Thiruvananthapuram: Keralam could see a significant reduction in GST revenue leakage if the proposed system-based changes to GSTR-3B (GST return used to declare tax liability and claim input tax credit) are implemented. GST sources estimate that the state is currently losing around Rs 100 crore a month through fraudulent utilisation of input tax credit (ITC).The proposal is part of the agenda for the 57th GST Council meeting scheduled to be held on Thursday, in which chief minister V D Satheesan will represent the state in his capacity as the finance minister. The GST Council agenda, accessed by TOI, proposes an alternative mechanism for amending tax liabilities and ITC in GSTR-3B, aimed at reducing mismatches and the consequent notices issued to taxpayers.At present, tax liability in GSTR-3B is automatically filled in by the GST system based on the details furnished in GSTR-1 (sales return), while available ITC is automatically filled in by the GST system based on GSTR-2B (statement of input tax credit available to a business). Taxpayers can, however, edit these figures before filing the return. This can result in discrepancies between the liability reported in GSTR-1 and the tax paid through GSTR-3B, as well as between the ITC available in GSTR-2B and the ITC claimed in GSTR-3B.Centre’s national coordination committee and state GST administrations had flagged the large number of demand notices under Section 73 and system-generated DRC-01B and DRC-01C intimations (system generated intimations flagging mismatches in tax liability and input tax credit, respectively) arising from such mismatches. The proposed mechanism seeks to increase system validation and reduce manual intervention in filing returns.A GST official said the changes could have a direct bearing on Keralam’s revenue because of the way ITC is used to discharge Integrated Goods and Services Tax (IGST) liabilities. “Fraudulent State Goods and Services Tax (SGST) ITC utilisation to discharge IGST liability is causing Keralam to lose around Rs 100 crore a month. The proposed Rule 61(1B) amendments could help curb this leakage and safeguard the state’s revenue,” the official said.The proposed changes, however, are not aimed only at detecting fraud. The GST agenda notes that a majority of the mismatches are attributable to lack of uniformity in furnishing data and clerical errors. A more system-validated return, according to the agenda, would improve the integrity of the data and reduce the need for manual intervention.Satheesan had, as leader of opposition, claimed that Keralam was losing around Rs 5,000 crore a year in IGST, citing the state’s consumption pattern and the high proportion of goods coming from outside the state. Keralam has also flagged a broader concern in the GST Council over the impact of rate changes on its finances.In the agenda papers, the state argued that goods and services in higher GST slabs contribute a relatively larger share of its revenue because of its consumption pattern and sought a detailed revenue-impact assessment before broad-based rate changes. It also sought measures to protect state revenues, including continuation of a compensation mechanism, the possibility of a state-specific cess and a 60:40 revenue-sharing ratio in favour of states.The state has separately opposed the proposed increase in GST on state-run paper lotteries from 28% to 40%, pointing out that the sector provides direct employment to around two lakh people, including ticket sellers and distributors.
