Editorial 1 : Ease of compliance
Introduction: Last month, monthly GST collections hit an all-time high, surpassing the Rs 2 lakh crore mark for the first time. However, this emphasis on collections should not overshadow the persistent issues and glitches in the daily application of GST laws. One significant issue is the time-limit conundrum related to claiming input tax credit.
One Nation, One Tax Philosophy
- Merger of central and state indirect taxes.
- Seamless availment of credit on tax paid on all inputs.
- Eliminates cascading effect of double taxation.
Understanding the credit issue with an example
- Manufacturer's monthly tax liability: Rs 1,00,000.
- GST paid on inputs: Rs 60,000.
- Balance tax payable in cash: Rs 40,000.
- Cash available: Rs 10,000.
- Resulting tax arrears: Rs 30,000.
Problems with GST Portal
- Monthly return not accepted unless entire tax is paid.
- Subsequent returns cannot be filed if previous returns are unpaid.
Time Limit for Input Tax Credit
- Deadline: November 30 each year.
- Failure to pay balance tax results in permanent loss of input tax credit.
- In the above example result: Rs 60,000 input tax credit lost due to inability to pay Rs 30,000 shortfall, creating a tax liability of Rs 1,00,000.
Need for GST Portal Adjustment
- Urgent alteration needed to accept monthly returns without full tax payment.
- Portal should record monthly tax arrears.
- As in above-mentioned Example: Accept return noting Rs 30,000 shortfall, with interest accruing until dues are cleared.
- Allows manufacturer to claim credit on paid input taxes.
Payment Issues for Small and Medium Enterprises
- Many SMEs do not receive payments within the 45-day limit set by the Micro, Small and Medium Enterprises Development Act, 2006.
- Government agencies often delay payments for months with no effective legal recourse.
- Time-limit issues are practical difficulties needing resolution without judicial interpretation.
Injustice in Tax Liability
- Income tax liability is based on net income: total sales receivables minus total expenses.
- Unfair to tax total sales if the assessee can't pay on time and disallow expenditure on purchases.
- Law should allow interest and penalties for persistent default, not deny credit for duty-paid inputs.
- Denial of credit for unpaid tax exacerbates problems for taxpayers.
GST Portal Issues and Needed Modifications
- Refusal to accept returns until full monthly tax is paid affects thousands of taxpayers.
- GST portal should accept all returns, noting arrears and applying interest.
- Law should mandate tax arrears clearance by November each year, with higher interest and penalties for failure to comply.
Conclusion: The GST Council needs to address this recurring monthly issue promptly, as defaults are often due to unfavourable business conditions beyond the control of many small and medium taxpayers. Until the GST Portal allows monthly returns with shortfalls, the November 30 deadline for availing input tax credit should not be enforced.
Editorial 2 : Hurdles on path to green
Introduction: The World Meteorological Organisation has confirmed that 2023 was the warmest year on record. This has brought the focus back on sectors like power and industry, which account for the bulk of carbon emissions. India is the third-largest carbon-emitting country and sectors like power, steel, cement, chemicals, fertilisers, refineries are facing heightened scrutiny.
Government Initiatives for Green Energy
- PLI scheme for manufacturing solar modules.
- Viability gap funding for offshore wind and battery storage projects.
- FAME scheme for electric vehicles.
- National Green Hydrogen Mission.
- Amendments to the Energy Conservation bill.
- Launch of green bonds.
Voluntary Steps and Transition Risks
- Entities taking voluntary steps towards green technology.
- Transition risks include policy, regulatory, technology, market, reputation, and legal.
- Major immediate risk is technological.
Renewable Energy Targets and Investments
- Fossil fuel power is the major source of carbon emissions in India.
- Government aims for 50% non-fossil power by 2030.
- ICRA projects India to achieve the climate goal with the share of non-fossil fuel-based installed capacity in overall installed capacity rising from 41 per cent in 2022-23 to 59 per cent by 2029-30.
- Required investments: Rs 11-12 lakh crore in renewable energy, Rs 5-6 lakh crore in transmission and storage.
Ensuring Round-the-Clock RE Supply
- Importance of continuous RE supply for target achievement.
- Use of hybrid RE projects (wind and solar) with energy storage systems.
- Need for carbon sequestration methods in hard-to-abate sectors like steel and cement.
Cement and Steel Industry Challenges
Cement:
- Producing one tonne of cement, an equivalent amount of carbon dioxide is released.
- Highly resource and energy-intensive, significant CO2 emissions.
- Need for Carbon Capture Utilization and Storage (CCUS).
- Niti Aayog estimates 2 million tonnes per annum CCUS capacity by 2030.
- Capital cost: Rs 1,600-1,800 crore.
Steel:
- High emissions due to coal use.
- Domestic steel-makers have sharpened their focus on reducing carbon footprint by 25-30% by 2030.
- Technological interventions needed.
National Green Hydrogen Mission
- Green Hydrogen planned for refining, chemical, fertilizer sectors, and transport.
- Capex for Green Hydrogen: Rs 8-9 lakh crore.
- Indian entities launching pilots and plans for Green Hydrogen/Green Ammonia production facilities.
Conclusion: Several entities in these high-carbon emitting sectors are taking voluntary steps to become more green. Nevertheless, the government’s support will be critical to hasten the technology transition in these hard-to-abate sectors. Such support could come in the form of policy interventions, subsidies, duty exemption or tax benefits.