The economist also drew the union finance minister’s attention to the complex web of GST that has been thrust upon the MSMEs and said that till date 770 notifications have been issued.
Alleging that GST frauds are proliferating across the country and MSMEs are facing problems due to a web of regulations, Dr Amit Mitra, principal chief advisor to West Bengal Chief Minister Mamata Banerjee, urged Union Finance Minister Nirmala Sitharaman to convene a GST Council meeting to discuss these issues.
Mitra, a former state finance minister, referred to the central government's admission in the Lok Sabha that Rs 1.15 lakh crore of fraud have been detected from GST invoices between 2018-19 and 2022-23.
"I write this letter with great anguish and deep concern. On one hand, GST frauds are proliferating across the country penetrating each and every state. On the other, the web of regulations is so overpowering for the MSMEs, that they are on the verge of deregistering back to their informal status," Mitra said.
The ‘humongous’ fraud taking place in the country and the suffering of the MSME in the current GST system require a total rethink by the Centre and the GST Council on the structure and GST, he added.
In the letter, Mitra also stated that out of 69,426 GST identification numbers verified during the last two months, 20,893 were found to be non-existent, and the amount of GST evasion detected in that period came to the tune of Rs 19,638 crore.
"May I point out that out of the 1.4 crore businesses registered with GST, only 0.42 per cent of registered taxpayers were verified, which yielded the shocking 30 per cent non-existent and fraudulent registrations," he said.
"Once again, on August 3, 2021, your MOS Finance put the quantum of fraud between 2020-21 and 2021-22 (till July 2021) at Rs 56,805 crore... In other words, since the inception of GST, year after year we have been helplessly watching massive fraud taking place in this porous GST system,” Mitra said.
The economist also drew the union finance minister’s attention to the complex web of GST that has been thrust upon the MSMEs and said that till date 770 notifications have been issued.
He said, "The rates of more than 400 items of goods and around 100 categories of services have been changed till date. How do you expect that an MSME company would be able to cope with this gargantuan regulatory structure?"
Though the intent of GST was to bring the informal sector entrepreneurs into the formal arena through a simple and transparent GST system, the unfortunate fact is that 90 per cent of the GST is contributed by large taxpayers who can cope with this complex web of regulations, Mitra said.
"I therefore, humbly urge you to convene a GST Council meeting that exclusively focuses on these two big issues, rather than tinkering with the nitty-gritty, to find holistic and sustainable solutions to control frauds & simplify regulations, keeping the MSMEs in mind," Mitra concluded.