Rahul Mehta Gandhinagar LsCandidate
The solution to "missing trader problem" of GST / VAT
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There are several status posts of mine which describe missing trader problem in GST / VAT. Please search in
.http://mehtarcfbcopy.blogspot.in/2016/02/dear-recallists-please-do-google-on.html . Please also see my video on VAT / GST at youtube.com/RightToRecallGroup
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The solution is as follows
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(1) A trader named A who is giving tax invoice will need to have two accounts - (1a) normal account of A , like today (1b) GST account of A. IOW, banks will provide two types of account.
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(2) Normal accounts are like accounts of today
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(3) GST accounts has following restrictions
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(3a) Money deposited in GST account can be given to govt as GST payment OR transferred to GST account of seller, and thats all,. i.e. money from GST account cannot be moved into normal account.
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(3b) one can transfer money from normal account to GST account, but not vice versa. If one wants money back from his GST account, then he will need to first pay govt, and then claim refund.
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How does this solve missing trader problem?
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Say A sells goods to B at say Rs 1000 and GST rate is say 20%
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The B should write two cheques
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(a)Rs 1000 in name of A, from his normal account
(b)Rs 200 in name of "GST account , A", from his GST account
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cheque (b) will also have invoice number as additional detail
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So now if A doesnt deposit second cheque, then B has that Rs 200 in his GST account which he can later pay to govt. And if A deposits the second cheque of he got from B, then from A' GST account, A can only pay GST or pay to govt but he cannot transfer money to his personal account or anyone else's personal account. IOW, the GST paid will never get siphoned out.
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THUS, GST-account-scheme solves missing trader problem.
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This works only when payment is made via cheque.
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If one is paying via cash, then also it can be implemented. I will explain that in tomorow's status.
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This doesnt need any change in tax law that calculate next tax due. The govt only need to order RBI to order banks to create a new type of account.
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Reducing "double taxation"
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Now this scheme of GST account can be extended to reduce double taxation i.e. one will have to pay income tax or GST but no both !! How?
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Say a buyer buys goods for say Rs 1000 + Rs 200 GST = Rs 1200 , and pays via card Then the merchant will make two entries Rs 1000 goods and Rs 200 GST. And the credit card statement will have two columns as well. The credit card will also show GST paid between 1-april and 31-march at year end
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So whats the use?
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The GST paid on record can be made rebate in income tax !!!
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So this proposal can benefit everyone who is dealing in white money. But now he has to pay income tax or GST but not both.
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So say a person has earned Rs 20,00,000 and say income tax due is Rs 500,000. Now say during the year he has recorded payment of GST as Rs 100,000. Then income tax he will have to pay will be only Rs 400,000
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Both proposals --- GST-account-scheme and deducting GST paid from income tax due are SEPARATE proposal.
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We at Right to recall party should work to ask activists to ask traders to order MPs via SMS to implement GST-account-scheme and give GST paid as rebate in income tax.
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Both will be two separate SMS.
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I will put drafts in 1-2 months
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