Para 1 - INTRODUCTION - Report on - Business Processes for GST - Payment - [April 2015]

INTRODUCTION During the Empowered Committee meeting held on 10th March, 2014, it was decided that a Joint Committee under the co-convenership of the Additional Secretary (Revenue), Government of India and the Member Secretary, Empowered Committee should be constituted to look into the Report of the Sub-Group-I on Business Processes for GST and make suitable recommendations for Payment and Return to the Empowered Committee. Accordingly, a Joint Committee, in consultation with the Government of India, was constituted on 7th April, 2014 (Annexure-I). The Committee held its deliberations on 28th October, 2014, 12th November, 2014, 25th November, 2014, 22nd December, 2014, 2nd and 3rd February, 2015, 19th and 20th February, 2015 and 16th and 17th April, 2015. 2. The Joint Committee on Business Processes for GST held on 2nd February, 2015, it was decided to constitute a sub-committee on GST Payment Process. Pursuant to that decision, the Member Secretary, Empowered Committee constituted the Sub-Committee vide his memorandum letter dated 3rd February, 2015 (Annexure-II). Shri V Rajendaran, DG (Government Accounts), CAG, Mrs. Krishna Tyagi, CCA, CBEC, Government of India, Shri Madan Mohan, Jt. CGA, Government of India and Shri G Sreekumar, CGM, RBI were co-opted as members of the Sub-Committee. Shri Ravneet S. Khurana, Deputy Commissioner GST Cell, CBEC also participated in the deliberations of the Sub-Committee. The Sub-Committee met in Bengaluru on 14th and 15th February, 2015 and on 06th and 7th April, 2015. The Sub-Committee also exchanged drafts on emails during the interregnum period. The Sub-Committee submitted its final report on 10th April, 2015. 3. The report of the Sub-Committee was discussed in the meeting of the Joint Committee of Business Processes held in Delhi on 16th and 17th April 2015 and was accepted with certain modifications. The meeting of the Joint Committee was attended by the officers as listed in Annexure III. 4. In modern day taxation regime, every transaction of the tax payer with the tax administration should be transparent, responsive and simple. It has been experience of tax administrations that more the system and procedures are made electronic more is the efficiency of tax administration and greater is the satisfaction of taxpayer. In this context, payment system of GST should also be based on Information Technology which can handle both the receipt and payment processes. 5. The objectives of this report are as under: a) Highlight key issues in tax collection, collation, remittance and reporting of tax collection into Government account; b) Need for a uniform system of banking arrangements for collection, remittance and reporting of GST to both Central and State Governments; c) Proper accounting and bank reconciliation of taxes derived from basic data of payments made by taxpayers to banks, with the required classification of heads of accounts indicated on the Challan; d) Designing the format of a new Challan for use by the taxpayers paying GST; e) Developing a detailed accounting procedure common to both Central and State Governments for GST, covering all relevant aspects of payments, accounting and related banking arrangements. 6. It is noted that under GST regime, some taxes and duties may remain outside the purview of GST and will continue to be collected in the manner prescribed under existing accounting procedures/rules/manuals, etc. This means that two types of challans (one for GST and other for non-GST) will be used and accounted for by the respective Pay and Accounts Offices (PAOs)/State AGs. 7. The payment processes under proposed GST regime should have the following features: a) Electronically generated challan from GSTN Common Portal in all modes of payment and no use of manually prepared challan; b) Facilitation for the taxpayer by providing hassle free, anytime, anywhere mode of payment of tax; c) Convenience of making payment online; d) Logical tax collection data in electronic format; e) Faster remittance of tax revenue to the Government Account; f) Paperless transactions; g) Speedy Accounting and reporting; h) Electronic reconciliation of all receipts; i) Simplified procedure for banks; j) Warehousing of Digital Challan. 8. With the above features in mind the following three modes of payment are proposed: a) Payment by taxpayers through Internet Banking through authorized banks and through credit card/debit card; (Section 45 of RBI Act, 1934 permit banks other than RBI to be appointed as agency banks for carrying out government business. Agency banks are permitted to both receive and make payments on behalf of the Government and therefore act as Banker to respective governments. However, authorized banks are only permitted to receive payment of GST on behalf of the Government, and keeping this distinction in view, the expression authorized bank is used throughout this Document.) b) Over the Counter payment (OTC) through authorized banks; c) Payment through NEFT/RTGS from any bank (including other than authorized banks). 9. Mode of payment described at b) above will be available for payments up to ₹ 10,000/- per challan only. Model GST law may have suitable provisions in relation to this. However, there should not be any IT system constraints for this i.e. the systems should be able to receive payments through all three modes irrespective of the amount. Other means of payment, such as payment by book adjustment as is presently being allowed by Government of India to some departments / State governments or payment by debit to export scrips, while paying tax would not be allowed. It is also noted that all taxpayers under Centre are paying taxes electronically and possibly the same situation exists in some State Tax administrations. It is desirable that under the GST regime, all taxpayers should gradually move to internet payment over an indicative time frame. 10. The Committee recommends that RBI should play the role of an aggregator through its e-Kuber system. Such role will facilitate participation of larger number of banks in GST receipts enhancing convenience for the tax payers and provide single source of information for credit of the receipts to Government accounts and thereby simplifying accounting and reconciliation tasks. In case of any discrepancy found during the reconciliation by the Accounting Authorities, they would directly interact with RBI. Joint CGA suggested that as per the provisions of Section 20 of the RBI Act, 1934 in the proposed scenario, RBI would be the sole banker to the Governments. RBI, on the other hand, has indicated that Section 20 and Section 45 of the RBI Act, 1934 are not mutually exclusive and therefore there would not be any conflict in the role envisaged for the RBI in the proposed model. 11. Each of the above modes is discussed separately along with the role of stakeholders involved, process of reporting, accounting and reconciliation of data. As already mentioned above, it is envisaged that for each mode of payment, the challan will be generated electronically at the GSTN and no manual challan will be used under any mode of payment.