On the 79th Independence Day, Hon’ble Prime Minister Sri. Narendra Modi announced a full fledged revamp of GST. The declaration is a very welcome one, though a little bit belated. Better late than never.
Reduction in slabs of GST Tariffs
The main thrust during the PM’s speech was on rationalisation of GST Rates and minimising the slabs in the rates of taxes to two from present four. This move shall definitely be a positive sign for the general public, provided the authorities take sufficient steps to ensure that the GST Rates cut reaches the general public in full swing and the Maximum Retail Prices of the products on which the rates have been reduced are proportionately reduced by the Manufacturers. There have been many instances, where instead of reducing the MRP, some promotional schemes are introduced by the manufacturers at first, with huge media publicity. In effect it comes to light that once the scheme is withdrawn, the prices reach the earlier level, for the undue benefit of the manufacturers alone.
The reduction in prices caused by the reduction in GST Tariffs will have to get reflected on the stocks, with MRP printed on them based on the higher rate of tax, held at various points of distribution, and also at the retailers. Unless provisions are embedded in the system for making up the loss incurred by the various points of distribution and the end retailers, the benefit of the rate reduction shall only cause unwanted issues among the consumers and the sellers. Similarly, the various firms in the chain of distribution would have taken the Input Tax Credit at the rate of the higher rate of tax and the Output Tax collected by them shall be much lesser, which can cause embarrassing situations by way of issue of notices by the Department and replies by the taxpayers, in future. Unless clear steps are initiated by the authorities in the above matters, it shall become hard nuts to crack, leading to unwanted litigations in the coming years.
Simplification of procedures and Ease of doing business, especially for MSMEs.
In order to bring in an era of ‘Ease of doing business’, it would be in the nice of things only if certain points mentioned below are considered by the Law makers: Though the Hon’ble Prime Minister offers a Diwali Gift in 2025, the actual offer in letter and spirit can be made only after the 2026-27 budget is passed by the Parliament. Otherwise, even if the GST Council recommends such solaces, unless a special session of Parliament considers such recommendations and passes the same, it will carry no weight.
i) Simplification of GST Act and Rules:
It is known to all the stake-holders that various provisions embedded when the GST Act was introduced, were amended to suit the exchequer, neglecting the aspirations of the MSMEs. The amendments were so worded, that in many sections of the Act, ‘as prescribed’ was sneaked in, enabling the Government to bring in any provisions and provisos in the Rules and snatch away the legal rights of the taxpayers that have been originally included in the Act. We can take the Sections 38, 39, 41, 42, 43, 50, 81, 86 and so on. If we have a general view of the amendments made in the provisions of the Act since 2017 till 2025, it can be seen that most of the amendments were brought in creating hardships to the MSMEs. It is really painful to see that the frequent amendments to the Rules are brought in at any moment of a day, under the pretext of considering the petitions and requests made by the taxpayers, actually, ending in creating more troubles for the tax-payers.
ii) Denial of Input Tax Credit:
The main amendments that have been brought in through amendments relate to curtailing the availment of Input Tax Credit or even blocking the legitimate Input Tax Credit due to the recipient. Introduction of Section 16(2)(c), 16(2)(aa) etc. shall throw light into the plight of the MSMEs in availing the Input Tax Credit, for the tax paid to the suppliers by the recipients, other than blockage of Input Tax Credit vide Sec. 17 (5). Another provision in the Act is with regard to restricting the Input Tax Credit of such tax payers whose monthly turnover is above Rs. 50 lakhs and directing them to pay 1% of the Output Tax liability in cash. This is an unwarranted clause, since even those taxpayers who have a good sum lying in their Electronic Credit Ledger are forced to remit 1% of the Output Tax Liability in cash.
iii) Periodical Returns:
Every registered person is embarrassed to find that there is practically no month in a calendar year during the past so many years of GST, that some alterations are made in the various rows and columns of the various Returns. Since there exists no methodology for even correcting genuine mistakes or human errors that might have crept in while making entries in the Returns, it invites queries and notices from the Tax authorities, for which the taxpayer is to submit clarifications, explanations and so on. It has come to a stage that the taxpayer has been deprived of availing the Input Tax Credit by way of the tax he has already paid to the supplier by the latest amendment to GSTR 3B. This can be called a draconian step. It is even doubtful that whether such an alteration in Form GSTR 3B has any legal backing.
iv) Attitude of the Officers
One of the main pains of the taxpayers is that the Tax authorities are viewing the taxpayers as tax evaders. This attitude has to change. It should be borne in mind by the Tax Authorities and Government that the crores of Registered Tax Payers are collecting the Taxes for and on behalf of the Revenue, without receiving any emoluments or benefits from the Government. Instead of supporting them, they are harassed by the Department Officials, by sending notices demanding Taxes along with huge interest rates and unbearable penalties. While there is no second opinion that stringent actions should be taken against the tax evaders, it is the bound duty of the Government and Tax Authorities to see that the interest of the genuine taxpayers is protected and that they are not drawn to unwarranted appeals and litigations, causing them to bear the huge cost of the same.
v) Issue of Notices
Though the digital era has so much advanced, and there is provision in the GSTN to send alerts electronically to the taxpayers, while the same is used to remind them with regard to filing of Returns or non-filing of Returns, the facility is not being used to send an alert to the Taxpayer in the case of issual of any intimation, notice etc., in the email addresses and Mobile number provided by the Registered Taxpayer. It can be seen that a major portion of the demand notices, interest and penalties pertain to absence of timely response to Show Causes Notices and other Notices issued by the Authorities, which get reflected in the ‘View Notices and Orders ‘ and sometimes in the ‘View Additional Notices and Orders’ in the GST Portal. The authorities should bear in mind that the main objective of the Taxpayers is furtherance of business and not to visit the GST Portal on a daily basis to see whether there is any notice is sent to them through the portal. An alert from the authorities through the Registered Email address and the Mobile Number regarding such issual of notices shall be a boon to the Taxpayers.
vi) Inverted Duty Structure:
Many MSMEs, who are facing competitions from National Corporates and International bigwigs, are finding it extremely difficult to pull on due to the fact that Refund due to them by way of Inverted Duty Structure is denied, for no fault of theirs. It is not their fault that the GST Rates for their inputs is higher, while that of their Output product is lower. A sympathetic view of such fields has to be there for protecting the interest of the MSMEs.
Though a lot more issues have to be penned, considering the vastness of the matter and length of the article, it is being concluded here. All the points mentioned above are already known to the concerned authorities and are aware of the issues and problems. It shall only be in the interest of the MSMEs and the proclaimed Ease of Doing Business that the declaration by the Hon’ble Prime Minister is absorbed in its full spirit and amendments are brought in to protect the MSMEs which are the largest employment generators in the country, of the country and for the country.
*****
P. Venkitarama Iyer | GST Advisor & State President | Confederation of All India Traders (CAIT), Kerala
Author Bio
