for LIC agents, aiming to bring substantial improvements to the working conditions and benefits of those individuals.

The term insurance cover for the agents has been expanded from the existing range of Rs 3,000-10,000 rupees to Rs 25,000-150,000.

This enhancement in term insurance is expected to significantly benefit the families of deceased agents.

Also, a family pension at a uniform rate of 30 per cent for the welfare of the families of LIC employees has been decided upon.

“More than 13 lakhs agents and more than 1 lakh regular employees, who play a pivotal role in the growth of LIC and deepening of insurance penetration in India, will benefit from these welfare measures,” the finance ministry said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

“Indian GDP data are not seasonally adjusted, and they are also revised multiple times before they are finalised three years after the close of the relevant financial year,” the Finance Ministry said. File
| Photo Credit: PTI

The Finance Ministry on September 15 scotched aspersions cast by “certain sections” on the credibility of Indian GDP data, which showed a 7.8% uptick in the first quarter of this year, stressing that Indian GDP data is not seasonally adjusted and is finalised three years later so “it is wrong to look at the underlying economic activity based on GDP indicators alone”.

“Ideally, critics would have done well to look at several other growth indicators to see if other data match their conclusions. Purchasing Managers’ Indices indicate that the manufacturing and services sectors are growing. Bank credit growth is in double digits. Consumption is improving, and the government has vigorously ramped up capital expenditure,” the Ministry said in a long post on social media platform X, formerly known as Twitter.

“Higher frequency data must be relied upon to form a view of the strength of the economic activity,” the Ministry said, adding that “if anything, India’s growth numbers might understate the reality because manufacturing growth indicated by the Index of Industrial Production (IIP) is far lower than what manufacturing companies are reporting”.

“Indian GDP data are not seasonally adjusted, and they are also revised multiple times before they are finalised three years after the close of the relevant financial year… Many international agencies have revised up their growth forecast for FY24 (financial year 2023-24) after the first quarter data for FY24 was released. They would not have done so if the underlying economic activity was weak,” the Ministry asserted.

The Ministry also called out references to nominal GDP growth being lower than real GDP growth as “a new bogey being spread to discredit the GDP numbers and indicate that underlying economic activity is quite weak” and said both do not stand up to scrutiny.

“India’s GDP deflator is dominated by the Wholesale Price Index (WPI) [which] peaked in the first quarter of 2022-23 due to the oil and food price increases in the wake of the war in Ukraine and supply-side disruptions. Prices began to come down from August 2022 onwards. Hence, WPI is now contracting year on year. It will soon pass once the statistical base effect disappears,” the Ministry statement noted.

“If inflation were higher, critics would argue that nominal GDP growth is much higher because of inflation and that there was little underlying activity. MoSPI calculates quarterly GVA in real terms first, and then, using the deflator, nominal values are obtained. No wonder nominal growth rates have slowed, with WPI contracting in recent months. This will normalise in the coming months,” the statement pointed out.

Editorial |An uneven rebound: On the economy

“India’s real GDP growth was 7.8% year on year in the first quarter of 2023-24. This is as per the Income or Production Approach. As per the expenditure approach, it would have been lower. So, a balancing figure – statistical discrepancy – is added to the expenditure approach estimate. These discrepancies are both positive and negative. Over time, they wash out,” the Ministry pointed out.

“In fact, in FY23 and FY22, the ‘statistical discrepancy’ was negative. In other words, growth as per the Income Approach was lower. Using the expenditure approach, it would have been higher than the 7.2% reported for FY23 and higher than the 9.1% reported for FY22,” it emphasised.

“India consistently uses the Income Side approach for calculating GDP growth for various reasons. It does not switch between the two approaches depending on which one is favourable,” the Ministry underlined.

“So, arguing that nominal GDP growth is more reliable because India has issues with its calculation of GDP deflator is to invent an argument where none exists. This is just to justify the liking for nominal GDP growth because it has been moderating in recent quarters after the high growth in the first fiscal quarter of FY23. In other words, critics want to latch on to anything that does not paint the Indian economy in a good light,” the Ministry concluded.