GST could beef up state revenue from imported goods


Nagpur: The provision to charge Goods and Services Tax (GST) on imports as soon as the items reach the country is expected to beef up the state’s revenue. The erstwhile sales tax office, which is now state-GST department, hopes that the move will prevent tax dodging.

Under the earlier system, even as customs duty could be recovered on imports, the state government lost revenue since traders often did not bring sales of the goods on record. Sources in the department say it was often claimed to be sales outside Maharashtra, though the goods ended up being sold within the state itself. This helped evade sales tax. Maharashtra gets a major chunk of imports into the country, said sources.

Now, as soon as a commodity reaches the country, along with customs duty, Integrated Goods and Services Tax (IGST) will be charged. Suppose the goods reach Mumbai port, and are meant to be further sold in Kolkata, then the state’s share of the GST will go to West Bengal. In case the goods are sold within Maharashtra, even then IGST will be charged. The traders can later avail the credit for the IGST paid while discharging his liability towards central and state GSTs. The state, on the other hand, can claim its share out of the IGST on the basis of input credit claims.

“Earlier, there was a rampant practice of not disclosing the deals if imports were sold within the state. The state government is eyeing a considerable revenue under GST. Though no targets have been set but as much as Rs3,000 crore is expected to be collected through tax on imported goods. Mop up through this mode can cover the state’s loss estimated on account of shifting to GST to a great extent,” a senior officer in the erstwhile sales tax department said.

Pritam Mahure, a chartered accountant from Pune said, credit of IGST paid can be used for payment of CGST and SGST. This will effectively ensure that everyone in the supply chain claims credit, and goods imported in the country are tracked till they reach the final consumer.

Experts feel chinese goods traders can still dodge system

A section of GST experts says that there are chances that traders dealing in Chinese goods may still be able to dodge the system. Often, Chinese goods imported into the country are deeply under-invoiced. Even after the customs authorities add up the value in order to get a realistic levy, a large margin remains. There are chances that IGST may be paid at not more than 40% to 50% of the actual value of an item to further sell in the grey market. In a Chinese item, a trader can afford to forego the input credit because there is enough margin left on the goods due to underinvoicing or even otherwise cheap rates.
The state can claim its share of the IGST only if the deals are brought on record when input credit is claimed in the state-GST returns. Only after input credit is claimed will the state in which the item was further sold be identified. Else, the entire amount will go to the centre, said a chartered accountant on condition of anonymity.
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