Disproportionate Share of GST Revenue: Tamil Nadu Govt Sets up Committee to Study Settlement Pattern of IGST

The Tamil Nadu Government has formed a committee to study the settlement pattern of Integrated Goods and Services Tax (IGST) to the State of Tamil Nadu consisting Anand Subramaniam, Former Chief Economic Adviser to Government of India as the Chairperson with 5 other tax experts as members.

As per the order issued by the Commercial Taxes and Registration issued on 25th August 2023, the revenue due to the State accrues through payment of State Goods and Services Tax (SGST) by the taxpayers and Integrated Goods and Services Tax (IGST) Settlement received from the Department of Revenue, Ministry of Finance, Government of India, based on the details furnished by the taxpayers of this State and other State taxpayers in their monthly returns filed through front-end portal.

Taxes realized under GST are fully based on consumption. The consumption is of two categories one by the business and another directly by the consumers in the State. IGST Settlement is being made by the Government of India on the basis of three major components, (i.e.) Net of the values:-

• Input Tax Credit (ITC) accrued in intra-state B2B (Business to Business) transactions adjusted by the taxpayer with tax liability arising out of inter- state transactions (B2B & B2C) (Business to Consumer). (Negative to the State);
• ITC accrued from inter-state B2B transactions (Inward supplies) adjusted by the taxpayers with the liability arising out of intra-state transactions (B2B & B2C). (Positive to the State);
• ITC accrued on inter-state B2B & B2C transactions (Inward supplies) without any adjustments. (Positive to the State)

It was observed that in addition to IGST by way of regular settlement, ad hoc IGST Settlements were received at different intervals from the Government of India which has been completely stopped from October 2022. Further, an analysis of the pattern of Settlement of IGST both regular and ad hoc shows that there is no proportionate increase in total IGST Settlement to the State even though there has been an increase in consumption over a period.

Hence the Principal Secretary/Commissioner of Commercial Taxes requested to form a committee to study the Settlement pattern of IGST to the State of Tamil Nadu.

The committee formed will make a brief study referring to the following terms:

• Method of Settlement of IGST.
• Component of IGST that affects the Settlement to Tamil Nadu when the consumption is increasing year on year
• The impact of IGST over the SGST collection and vice versa in Tamil Nadu specifically when industrial production is increasing and the relation of the same.
• To identify the reasons for the difference noticed between the actual IGST Settlement made with that of IGST ITC adjusted with SGST liability as per the returns filed by the taxpayers.
• Why the ad hoc IGST that was settled till October 2022, has not been settled afterwards?, If such IGST is settled in any alternate way, whether it is fair to the State of Tamil Nadu?
• To recommend ways to fully capture the IGST sales (both goods and services) through digital mode where the place of supply is Tamil Nadu.

The committee comprises of Chair person Thiru Arvind Subramanian (Former Chief Economic Adviser to Government of India ) and other 5 members namely Thiru H. Krishnan (Secretary, Finance Unni, IAS), Thiru M. Parameswaran (Additional Commissioner of Revenue,Collection & Monitoring), Thiru R. Srinivasan (Professor/Full Time Member, State Planning Commission), Thiru K. Vaitheeswaran (Advocate & Tax Consultant & Member,Advisory Council) and Thiru. G. Natarajan (Advocate & Member, Advisory Council).

To Read the full text of the Order CLICK HERE

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