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The Goods and Services Tax (GST) Council’s decision to bring unbranded packaged consumer items within the GST net is meant to plug revenue leakages and reduce disputes, Central Board of Indirect Taxes and Customs (CBIC) Chairman Vivek Johri has said.
Packaged consumer items such as curd, paneer, lassi, and butter milk will be taxed at 5 per cent from July 18, irrespective of whether the item is a registered brand or not. “If it’s ‘packaged and labelled’ it will be taxable,” Johri said in an interaction. However, items unpacked and not labelled will remain exempt from GST.
The Council on Wednesday decided to remove exemption for at least 15 consumer items while hiking the rates for some goods and services to correct the inverted duty structure.
The CBIC chairman said the decisions taken by the Council would build a robust tax system without being intrusive.
“All these steps are improvements towards making the tax system more transparent and for increasing revenue productivity. If you go through the fine print, it provides relief to taxpayers in terms of compliance. So, the whole idea is to improve the systems by making them as simple as possible. When we do that, we also want to make life easier for honest taxpayers,” he added.
On the decision to reform GST systems, Johri said it would bring down cases of fake invoices and other GST frauds, and also help in eradicating black money generation.
“It will curb the practices of people to issue fake invoices and toxic credit going around in the system, thus eventually compromising our revenues,” he said.
The Centre, with support from the states, has so far detected input tax credit fraud of Rs 50,000 crore under its enforcement drive launched in November 2020. “We’ve done a multi-pronged attack to track down errant taxpayers. Early this year we mandated sequential filing of GST returns. That takes away the incentive to go for fake billing as this thrives on a long time period.
If that window is reduced, the incentive to do that goes down,” he said.
Integration of data
Joshi said the suggestions on integrating data with various departments would further help in risk profiling. “We are triangulating data between GST and customs and income tax. That itself is a wealth of data, which we are using in the best possible manner for risk profiling. Besides, GSTN is also exchanging data with the Ministry of Corporate Affairs (MCA), particularly when it comes to new registration to match where the companies seeking registration are in the ministry’s database. We are also exchanging databases with the UIDAI for Aadhaar-related data,” he said.
Johri said the suggestions by the group of ministers on information technology reforms would be effective for risk profiling. “One, there will be use of artificial intelligence and machine learning for risk profiling of new taxpayers. Second, the ingestion of electricity meter data into the GST system will ensure that any new person who’s asking for registration actually physically exists at that location. Another one is geo-tagging of location. So I think all three will help us improve the GST systems and also assess whether the taxpayer who is entering the system is actually a physical entity and is not there just to raise fake invoices,” he explained.
Clarifying the exemption of hospital room rent over Rs 5,000 and whether such rooms will not get input tax credit, Johri said most of the services provided in hospitals were exempt from GST and now it would be imposed only on room rent. “So, it is possible they may not get input tax credit,” he added.
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