In the backdrop of rising Covid-19 cases in its second wave, the International Monetary Fund (IMF) has raised its forecast of economic growth for India to 12.5% as per latest World Economic Outlook (WEO) for the FY 2022. In fact, it has pitched India as the fastest growing economy major and the only economy to likely to grow in double digits.
IMF has forecasted world economy to grow at 6% in FY 2021 and at 4.4% in FY 2022. None other country in the world is expected to grow at rates close to India (China @ 8.4%, US @6.4%, Spain @ 6.4%, France @ 5.8%).
Also, Reserve Bank of India has also maintained economic forecast at 10.5% for financial year 2022, looking at uncertainly over Covid surge in second phase now India is reeling under. There has been no change in RBI’s stance in Monetary Policy announced in April first week. Once again, RBI assures that it will do whatever it takes to sustain the economic recovery.
Domestic economic activities are likely to rebound and it will directly impact tax revenue. Indirect tax collection has exceeded the revised estimate by 9% for the financial year 2020-21 which is a welcome sign of economic activities picking up.
Advance rulings continue to provide fodder to media and stress to taxpayers AAAR, Tamil Nadu recently held that ‘gift vouchers’ are not ‘goods’ but to be considered as an instrument of ‘consideration’. Such pre-paid vouchers are neither goods nor services and GST will not be applicable on supply of vouchers but underlying supply of goods or services shall alone be taxable at the time of redemption. We also have conflicting advance rulings on allowability of ITC on CSR expenses. E-invoicing is likely to become a fraud proof and fool proof system of invoicing, doing trade and transportation of goods. It will also curb tax evasion. There is a dedicated invoice registration portal for the same.
Recently Supreme Court in Radha Krishna Industries observed on 06.04.2021 that GST law is not citizen friendly. It observed that purpose of Parliament for GST law was meant to be citizen friendly tax structure which is defeated by the manner in which GST law has been enforced. Actions of tax authorities ought to strike a balance between protection of tax revenue vis-à-vis allowing genuine businesses to function and operate. Tax authorities should not look at all businesses to be fraudulent. Powers of provisional attachment of assets u/s 83 in GST law are ‘draconian and as a ‘pre-emptive strike’. Tax authorities can’t start attaching assets unless there is alienation, winding up or liquidation of assets. Tax authorities have to abide by the mandate of law, the letter of law and the spirit of law.
According to latest MOF release dated 12.04.2021 on Indirect Taxes data in Financial Year 2020-21, provisional net indirect tax collections (GST & Non-GST) for the financial year 2020-21 have shown growth of more than 12% compared to actual revenue receipts in FY 2019-20. Net revenue collections are at Rs 10.71 lakh crore as compared to 9.54 lakh Crore for the financial year 2019-20, thereby registering a growth of 12.3%. Net indirect tax collections have achieved 108.2% of the Revised Estimates of Rs. 9.89 lakh crore of indirect taxes for the F.Y. 2020-21. Net Tax collections on account of Central Excise and Service Tax(Arrears) during Financial Year 2020-21 stood at Rs. 3.91 lakh crore as compared to Rs.2.45 lakh crore in the previous financial year, thereby registering a growth of more than 59%. Net customs collections stood at Rs. 1.32 lakh crore during Financial Year 2020-21 as compared to Rs.1.09 lakh crore during the previous financial year, thereby registering a growth of around 21%. Net Tax collections on account of GST of Centre (CGST+IGST+ Compensation Cess) during financial year 2020-21 is Rs. 5.48 lakh crore as compared to Rs. 5.99 lakh crore in the previous financial year. The GST collections were severely affected in the first half of the financial year on account of Covid. However, in the second half, the GST collections registered a good growth and collections exceeded Rs 1 lakh crore in each of the last six months.