It has been six years since the implementation of the goods and services tax (GST), and despite initial challenges, the revenue growth has consistently surpassed the Rs 1.5 lakh crore mark. The collection for the month of May which was reported in June, reached an impressive Rs 1.61 lakh crore, marking the second-highest collection in the past 14 months. As the union government's attention turns towards curbing tax evasion, compensation, and rate rationalisation concerns take a back seat. It is estimated that tax evasion amounted to around Rs 20,000 crore in FY23.

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Speaking to CNBC-TV18, Vivek Johri, the chairman of the Central Board of Indirect Taxes and Customs (CBIC), said that he expects the GST collection in June 2023 to surpass the Rs 1.61 lakh crore mark.

As part of its ongoing efforts to combat tax evasion, the government is intensifying its crackdown on fake invoices and fake firms that manipulate input tax credit claims. The CBIC has already detected 24,000 instances of fake GST invoices through its detection drive. These fraudulent activities have resulted in the detection of fake input tax credit claims worth Rs 63,000 crore, leading to approximately 8,000 cases being booked, Johri said.

Johri added that they are awaiting the report from the Group of Ministers (GoM) regarding the rationalisation of the overall GST rate structure. He also expects the GoM report on horse racing, casinos, and online gaming to be discussed at the next GST council meeting.

Below are the excerpts from the interview.

Q: Rs 1.61 lakh crore was the monthly collection reported for the month of May. Is that likely to be the run rate that we should expect now or do you believe that there could be an improvement on this number?

A: I definitely expect an improvement, although this itself is a major improvement over revenue collections in the previous year. It denotes a rate of growth of about 11 percent. However, I expect to do better in the remaining part of the year.

Q: How much better do you expect that rate to be on the back of the measures that you have taken - the anti-evasion measures that have been put in place? What could this 11 percent look like in the next few months?

A: We will be able to consistently do something between Rs 1.55 lakh crore and Rs 1.6 lakh crore which should be able to get us to the target that we are trying to achieve for the year.

Q: Let us talk about the road ahead now because of several pending items especially when we talk about rate rationalisation, is that a priority at this point in time? We have also seen the panel headed by Bomai give an interim report, a final report was not submitted, there has been a change there as well. So from a Centre point of view, is rate rationalisation today a priority?

A: The group of ministers (GoM) was tasked with two or three things, one of them being rationalisation of exemptions and removal of exemptions, which I think has already happened to a large extent. In the decisions taken by the last two or three GST councils, a very large number of exemptions were rationalised and removed. Some of the rates were also compressed. What remains to be done is, what happens to the four rate structures and whether the overall rate structure can be rationalised in the immediate future or not, I think we will have to wait for the outcome of the GoM report for that and that is likely to take some time.

Q: There has been a demand for instance as far as cement is concerned to bring it down from 28 percent to 18 percent. On some of these specific items is there a point of view now that the fitment committee has taken or is closer to taking which then will be presented to the GST council as and when it meets?

A: This has not been discussed in the fitment committee, so it is unlikely to come up in the coming GST council meeting later this month.

Q: Any further movement as far as online gaming, casino and horse races are concerned because even there the recommendations of the panel remain inconclusive. Is this uncertainty likely to continue because the industry is seeking certainty as far as the rate is concerned?

A: I do expect the GoM report on online gaming and horse racing as well as casinos to be discussed in the coming GST council meeting. Let us see what decision the council takes and based on that we will be in a position to say something about the rate and the legal structure that surrounds the taxation of these services.

Q: Let us talk about the priorities and as far as the CBIC is concerned cracking down on evasion, on fake entities has been a priority over the last few months. I am given to understand that about 60,000 units were identified as suspicious, but about 50,000 have in fact now been verified. Can you take me through where things stand now as far as the crackdown on what you believe a fake or suspicious entity is concerned and what is the leakage or the evasion estimated?

A: There are three parallel movements that are going on with regard to fake invoices and fake firms that are created for surge fake ITC. So if you recall the CBIC had initiated a campaign way back in August 2020 to deal with this surge of fake billing and fake invoicing. We have already detected about 24,000 fake GSTINs as part of that drive and we have detected fake ITCs to the tune of about Rs 63,000 crore as part of the drive which has been run by CBIC. Roughly about 8,000 cases have been booked under that drive. So that is one initiative of the three that I talked about.

The second one is a special drive, which was launched in May this year. It was meant to be a two-month drive, so it continues till the 15th of July, this is being run jointly by the Centre and the states. And for this purpose, we identified based on risk about 60,000 units for verification. As you mentioned, we have already verified about 55,000 so far and we have detected almost 25 percent of that number to be fake, and that involves the fake ITC of about Rs 14,000 crore. So within these two months, the drive is yet to be completed we have already detected cases worth about Rs 14,000 crore.

The third parallel stream which is going on is the follow-up to the Noida case where they arrested seven persons for creating a very large number of bogus firms and circulating fake ITC. Now, under that also, we have so far come across about 1400 fake GSTINs and we have detected fake ITCs of almost Rs 3,800 crore. So, we are determined and we are very resolute about going after bogus firms and fake ITC. We must protect the honest taxpayer and if we allow fake billing to continue, it, un-levels the playing field for the honest taxpayer, and more so for the MSMEs and the small taxpayers who find it difficult to compete with these kinds of unfair means and practices.

So along with the states, we are determined to use technology and not leave it to the discretion of field officers. We will use technology to identify these bogus units if they have already entered our system and they have started circulating fake ITCs and to crack down upon them, and take action by way of suspensions and cancellations. We have done that in a very large number of cases. And so I just want to warn all people who are using this as a means of earning quick money to beware, the law enforcement agencies of CBIC and the state governments in a very concerted way are going to come at you.

Q: Since we are talking about cracking down on possible evasion, as well as the action that the department is taking - from insurance companies to mutual funds, there has been a lot of ongoing activity, and investigations, where do things currently stand specifically on that front involving insurance companies as well as mutual funds?

A: So we had initiated investigations against about 30 insurance companies, 15 of which handle life insurance and another 15 involved in the general insurance business. Again, the information we had with us was that many of them had been using fake ITC or receiving input tax credits from units that were non-existent or suspicious. So far, we have been able to complete investigations in 15 cases and we have unearthed wrongly availed input tax credits to the tune of about Rs 2,400 crore so far. In the other 15 cases, the investigations are going on and we will be finalising them soon.

Q: So you are saying 15 companies, these are insurance companies specifically where investigations have been closed and 15 where they are still pending, and of the 15 cases where the investigation now stands closed you are saying that the ITC evasion is to the tune of Rs 2,000 crore that is what has been detected and identified?

A: Rs 2,350 crore to be precise.

Q: Are any other specific entities at this point in time, across the large listed universe, like we just spoke of that is being looked at?

A: In terms of sectors, this is one of the major ones that we were looking at.

Q: In terms of other pending sort of matters as well, as far as the GST tribunals are concerned, and this has been, of course, a long pending demand, when can we now see the operationalisation as far as the tribunals are concerned?

A: The legal framework for putting in place the tribunal in the central GST law has already been done. So in the Finance Act of 2023, we incorporated requisite changes in the CGST Act to put in place an appellate tribunal for GST. There have to be corresponding amendments in the state GST laws and the state governments are aware of that and depending on when the legislative assemblies meet, they will also be carrying out suitable amendments in their law.

I expect that process to be completed by the latter part of this calendar year and so the process of setting up the tribunal should be possible soon thereafter, which means it should happen within this financial year, at best it may spill over into early next financial year. But I am quite confident that we would be able to do it within this financial year.

Q: I want to pick up on the issue of the windfall tax, of course, the levy is nil, and has been nil for the last few reviews of the fortnightly review, but will this mechanism stay in place for the time being?

A: Yes. Effectively, as you said, the tax is nil. It has been like that for almost a month now. That is because the petroleum prices the world over are where they are. But we are keeping a close watch and the mechanism for the time being will stay.

Q: Also wanted to understand from you, there were demands and we were given to understand that there was a conversation between the steel ministry as well as the finance ministry on the issue of duties there, has there been any further movement on that front?

A: Are you talking about a recommendation for anti-dumping duty on certain products of steel?

Q: Steel products, that is right?

A: So we have received the recommendation from the Directorate General of Trade Remedies on some stainless steel products and those are currently under examination, we will be taking a decision soon.

Also Read: 6 Years of GST: Centre's big focus on anti-evasion measures; Industry flags unfinished agenda

Q: So would it be fair then to say that at least as far as this calendar year or this financial year is concerned, evasion, clamping down on leakages that will be the priority as far as the government is concerned and rate rationalisation will only have to wait perhaps post the general elections?

A: There are two or three other things that are going to be our priority apart from just cracking down on fake billing and fake invoicing or evasion. The second priority, which we've set for ourselves, is to expand the taxpayer base. When you look at the income tax taxpayer base, for example, for corporate tax, we find that there is a gap between the GST taxpayer base and the income tax, taxpayer base in terms of numbers. We need to explore why this gap is there and whether it is explained by exemptions related to the threshold turnover sector. So, that is one leg of the exercise that we're going to undertake. Coupled with want to do a very major campaign and an outreach program through all kinds of media and by having physical meetings with potential taxpayers in different parts of the country, explaining to them the benefits of being part of GST, and the benefits are now fairly well documented, whether it is in terms of integrating with domestic value chains, global value chains, in terms of quick receipt of export benefits, refunds of the input tax credit, and so on, and so forth. So there are several benefits that are available under the GST law. And by being part of GST, many of them can connect with e-commerce operators and expand their businesses. So we want to do outreach and appeal to those taxpayers who haven't yet joined the GST bandwagon to do so.

We'll also demonstrate to them that the processes which have been put in place under GST are actually very taxpayer friendly. And they are all electronic, there is very little physical interface. So that is one part of the exercise.

The other thing we want to do to drive home the message also is that we want to be very efficient in resolving the grievances of taxpayers. So we have already undertaken a campaign of sorts- the members of the board have also gone out, visited different locations of the country, they've been holding long and detailed meetings with trade bodies to understand what kind of grievances they have with the current system, and how we can make it more taxpayer-friendly. We've received a very large number of suggestions, I would like to thank all the taxpayers and trade bodies for sharing those suggestions with us.

In terms of scope, the range is very wide, there are some that pertain to legal changes, and there are some that are easier to do because they pertain to making the GSTN or the system more friendly to taxpayers, giving them more information. So we are also looking at this as a very positive means of not only addressing the concerns of existing taxpayers but attracting many more into the fold.

Q: Let me put on the table the grievances and concerns that have been raised by many state finance ministers. And what they're essentially saying, especially in light of the fact that there is no longer any compensation that's coming from the center to the state. So they would like a review of the sharing formula and the shared split. How do you react to that? I know that the finance minister over the weekend did of course say that the government wants to dispel the myth that states are losing but states are seeking and have in writing sought a review of the sharing split.

A: I don't think it's proper for me to comment on that. That is something that the council will look at.

Q: As far as the revenue neutral rate is concerned, started at about 15.5-16 percent. We're now I believe, down to about 11 percent at this point in time, what's your own sense of where we need to be given the many steps and measures that have been taken forward, as well as what is pending at this point in time?

A: Where we need to be, is very clear, because the revenue-neutral rate that was worked out was close to 15 percent. So I don't think there's been any rethink or revision of that. But I'm quite confident with the kind of revenue collections we've had over the last year and the first quarter of this financial year that the collection rate would already have gone up and it will continue to do so. So till the time, the rate rationalisation is put in place, which should also be contributing to better revenue collections, I think we are inching our way towards that rate.

Also Read: E-commerce operators face issue in GST drive to check fake registration

First Published:Jul 3, 2023 10:18 PM IST