Mukul Gupta*
India expected a major boost in the socio-economic arena as a direct benefit of GST and thus, the country needs to attend a few pertinent issues immediately to fast-track the development process with the constructive help of new technology.
India is a country with huge potential. It is an emerging business & economy, powered adequately by the political will of the present leadership which placed the new Indirect Tax Regime of ‘Goods & Services Tax’ (GST). There are expectations that the new regime is to accelerate the development process for improving the lives of billions of poor, on the contrary, it is still struggling to attain the desired results or to even begin the process of such development as expected from an ideal GST.
Demonetization, though it was principally a radical measure to eliminate the parallel economy, has adversely affected the industries & businesses besides bringing misery to common man due to the faulty implementation by the banking channels and lack of close and effective control of the government agencies.
GST, undoubtedly, was to further support the Government’s goal of abolishing parallel economy & eradicating corruption. But the initial hiccups, again due to bad planning and improper implementation, have halted the desired results. GST, on the one hand, has lost its image of ‘Game Changer’, India, on the other, has lost a big opportunity to make a great stride as far as socio-economic development is concerned.
The Government may term GST as ‘Good & Simple Tax’, but GST Law as well as its implementation, is neither good nor simple.
Another term coined by the Government – ‘One Nation One Tax’ is also not living up to its theme. The aim of seamless movement of goods from one corner of the country to another could not be achieved with the present provisions of GST and thus the desired reduction in the delivery time could also not be achieved to a satisfactory level. In short, India is still far away from having one uniform market.
A taxpayer having a presence all over the country needs to comply with the Laws in every state. The GST has not removed the cumbersome and recurring compliances of filing of multiple returns either monthly or annual for each branch of the same business entity. Multiplicity of taxes still exists in the Indian economy to substantial extent denying the real benefits of GST.
However, GST also carries both positive and negative points and it is not an exception. India certainly has found much-needed relief from innumerable separate indirect tax legislations like VAT, Central Excise, Service Tax, Toll Taxes, Luxury Tax, Entertainment Tax and many more. The cascading effects of them have also been brought down to a minimum resulting in reduced prices of goods and services, reduced rate of taxes, more transparency and some other good aspects.
But as far as the negative side is concerned, there are some pertinent issues which emerge frequently during the discussions of common people and are also raised regularly by professionals and authorities including media.
For the timely execution of some suitable solutions, following are a few extremely pertinent requisites crying for immediate attention of the GST Council & the think-tank, they are though very efficiently and dedicatedly developing and implementing the GST in India.
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1. Software & Technical Infrastructure Needs upgradation
The hitherto easy excuse for all the routine issues concerning disclosures/ compliances under GST and the most often defense submitted by the GST authorities as “All problems on GSTN are because GST was launched in a hurried way”, now certainly sounds childish after over one-and-half-year of its implementation. Nothing, except the lack of strong will, could be the reason for not setting up the backbone i.e. GSTN (the Information Technology Platform) in sync with the technical or software requirements.
A.1 Robust Digital Platform for GSTN is absent:
It was indeed a praiseworthy effort that Government had implemented GST through a digital platform, whereby personal interaction is minimized that reduces the scope for corruption to a large extent.
But the absence of a robust digital platform for GSTN has been the major problem for business and GST tax professionals across the country. There could be a few reasonable excuses, but the Indirect Tax Collection Platform cannot effectively function without a fully competent digital platform.
The All India Federation of Tax Practitioners (AIFTP) has been getting media inputs suggesting that Government is addressing this issue. But we have not been enough fortunate so far. A hassle-free service from GSTN network is still eluding us.
Time has come for the citizen of India and the Indian Economy to get the due benefits of such an epoch-making reform. But for that stabilization of GSTN is very much essential.
Business and tax professionals, of the country are under a great stress due to deficiencies of the digital system used for disclosures and compliances required under GST law. The business and tax professionals have to put extra hours and have to exert much more than the erstwhile manual system resulting in health problems of the functioning in their offices.
A.2 Representation accepted by Govt. and now GSTN is under full control of Government :
I am pleased to share the achievement of the ‘Indirect Tax (GST) Representation Committee’ of the AIFTP, as the representation earlier made in 2014 and again in 2015, has been accepted by the Government in the last week of September 2018.
The GSTN, a body made by the Government, to digitally implement GST through the GSTN web portal as a sole interface with the taxpayers shall now be a fully-owned Government body. The 51% stake of private shareholders has been taken over by the Central Government and the State Governments; now 51% shares will be held by Central Government and 49% together by all the State Governments in accordance to the arrangement.
The GST Representation Committee of the AIFTP had raised the concern in very initial period itself when GSTN was being envisaged as a private entity. The GST Representation Committee had objected the control of the GSTN by private players, mainly for the reason that precious and confidential data of supply transactions, including names of the parties, types of products and their quantity as well as the value might be known to some private players. And the data could be misused against the business interest of the taxpayers, especially dealing with proprietary scientific project or defense projects.
It is commendable that Government has removed private equity and made GSTN a Government body. The GST professionals in India now hope that GSTN will work more efficiently and effectively that may provide much-needed relief to a large number of business and tax professionals.
You will appreciate that we 7,500 individual members as well as members of the 122 Tax Bar Associations from across the country are the most important link between treasury and taxpayers. The Government must keep our well-being in mind, must safeguard our interests and pave way for the smooth and hassle-free function for the GST.
2. Responsive Judicial System for Redressing Issues under GST is the Need of the Hour:
The absence of a dedicated judicial system for addressing the legal issues concerning GST creates doubts in the minds of millions of Indians that whether any ‘Rule of Law’ really exists as far as the Goods & Services Tax is concerned.
Altogether 17 crucial months have passed since the introduction of GST but neither the 1st Appellate Courts nor the Tribunal has been constituted as required under any fair law. Notably, such judicial forums have been envisaged in CGST/SGST or IGST Acts passed by the Parliament as well as the State Legislatures. Proper forums for ‘Appeals and Revision’ has been provided in Chapter-XVIII U/s 107 to 121 of CGST/SGST Acts which was put in force w.e.f. July 1, 2017 but they have not made functional as yet.
Professionals associated with Indirect Tax Law are expressing concern that how the Governments, Union as well as States, would be able to implement the GST Law in a constitutionally driven democratic country without structuring and placing the system of a judicial redressal.
Every legal action taken by any implementing authority of a government should be opened to judicial scrutiny for which proper prescribed structure must be in place from the very first day of the implementation of the law. We believe that Government must not ignore this important requisite of the judicial forum under the GST.
Notably, the Government is collecting huge revenue from GST since July 2017, the revenue has now touched the mark of almost Rs. One Lakh Crore per month without any forum for judicial redressal.
B.1 Government’s Intention under Scanner:
What is in the mind of the Government? Should it not be deemed that the Government wants to take away the constitutional right of the Indian taxpayers and drag them away from ‘Rule of Law’?
A strong and authenticated judicial forum has always been the backbone of successful implementation of any law for governing a society.
The Government must realize that even though as per the law, any citizen of India has a right to approach High Courts or the Supreme Court, would it be feasible to approach these courts for each and every wrong interpretation or wrong deed of the officer working for the implementation of GST. Most of the taxpayers either have no courage or have little means or have no time to approach High Courts or the Supreme Court.
Further, whether the Government wants to put more burden on the already burdened High Courts and the Supreme Court by not constituting the judicial forums for the redressal of regular issues pertaining to the implementation of Indirect Tax Law.
Therefore, there should be a legal redressal system as prescribed under the GST Law to empower the taxpayers to approach judicial authorities against the decisions of the implementing authorities.
3. Advance Ruling Mechanism under GST needs to be reviewed:
The benefit of the new regime of the GST in the Indian Economy is based on the correct recording of the ‘Chain of Outward Supply Transactions’ and in turn the ‘Input Tax Credit Mechanism’ and its veracity and authenticity.
The intricate provisions of GST Law need minute analysis for understanding and compliance at the very first stage of structuring the transaction in the planned business. Unless the liability of tax on ‘Outward Supply’ is correctly self-assessed by the taxpayer, the ‘Input Tax Credit’ cannot be correctly claimed by the recipient in the chain of transactions. If at any earlier point some wrong decision is taken by the taxpayer, it affects the whole chain of the subsequent transactions resulting in repelling adverse effect. Therefore, correct understanding and payment of the liability of tax under GST at every stage in the chain of a transaction is very much essential for the success of GST and also for the interest of the economy of India.
The core benefits as envisaged at the time of introduction of GST can only be achieved when taxpayers thoroughly understand their actual liability of GST and make payment of the same.
The concept of ‘Advance Ruling’ of GST Law has been talked about in the Chapter-XVII with the aim to clear all doubts of taxpayers related to their tax liability and the correct procedure to be followed prior to start of their business transactions. The present provisions contained in Section 103 to 107 are not elaborate and do not provide the sufficient guidelines which a good law for this purpose should have. The law needs detailed analysis, scrutiny and redrafting to achieve the real aim of ‘Advance Ruling’ under GST.
C.1 Pro-Revenue approach of Advance Ruling Authority:
Further, during the short history of ‘Advance Ruling’ under GST, it has been found that the Joint Commissioners appointed as Members of Advance Ruling Authority are dictating the judgments with an absolute pro-revenue mind, ignoring the arguments and well-established ratios of law arising out of already held verdicts of High Court and the Supreme Court of India. It is an extremely sorry state of affairs that the ‘Advance Ruling’ passed is decided in most of the cases in favour of revenue with a prejudiced mind which vitiated the whole scheme of GST mechanism. The prime change needed is to appoint only Judicial Officers in the ‘Advance Ruling Authority’ by replacing the presently appointed Joint Commissioners who are also not quite senior in the administrative capacity of the CGST/SGST departments, these officers of the rank of Joint Commissioners are not justifying the requirement of unbiased and transparent approach as required for the ‘Advance Ruling Authority’.
The system of ‘Advance Ruling’ must be strong and unbiased as well as must be super sensitive towards the time frame. The very nomenclature of ‘Advance Ruling’ signifies that the ruling is provided in advance i.e. prior to the actual transaction which is in offing, but the present experience of ‘Advance Ruling’ decisions given by Authorities of the rank of Joint Commissioners are absolutely ridiculous and of no use for the taxpayers if they are judged from the accepted legal norms.
The ‘Advance Rulings’ given by the junior officers as mentioned above are clearly tilted towards the interest of revenue rather than unbiased logical opinion on the issue and fully devoid of accepted judicial norms. Most of these ‘Advance Rulings’ are non-speaking and have not addressed the arguments placed in writing by the applicant taxpayers.
The biased and arbitrary judgments of ‘Advance Ruling Authority’ are forcing the tax payers to take shelter of the other prescribed judicial forums after transacting the business transaction. It must be appreciated that the retrospective demand or refund would cause distortion in the chain of the business transactions which was already taken place sometime ago, as the chain in real time would not be able to encompass the actual effect of the right conclusion if it is coming out of prolonged legal battle. An assessee/taxpayer cannot wait for long to transact business as this would be against its own interest as well as against the interest of the country which is in the developing mode.
Any system of ‘Advance Ruling’ cannot achieve its true aim unless an unbiased logical conclusion is given by the authority, in most of the cases the applicant does not have any time to approach courts due to the time constraint for effectuating the actual business transaction.
A casual approach towards ‘Advance Ruling’ is vitiating the whole concept and will create irreparable damage to the GST mechanism. It needs to be corrected otherwise the faith will vanish very soon.
4. Officers of CGST and SGST Departments need to be made Answerable & Accountable:
The present system of implementation and collection of GST at the field level seems to be in an auto mode where there is no responsible or answerable authority or officer of the Central or State GST Department.
These officers sitting in their plush cabins do not have any administrative or judicial powers which could be practically exercised nor do they have proper access to the digital platform for any analysis and solution of the day-to-day issues raised by their jurisdictional assessee/taxpayers through the business and tax professionals.
Most of the Officers of CGST or SGST departments do not take any responsibility and are creating a situation that suggests that they do not have any effective mechanism to solve routine/regular issues of the business and tax professionals. No solution of any issue is coming out from the field officers and everything is being controlled by the GSTN which itself is functioning defectively.
D.1 Business and Tax professionals facing unprecedented situation:
Reeling under such a grave situation, business and tax professionals from every nook and corner of India, have been raising their concern to the ‘Indirect Tax (GST) Representation Committee’ through e-mails, SMS and Whatsapp messages on daily basis, only to get a routine reply in terms of officer’s inability to access the data. It means expecting a solution to the issue is total wastage of time and energy.
Now the question arises that if the Government thinks that there is no need of any human interaction from the field officers in the implementation of GST, then why these officers in large number are paid out of the scarce tax payer’s money?
These officers are proving to be of no help to the taxpayers. The real benefits of the policy of minimum official interaction with the taxpayers can only be appreciated with the help of robust and vigilant digital platform.
D.2 How to address Interaction issue:
The routine problems should be addressed and could be resolved by making some room for human interaction between taxpayers and tax collector. The timely and proper redressal of the issues to the satisfaction of tax payer’s assesse is crucial.
Since the aim is to bring every penny of the tax due into the tax net, it becomes important that proper scrutiny, verification and reconciliation of the returns especially of ‘Input Tax Credit’ claimed could be made regularly. This would not only help in avoiding and continuing errors but also help in eliminating unscrupulous business from distorting the developing economy.
The genuine business in the country could be flourished with proper adherence of the GST Law which requires surveillance by implementing/field officers over the business transactions of the taxpayers. Present laxity in many of the GST aspects may not be in the larger benefit of Indian economy besides causing difficulties for the Revenue Authority to collect the legally due amount of revenue, which may lead to unreasonable litigations to the disadvantage to the country.
CONCLUSION:
The introduction and implementation of the ‘GST Regime’ taken by the GST Council and Government of India have as yet to give the desired results as far as socio-economic turf is concerned. The business and economy have been feeling great pressure even inspite of the fact that anti profit measures and other effective measures for implementation of GST has not been fully functional. The demand in the market could not be raised as the benefits of reduced prices due to GST is not generally available to the consumers of India. If the above mentioned pertinent issues are attended immediately along with the provisions of GST law are implemented in true sense then the development process could be fast-tracked by roping in the real benefits of GST to the Indian economy.
GST being fully controlled by the government through GSTN web portal, it needs to be transformed into a robust digital platform which could withhold the pressure of large number of assessee approaching/ uploading their data for various types of returns etc. The business in India should not be allowed to adversely be affected due to the deficiencies in digital infrastructure.
*Written by Mukul Gupta (Sr. Partner) and assisted by Nainshree Goyal (Associate) at SHARNAM LEGAL
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