CA. Pradeep Jain, CA. Preeti Parihar, Prayushi Jain
Whole country witnessed historic win of BJP lead NDA in recently concluded general elections. New government in the leadership of Mr. Narendra Modi is all set to prove its mettle of governance. With oath taking ceremony on 26.05.2014 and announcement of cabinet ministries, now Citizens of India have huge expectation on this newly formed Government to fulfill its promises which they made in various election campaigns.
Last 5 years have been a very rough period for the country as inflation was all time high and growth had been stagnant. The shooting prices of consumer goods increased the plight of a common man. Moreover the corruption charges on the last government ministers made the general public getting anti to the government. As the development and change in government polices is need of the hour therefore there are huge hopes and aspirations on hon’ble Prime Minister Mr. Narendra Modi. As the caption goes ‘HUM MODI JI KO LANE WALE HAIN ACHE DIN ANE WALE HAIN’, people are waiting for these good days to arrive soon.
As changes in various spheres of the economic matters is now a necessity there are some procedural provisions in case of Central excise and service tax which needs to be amended or removed. These unnecessary procedural requirements are consuming most of the time of manufacturers and service tax assesses. If these are removed then he can do some productive work. This work by new Government will clearly send the message that the new Government intends to reduce paper work and some major changes needed to be brought in the case of Indirect Taxes have been discussed below:-
We have heard that these figures are compiled at each division level and then at commissionerate level and then communicated to CBEC. The purpose of this big exercise every month is not understandable.
With the introduction of partial reverse charge mechanism registration is required to be taken by both the service provider and service receiver. There are many such assessees who have to take registration just because of falling under this reverse charge mechanism. For example in case of goods transport agency transporter and GTA service recipient both have to take registration under the service tax. This is due to the fact that the transporters has to pay the service tax when the person paying the freight is individual or HUF. But in all other cases, service recipient are paying service tax. When the transporter is already registered and paying service for few transactions then he can charge and pay for all the transactions.
Some service recipient is registered just because goods are either being transported by them or being received by them. This has led them to maintain the separate records for the same as well as keep the consignment notes/ bilties in a proper file. There is whole lot of ambiguity in the same as at times transporter charges complete 12% from the receiver which leads to double deposition of tax from the service receiver. This is practically being done in many of the cases covered under partial reverse charge. All this is complicating the law for the assessee and revenue. Due to this, in order to ascertain the correctness of tax payment, both the records of service provider and service recipient are to be simultaneously checked. Merely by checking records of one party, the correctness of service tax payment cannot be assured. The situation becomes much complicated when both the parties fall under different jurisdictions.
Further, the partial reverse charge has much complicated the procedure. Both the service provider and service recipient has to get registered with the department and file returns. What is need of two registrations? The department needs revenue or the number of assessees. This unproductive registration is taking most of time of assessee and this should be avoided.
To overcome this problem, 100% service tax can be collected at the service provider’s end which will save service receivers from the ambit of service tax and revenue can also keep the proper check on collection of proper amount of tax. Reverse charge mechanism should only be levied on import of service and not on any other service.
This provision is merely a formality and of no utility neither to revenue and neither to assessee. There is no financial effect if this provision if this provision is removed as every month in ER-1 return assessee mentions the serial number of sales invoice from where department can easily cross tally about the invoices. Hence intimation for changing the invoice book is not at all required. This is to be physically filed in the range office. When the system of pre-authentication by department was changed, there was objection by the department. To satisfy their objections, this new system of pre-authentication by manufacturer and intimation of invoice book was introduced. The requirement of pre-authentication has been dispensed with but this intimation of serial number before starting of invoice book is continued. This does not serve any purpose and this unnecessary work should not be deleted from statue book.
(i) By the 6th day of the month, if the duty is deposited electronically through internet banking; and
(ii) By the 5th day of the month, in any other case, immediately following the calendar month in which the service is deemed to be provided
Provided also that the service tax on the service deemed to be provided in the month of March, or the quarter ending in March, as the case may be, shall be paid to the credit of the Central Government by the 31st day of March of the calendar year.
The proviso for making of payment of duty till 31st march creates lot of hustle amongst the assessee as extracting the exact amount of duty/service tax to be paid with at the month end is not possible. Moreover banks are also kept opened for the complete day. Thousands of assessees are keeping themselves busy in calculations to deposit the tax by due date. Assessees as a result have to submit either in various challans. Most of assessees have to stop the transactions in last days of March. This is due to the fact that more transactions are entered then one more challans is to be submitted. This futile exercise deviates them from doing productive work in year end.
The author of this article tried to know about the reason from the departmental officers about this provision then it was unofficially told that the amount deposited till March 31 will be counted in this year budget. If this is the reason then a simple provision should be made by the Government that the amount deposited by 5th April will be taken in revenue of last year budget. This simple amendment will not harass lakhs of service tax and Central Excise Assesses and they will utilise their time in productive work.
The purpose of such intimation is that the department can check the export consignments on random basis. But the department is normally not checking the same. But the exporter doing export on regular basis have almost the consignment on each day and it can be checked at any time. Even the custom department is also checking these consignments stuffed under self sealing basis on specified percentage basis. Hence checking by Central Excise department of these consignments does not sound very well. Hence the requirement of this intimation should be dispensed with.
As the last decade has seen major shift from manual to online work which have touched central excise department. However, the export procedures are still the old ones. They should be made easier by removing the procedural formalities and making them computerized. Even the intimation should be accepted on mail. Furthermore the department should accept such initmation on holidays so that export work is not held up.
The above issues should be kept under consideration by the new government in order to bridge the gaps in these two vital indirect tax laws. With conclusion of oath taking ceremony on 27-05-2014 and announcement of cabinet ministers, people now look forward to see the model of developed India as showcased by Narrendra Modi. The first move shall be seen by the budget presentation by Mr. Arun Jaitley. Hoping this budget shall make the required changes.