Centre, states to work on widening GST base

After GST rate cuts and procedural simplifications, the Centre has offered its support to states in broadening the GST base, according to a source. This will be achieved through data analytics, modifications in return filing, and invoice matching, which will help in reducing leakages. Discussions have already taken place on enhancing the base and disclosure quality.

Technology can be leveraged to expand the base without being intrusive, and an official stated that the number of registered taxpayers, which is currently 1.7 crore, can be increased. Changes in returns and invoice matching will also simplify the process and plug revenue leakages. The Centre and the states are also exploring the possibility of encouraging e-invoicing, which is expected to be operational by April.

This initiative will incentivize businesses to adopt the new system, rather than mandating it. B2C e-invoicing is anticipated to provide data on all entities in the supply chain, from suppliers to the final seller. Presently, businesses with an average annual turnover of Rs 5 crore are mandated to generate e-invoices for B2B sales.

Most of the changes finalized by the GST Council last week will be implemented from April, pending some legal amendments. The finance ministry is also examining if the decision to not issue notices for demands under Rs 10,000 can be implemented through an executive order. Officials will meet soon to discuss the need to stop tax credits either for the entire supply chain or just the faulty entity.

Some states have suggested reviewing the proposal, with concerns that blocking tax credits may lead to harassment of businesses. The Centre has acknowledged that this issue may be more prevalent among small businesses or proprietorship firms, which account for 75% of the vehicle purchase credit but contribute to only 15% of the claimed amount.