Simplifying the invoice matching process to check tax evasion and the revenue leakages under the composition scheme will dominate discussions of the goods and services tax (GST) Council in its next meeting.
The representative federal body comprising the Union finance minister and state finance ministers will meet on 18 January in New Delhi.
The law committee of the council, which held meetings last week, has come up with suggestions to make the invoice matching process simpler, said a person familiar with the development.
These could translate into doing away with the multiple return forms under GST by combining some forms, the person added.
“The council will discuss how to resolve the issue of invoice matching and make it more simpler,” the person said.
Invoice matching is key as the law is framed in a manner wherein relevant input tax credit of purchase of goods will only be available if the details of inward supply filed in GSTR 2 by the buyer matches the details of outward supplies filed in GSTR 1 of the supplier. Since these details will be automatically filled into the tax return form on the buyer, the entire supply chain will be networked.
This interlinking has been done by way of auto-population of data filed in GSTR 1 of supplier into GSTR 2 of the buyer.
To ease the transition burden into a new tax regime for small dealers, the government had postponed the deadline for filing of GSTR 1, GSTR 2 and GSTR 3 forms. These forms would have ensured that input tax credit could only be claimed by the purchaser if the supplier has paid tax.
“The matching will remain. The council may look to simplify the forms further and may end up combining the returns,” said Harishanker Subramaniam, indirect tax leader at EY.
Taxpayers have to file the GSTR 1 form for the initial few months by 10 January.
The person added that compliance issues under the compounding scheme will also be discussed.
In an audit of the composition scheme, the government found that the 600,000 taxpayers who filed tax returns under the scheme paid only Rs251 crore for the July-September period.
Under this scheme, taxpayers with a turnover of up to Rs1.5 crore have the option of paying a minimal rate of tax and filing a simplified tax return.
The government suspects many business-to-business transactions are being kept off the books and payments done in cash to avoid paying GST. Additionally, it also suspects under-invoicing of goods.
In the previous meeting held through video conferencing, states had decided to advance the implementation of the e-way bill to check tax evasion.