The 70th year since Independence will go down in Indian history since the country switched over to the Goods and Services Tax (GST) regime, realising, thereby, the vision of a unified market in a federal system that guided the nationalist bourgeoisie in joining Mahatma Gandhis struggle to liberate India from the British.
Of course, the structural reform came accompanied with pain for trade and industry caught off-guard by the rigours of new compliance procedures. Queried by corporate leaders at industry chamber Ficci’s 90th AGM here earlier this month on how GST was impacting through lower tax collections, Finance Minister Arun Jaitley put the onus on them.
“It is you from industry, who have been calling for so long to bring GSTA… and no sooner do these initial problems in implementing a reform of such scale appear, then you want to go back to the system we’ve had for 70 years,” he said. The earlier system was a myriad of central and state taxes where the movement of goods was slowed down by products being taxed multiple times and at different rates. State level taxes replaced by the pan-India GST include state cesses and surcharges, luxury tax, state VAT, purchase tax, central sales tax, taxes on advertisements, entertainment tax, various forms of entry tax, and taxes on lotteries and betting.
Central taxes replaced by GST are service tax, special additional customs duties (SAD), additional excise duties on goods of special importance, central excise, additional customs duties, excise on medicinal and toilet preparations, additional excise duties on textiles and textile products, and cesses and surcharges.
The new indirect tax regime unifying the Indian market has four tax slabs of 5, 12, 18 and 28 per cent.
It has a novel feature whereby goods and services providers get the benefit of input tax credit for the goods used, effectively making the real incidence of taxation lower than the headline taxation rate.
The second half of the year saw a radical reworking of the items within the four-slab tax structure by the supremely federal institution of the GST Council, whereby all but 50 of over 1,200 items remained in the highest 28 per cent bracket. Those retained included luxury and sin items, the cess on which goes to fund the compensation to states for the loss of revenue arising from implementing GST.
With the Council’s decisions last month, GST has been cut on a host of consumer items such as chocolates, chewing gum, shampoos, deodorants, shoe polish, detergents, nutrition drinks, marble and cosmetics. Luxury goods such as washing machines and air conditioners have been retained at 28 per cent.

Eating out has become cheaper as all restaurants outside high-end hotels charging over Rs 7,500 per room will uniformly levy GST of five per cent. The facility of input tax credit for restaurants has, however, been withdrawn as they had not passed on this benefit to consumers. Petroleum, including oil and gas, is a strategic sector that is still not under GST, while the industry has been pushing for its inclusion so as not to be deprived of the benefits of input credit. Including real estate is another matter pending before the GST Council.
On the functioning of the Council, Jaitley who is its head, had this remarkable insight about the way in which it had effected such large-scale rationalisation of the item rates in a short span of “3-4 months”.
“Everything has been achieved by consensus in the best spirit of cooperative federalism. There has been no politics, even from states which are controlled by opposition parties,” he told a gathering of industry leaders here.

The other side of GST was revealed through what the International Monetary Fund described as “short-term disruptions”. With businesses going into a “de-stocking” mode on inventories in anticipation of the GST rollout from July and sluggish manufacturing growth, among other factors, pulled down growth in the Indian economy during the first quarter of this fiscal to 5.7 per cent, clocking the lowest under the Narendra Modi dispensation. Breaking a five-quarter slump, a rise in manufacturing sector output, however, pushed the growth rate higher to 6.3 per cent during the second quarter (July-September) of 2017-18.
Besides, technical glitches appearing on the GST Network portal, often unable to take the load of last-minute rush to file returns, marred the filing of returns by traders, forcing the government to postpone filing deadlines several times. The glitches also led to export refunds piling up, resulting in a grave situation of cash crunch for exporters, whose working capital was getting blocked.
“The great Indian economist P Chidu” has been predicting that note-ban and GST will sink the Indian economy, make it bankrupt, but no such thing really happened. Either these so called self… Read MoreJustice For All
In the final analysis, the GST balance sheet is provided by Gita Gopinath, Professor of International Studies and Economies at Harvard University, who is also the economic adviser to the Kerala Chief Minister.
“GST is a real reform. It is a way of formalising the economy. It is a very effective way of ensuring tax compliance, making it harder to earn black money. I mean, nothing ever goes away completely, but it just makes it harder to make it happen,” Gopinath said in Mumbai earlier this month. The icing on the cake came with the World Bank announcing earlier this year that India had jumped 30 places in its Ease of Doing Business rankings to get among the top 100 countries on the list. Though reforms in India’s direct tax regime figured among the parameters considered in evaluation, GST had not been taken into account by the multilateral agency since their cut-off date was June 30.

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Around a year and a half since launch, the Rs 6,000-crore package for the labour-intensive garments sector, which included freedom to mills to have fixed-term employees, has accomplished much less than envisaged.
Around a year and a half since launch, the Rs 6,000-crore package for the labour-intensive garments sector, which included freedom to mills to have fixed-term employees, has accomplished much less than envisaged. Despite a crucial component of the package that the government will bear the entire 12% employer’s contribution to the employees provident fund for the first three years (against 8.33% earlier under a scheme), just 655 units have availed themselves of the benefit so far and the number of beneficiaries stood at 1,55,564, according to labour ministry data. And not all are new employment. Through the package, the government had targeted to create one crore additional jobs and investments of Rs 74,000 crore and extra exports of $30 billion (over and above the textile and garment exports of $40 billion in 2015-16) over a three-year-period. A senior textile ministry official said a comprehensive study on the impact of the package is yet to conducted, but according to an assessment done by it on the basis of investments under Amended Technology Upgradation Fund Scheme (A-TUFS), 3,26,471 direct and 4,24,412 indirect jobs were created in the textile and garment sector in the last fiscal, mostly after the announcement of the package. The actual job creation, said the official, will be much higher, after factoring in the investments made by the companies outside A-TUFS. Still, the targets prove to be elusive. An assessment by the Apparel Export Promotion Council (AEPC) and announcements by some companies, around six months after the declaration of the package, indicated investments of only Rs 1,000 crore pledged by various exporters. Garments exporters said the package, especially the scheme under which state levies paid by exporters were refunded to them from the centre’s funds, did help them reverse an earlier slowdown until the incentives were substantially cut under the goods and services tax (GST) regime.
The fixed-term employment made it easier for the industry to hire more in times of need to cater for the seasonal nature of order flows, but this remission of state levies (RoSL) scheme, along with a duty drawback scheme, were fiscally most important for exporters. The RoSL alone was estimated to cost the exchequer around Rs 5,500 crore in three years (of the Rs 6,000-crore package). Garment exports went up almost 9% to $13.47 billion between July 2016 and March 2017 (after the package was announced), exceeding the overall textile and apparel export growth of 3.5% during the period. Garment exports continued to rise up to May this year before dropping almost consistently since June, ahead of the introduction of the GST, barring the blip in September. This, exporters claim, was the adverse fall-out of the fears of a cut in incentives under duty drawback and RoSL scheme in the GST regime, and an actual cut later, which negated the positive impact of the package.
“The package helped us a lot and the government made some landmark announcements. But before the full benefits were reaped and businesses scled up, incentives under the RoSL and the duty drawback schemes were cut under the GST regime. This hit us hard. As such, we have been handicapped by the duty disadvantage against our competitors like Bangladesh and Vietnam in biggest markets — the EU and the US,” said AEPC chairman Ashok G Rajani said. Rajani said exporters are now getting less than 4% under both duty drawback and RoSL schemes, which need to be raised to around 11% (of freight on board value of exports) to offset various levies, even excluding the taxes that are subsumed by GST.
AEPC and other garment exporters have sent representations to the ministries of textile and finance, NITI Aayog and even the Prime Minister’s Office to raise these incentives. The government had said since the GST subsumed a number of state levies, including sales tax and VAT, the incentives were reduced. According to Sudhir Dhingra, chairman of one of the country’s largest garment companies, Orient Craft, if the proposed free trade agreement with the EU and another one with Britain are clinched, all these targets will be easily realised. Indian exporters are paying around 10% duties for supplies to the EU, while key competitor Bangladesh, Pakistan and Cambodia have zero duty access to it. The EU makes up for 37% of India’s garment exports and Britain alone used to account for roughly one-third of the EU demand. Orient has committed to add 4,000 people to its existing workforce of 32,000 over the next three years.
Virender Uppal, chairman of another large exporter, Richa Global, said he will add 3,000 people within a year to its existing employee base of 11,000 people. Narendra Kumar Goenka of Texport Industries said his company is looking to hire 4,500 people over the next three years, recording a sharp increase over the current workforce of 1,000 people. Despite enthusiasm shown by exporters for the package, analysts say the targets set by the government are too ambitious to be achieved in a span of three years, given stressed balance sheets of most companies, subdued demand and dented cost competitiveness of Indian exporters vis-a-vis Bangladesh’s or Vietnam’s.

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While it may have played a crucial role in helping the ruling Bharatiya Janata Party (BJP) win the recently concluded Assembly elections in Gujarat, the Surat-based textile industry is still reeling under the goods and services tax (GST) impact.
According to industry sources, especially in weaving and trading, capacity utilisation at most of the power looms and trading units is still down by 50 per cent or lesser. While spinning units are finding takers in the knitting industry — which is currently doing better due to the winter season — the other verticals in the textile chain, such as weaving and trading, are still finding business unsustainable, especially among smaller players.
Against 40 million metres per day of production in the Rs 500-billion synthetic textile hub of Surat, the current production is down to 2.5 million metres per day. Similarly in the weaving sector, against a Rs 600-million daily turnover in the pre-GST era, the same is still down by 50 per cent, said Ashish Gujarati, president of Pandesara Weavers’ Association.
Moreover, power looms continue to shut shops, with roughly 250-300 looms being discarded as scrap daily, albeit at a slower pace than in October.
Further, there are still several traders and weavers who are yet to register and come under the tax net.
“Smaller traders are still hit. The matter is not just about the 5 per cent GST the traders have to pay, it is about the additional costs of hiring accountants and investing in technology that is hitting the smaller traders’ pockets. This has led to a 50 per cent decline in business,” said Hitesh Sanklecha, one of the traders leading the demands on changes in GST in the Surat textile trading industry.
In normal circumstances, there are 650,000 power looms, 150-200 wholesale textile markets, 20,000 manufacturers — including 10,000 weavers, 75,000 traders, 450 processing units — and 50,000-60,000 embroidery machines in the Rs 500-billion synthetic textile hub of Surat.
According to Sanklecha, at least three different industry associations, including silk weavers and textile processors, have made representations to the Centre for relief from the impact of the GST on businesses.
The decline in business, as an impact of the GST, accentuated in the months of September and October when the industry apparently receives peak festive season orders. The peak Diwali season dispatch this year was only 15 per cent of normal in October.
Against a typical Rs 100-120 billion worth of business during Diwali through dispatch of 1,500 trucks daily for a fortnight, the same was down to mere 15-20 per cent.
“This was the first time we saw such a Diwali. In the last fortnight or so, which sees peak of Diwali dispatches, business was down by 15-20 per cent of a typical season,” Tarachand Kasat of the Surat-based GST Sangharsh Samiti and a leading textile trader.

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With CCI having already procured around 5 lakh bales, the target is to procure another 5 lakh bales, officials said. CCI already has some buyers on its list with whom it has reached agreements to sell cotton.
Cotton Corporation of India (CCI) has procured around 5 lakh bales this season of which 4 lakh bales have been procured at Minimum Support Price (MSP) and the remaining 1 lakh bales as part of its commercial operations, senior officials at the CCI said. With cotton prices firming up to around Rs 5,300 per quintal, farmers are finding it more lucrative to sell cotton in the open market. Officials at CCI therefore feel that the intervention of the corporation may not be required for a better part of the season unless arrivals increase and prices fall below MSP.
CCI, however, is likely to continue with its commercial operations during the ongoing season for some of its existing buyers.
With CCI having already procured around 5 lakh bales, the target is to procure another 5 lakh bales, officials said.
CCI already has some buyers on its list with whom it has reached agreements to sell cotton. Cotton prices have firmed up on lesser availability of the commodity owing to the pink bollworm attack.
According to Cotton Association of India (CAI), the crop arrivals in the country up to December 31 have crossed 147.75 lakh bales in this season. By the same time last year, arrivals were about 108 lakh bales.
Since cotton rates have gone up in the country by 10% in the last one month, the earlier set target of cotton export of 63 lakh bales looks difficult now. Hence, cotton export figures have been reduced and revised from the earlier 63 lakh bales to 55 lakh bales, said CAI president Atul Ganatra.
Since cotton price has increased in India, parity to import of cotton has increased so CAI has revised import figures from 17 lakh bales to 20 lakh bales this season.
CAI has estimated the total consumption of cotton during October 1, 2017 to September 30, 2018 of around 320 lakh bales. Due to reduction in export and increase in import, CAI’s carry forward has increased from 39 lakh bales to 50 lakh bales on September 30, 2018, which is a very comfortable position for Indian spinning mills, he said.
Officials at CCI said some one-third of the arrivals have been completed and another two-thirds remain. Farmers are holding on to their crop in anticipation of a better price. Mills are also stocking up on cotton in anticipation of shortage, industry people said.
The Cotton Advisory Board (CAB) has estimated the fibre’s output to increase by 9% to 377 lakh bales (of 170 kg each) despite lower production in Maharashtra and Madhya Pradesh. The output in the northern region is expected to increase 28% to 59 lakh bales from 46 lakh bales earlier on the back of a bumper crop in Rajasthan and Punjab, which is pegged at 22 lakh bales from 16 lakh bales previously and 12 lakh bales from 9 lakh bales earlier.
On the demand side, mill consumption is estimated to be higher at 288 lakh bales from 263 lakh bales earlier — consumption by the small-scale and non-textile industry may increase to 27 lakh bales from 26 lakh bales previously and 19 lakh bales from 17 lakh bales earlier.
Exports are slated to increase to 67 lakh (58 lb) as Pakistan is expected to import from India, Textile Commissioner Kavita Gupta had said. Maharashtra suffered the worst pest attack of Pink Bollworm, especially in Yavatmal and Jalgaon. Other States that were hit are Karnataka, Telangana and Madhya Pradesh During the current cotton season, CCI has opened 348 procurement centres to ensure remunerative prices to farmers.

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The longest winning streak in two decades propelled cotton to 2017’s biggest increase among crop commodities, and hedge funds are ready for more gains in 2018.
Of the nine components tracked by the Bloomberg Agriculture Subindex, only cotton and wheat contracts posted gains last year. The fiber lead the way with an 11 per cent advance as demand grew for US exports. Prices capped 2017 with 10 straight weekly gains, the best streak since 1998.
Cotton was also one of the few crops that hedge funds got more positive on during the course of the year. Money managers held a net-long position, or the difference between bets on a price increase and wagers on a decline, of 102,402 futures and options as of December 26, according to US Commodity Futures Trading Commission data released Friday. That’s up from 76,052 at the end of 2016.
Cotton’s stellar performance came as crop woes in Pakistan and India, two of the world’s biggest growers, raised prospects for American shipments. In the 2017-2018 season, commitments for US cotton exports are running 29 per cent higher than a year earlier, government data show.
The investors also added to their bullish outlook in soybean meal in 2017, the CFTC show. By contrast, the funds lowered their net-long holdings in soybean oil, while turning bearish on coffee, sugar and soybeans during the year.

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There is no provision to take ITC of CVD and SAD in the current GST laws
The Foreign Trade Policy (FTP) says that advance authorisation can be used for procurement from an Export Oriented Unit (EOU). It also says that EOUs must surrender the Basic Customs Duty (BCD) on inputs and charge GST on clearances into Domestic Tariff Area (DTA). There is no provision under GST laws to clear from EOU to DTA without GST payment against advance authorisation. Also, what happens when EOU materials are used by DTA in the manufacture of export goods? The BCD surrendered becomes part of the price and not charged as duty by the EOU. So, it cannot become part of drawback claim. How to get that part back?
Para 4.20 (a) of the FTP says that the holder of an advance authorisation/duty free import authorisation can procure inputs from indigenous supplier/State Trading Enterprise /EOU/ EHTP / BTP /STP in lieu of direct import. Such procurement can be against Advance Release Order (ARO), or Invalidation Letter.
Supplies to advance authorisation holder are treated as deemed exports under the GST laws. So, you can claim refund of the GST paid in accordance with Central Tax (Rate) notifications 48/2017 and 49/2017, both dated October 18, 2017. On the issue of drawback or exemption of BCD surrendered by EOU, there is no provision to compensate the exporter. This matter may be raised before the DGFT.
On an advance authorisation taken by us in 2015, we made imports during the pre-GST period but there is shortfall in fulfilment of export obligation. We want to regularise by payment of customs duty on unutilised material. Now, we are required to pay the BCD and additional duty of customs (CVD and SAD) as well as cess. Can we get Input Tax Credit (ITC) of CVD and SAD paid for regularisation of default?
There is no provision to take ITC of CVD and SAD in the current GST laws.
I suggest you write to DGFT, who can take up this matter with the Ministry of Finance.
In the Central Tax (Rate) Notification no. 40/2017 dt. October 23, 2017, issued for Merchant Exporters for Goods and Services Tax (GST) rate @ 0.05 per cent, under Para VI (b), they have used the word “Registered Warehouse”. Is some registration required from the customs or GST office, for this?
CBEC Circular no. 43/2017-Cus dated November 7, 2017 clarifies that for the purpose of above notification concerning supply to registered recipient at concessional GST, registered principal place of business or registered additional place of business shall be deemed to be a “registered warehouse”.
We have made a deemed export supply to EPCG authorisation holder against invalidation letter. The supply is within the State and so, we have paid CGST and SGST. How to report this in GSTR-1, when Table 6 has only a facility to report IGST? Secondly, what is the procedure to claim refund of GST?
There is no solution under the present dispensation for these problems. These matters may be raised before the DGFT for taking up with the Ministry of Finance.

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2018 may turn out to be a challenging year for India’s textile and garment industry, with exporters still reeling under the impact of GST and outward shipments likely to miss the $45 billion target for 2017-18.
Garment exporters have been demanding that the duty reimbursement to them be retained at the pre-GST (Goods and Services Tax) drawback rate of 7.5 per cent, amid declining outbound shipments.
India’s apparel exports declined 39 per cent in value terms in October.
However, India’s cotton production could touch 37.7 million bales in the year that began on October 1, up from 34.5 million bales produced in 2016/17.
The production of import substitute bivoltine silk in the country is expected to reach around 6,200 million tonnes (MT) in 2017-18 as compared to 5,266 MT a year ago, registering an increase of 19 per cent, according to the Textile Ministry.
Meanwhile, 2017 turned out to be a mixed bag for the textiles sector. While initiatives were unveiled for power loom units and weavers, the much-awaited new National Textiles Policy is yet to see the light of the day.
Towards the end of the year, a scheme for capacity building in textile sector to boost skill development and job creation was launched with an outlay of Rs 1,300 crore. 10 lakh people are expected to be skilled and certified in various segments of Textile Sector through the scheme, out of which 1 lakh will be in traditional sectors.
The year also witnessed the first mega international trade event for the textile sector, which was inaugurated by Prime Minister Narendra Modi in Gandhinagar, Gujarat, on 30 June.
The event recorded participation from more than 100 countries and a total of 65 MoUs with an estimated value of over Rs 11,000 crore were signed during the exhibition.
India Handmade Bazaar, an online portal to provide direct market access facility to artisans and weavers, was launched in January.
In November, the Textiles Ministry notified post-GST rates under the scheme for Remission of State Levies (RoSL) on exports of readymade garments & made-ups. For garments, the rates range between 1.25 per cent and 1.70 per cent and for Made-ups, they range between 1.40 per cent and 2.20 per cent, with the rates effective from October.
The government also enhanced the rates under Merchandise Exports from India Scheme (MEIS) on readymade garments and made-ups from 2 per cent to 4 per cent. The rates will ve applicable between November 1, 2017 and June 30, 2018.
A comprehensive national policy covering all segments of the textiles sector is the need of the hour, to give a push to exports from the sector, which have remained stagnant for the past four fiscal years, mainly because of less demand in major markets such as the US, EU and China, and stiff competition from countries like Vietnam and Bangladesh which enjoy an edge over India.

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The district consumer disputes redressal forum has directed a garment retailer to refund Rs 576 charged as VAT from a customer as the price tag of the product read that the maximum retail price (MRP) was inclusive of all taxes. The trader has also been asked to pay Rs 1,000 as compensation and Rs 500 as litigation expenses to the customer.
Jaikaran Singh, a resident of Noordi Adda village in Tarn Taran, had filed a complaint against United Colors of Benetton stating that he had purchased garments from the opposite party. The price of three items was Rs 9,797. As the retailers was offering 50 per cent discount, the net price came down to Rs 4,898. According to Jaikaran, the retailer charged Rs 576 as VAT on the discounted price even though the price tag read “MRP inclusive of all taxes”.
The opposite party in its reply stated that a discounted price does not become a new MRP. It also stated that the question whether the VAT was rightly assessed and accounted for was a matter of assessment by the appropriate authority under the VAT Act.
The forum observed that under Section 2 (d) of the Consumer Goods (mandatory printing of cost of production and maximum retail price) Act, 2014, the MRP printed on the goods means the price at which the consumer goods shall be sold in retail shall include all taxes levied on the goods. “Having read ‘flat discount’ advertisement, a consumer will be tempted to buy the goods under a bonafide belief that he will get a flat discount on the MRP,” the forum stated.
The forum ruled that it was an unfair trade practice since the advertisement was misleading.\
Charged tax on MRP
• Jaikaran Singh of Noordi Adda village bought clothes from United Colors of Benetton for Rs 9,797.
• Since the outlet offered 50% discount, the net price came down to Rs 4,848.
• But the outlet charged Rs 576 as VAT on the discounted price even as the MRP read ‘inclusive of all taxes’.
• Consumer forum terms it a misleading advertisement and unfair trade practice.

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Weak global economy was a cause: FM
Finance Minister Arun Jaitley on Friday said that the slower GDP growth of 7.1% in the financial year 2016-17, compared with 8% in the previous year, was due to a combination of reasons, including a weak global economy, a reduction in investment, stressed corporate balance sheets, and lower credit.
During the Lok Sabha question hour, Mr. Jaitley said, “The government has taken various initiatives to boost the… economy,” including “a fillip to manufacturing, measures for transport and power sectors,… comprehensive reforms in the FDI policy and a package for textiles.”

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The mandatory implementation of the e-way bill system from February 1 for all inter-State movement of non-exempted goods will help boost compliance under the Goods and Services Tax (GST) regime, according to Finance Secretary Hasmukh Adhia.
“All we want to do is using information technology and a simple self-declaration saying you moved so much goods… be able to then ask so why didn’t you file a GST return,” Mr. Adhia said at a briefing on Friday. “Our intention is to make the filing of a simple e-way bill — which, either the supplier, the buyer or even the transporter can file – a habit that is adopted by everyone.”
The July 1 implementation of GST has seen revenue collections from the new nationwide indirect tax falter in recent months and the Centre, already struggling with a wider than budgeted fiscal deficit, is keen to tighten tax compliance under the new regime. The decision to advance the roll-out of the nationwide e-way bill system to February 1 is line with this objective.
‘No inspector-raj’
Mr. Adhia sought to allay fears that the implementation of the e-way bill system would result in a return of ‘inspector-raj’ and said only in the initial period would a few random vehicles be stopped en route to check if the goods being transported were accompanied by an e-way bill. Also, once a vehicle had been stopped and checked it would not face any further inspections along the rest of its route, even if it traversed multiple States. The number of exemptions for complying with the requirement of an e-way bill was also extensive, including about 50% of the CPI (Consumer Price Index) basket of goods, he said. Given the experience of States which had implemented similar e-way bills as part of the earlier VAT regime, there is clear evidence that tax collections jumped following implementation of the system.
“Some of these States had not only intra-State but they also had inter-State requirement of e-way bills. These States saw a 15% to 20% increase in revenue the year after they implemented it,” Mr. Adhia said.
About 15-16 lakh e-way bills are likely to be filed daily for inter-State movement of goods, with the combined number inclusive of filings for intra-State transportation estimated to be about 40 lakh, according to Prakash Kumar, CEO, GST Network.
Separately, Mr. Adhia said initial data on GST collections under the composition scheme — where small businesses self-declare turnover and pay a flat rate varying from 1% for traders to 5% for restaurants — had revealed “outright under-reporting.” With 6 lakh returns filed under the scheme, the revenue receipts amounted to a paltry Rs. 251 crore.
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