Journey well started:
GST was claimed to be Good & Simple Tax by the Modi Government. The world acknowledged the reform as game changing too. Indian business houses too gave warm welcome to the law. Teething problems were bound to be there initially. No Law can be robust or full proof from day one. But GST council was very prompt in fixing the bugs in the law to certain extent. Many illogical provisions were even set aside too.
Then the complexities:
Somehow after a good beginning, government started tinkering with the law with a mindset that everyone is a thief. Although recently during the loksabha address, Modiji acknowledged the role of private sector in nation building and claimed to offer “Ease of doing” business to all. But sorry to say, by bringing illogical and even unconstitutional provisions, you are refuting the claim on your own.
There are few examples which I would like to highlight here:
1. Input credit restriction under Rule 36(4):
Rule 36(4) of the CGST Rules 2017 has been inserted by notification No.49/2019 Central Tax dated 09.10.2019 with effect from 09.10.2019 under section 164 of the Act, which restricts the credit relating to the invoices not uploaded by the suppliers in their form GSTR-1 to the extent of 20% (10% w.e.f. 01.01.2020) of such credit. Further w.e.f. 01.01.2021, said percentage was further reduced to 5%.
The restriction provided vide rule 36(4) is nowhere specified under section 16(2) of the Act and thereby for sure it can be said that the condition imposed under rule 36(4) is an additional requirement which increases the scope of the principal Act and not valid. Rules cannot override the act.
If the supplier doesn’t file the return or doesn’t upload the invoice or comes under quarterly return filing deadline, the recipient of goods/service cannot enjoy ITC. How illogical!
2. Input credit restriction under Rule 48(5):
Rule 48(4) of CGST Rules 2017 has been enacted by notification no. 13/2020 dated 21.03.2020 and notified that registered person, whose aggregate turnover in a financial year exceeds rupees 100 crores (amended as 500 crores vide notification no. 61/2020 dated 30.07.2020) as a class of registered person who shall prepare the invoice and other prescribed documents, in terms of rule 48(4) in respect of supply of goods and /or services to a registered person.
Further, Rule 48 (5) prescribes – Every invoice issued by a person to whom sub-rule (4) applies in any manner other than the manner specified in the said sub-rule shall not be treated as an invoice.
If the supplier doesn’t comply with the said rule applicable to him, the recipient of the goods/service cannot enjoy ITC. Again illogical!
3. Penalty for E-way bill under Section 129:
The CBIC vide Notification No. 94/2020, dated 22.12.2020 has issued CGST Rules (Fourteenth Amendment), 2020, inter alia, amending Rule 138 of the Central Goods and Services Tax Rules, 2017 (CGST Rules), w.e.f. 01.01.2021, in following manner:
The validity of e-way bill under Rule 138(10) of the CGST Rules has been amended, according to which the e-way bill will now be valid for 1 day for every 200 km of travel, as against 100 km earlier, in cases other than Over Dimensional Cargo or multimodal shipment in which at least one leg involves transport by ship.
Even this amendment was also brought in without consulting the stakeholders. Recently, the transporters went on strike to oppose the same.
Moreover, Second Proviso to Rule 138(10) allows only transporter to extend the validity period of the E-Way Bill. Thus, it is upon the transporter and not the taxpayer to extend validity period of E-Way Bill.
Section 129 imposes penalty on taxpayer even if he is not allowed to extend the validity of E-way bill. Again Illogical!
4. Cancellation of Registration under Rule 21:
The CBIC vide Notification No. 94/2020-Central Tax Dated 22.12.2020 – 14th CGST Amendment Rules 2020, interalia, amended Rule 21 : Additional Grounds for Cancellation of Registration.
With the insertion of clauses (e) & (f) in Rule 21, the department shall have the powers to cancel GST Registration in case there is a noncompliance as per Sec 16. Most important is Sec 16(2)(c) wherein requires proof of payment of tax by the supplier. Hence incase the amount of GST paid by the recipient to the supplier is ultimately not paid to the Government; the department may invoke Rule 21.
Furthermore, Rule 21A(2) provides that at least suspension of GST Registration may be done in case of violation of Rule 21. The suspension can now happen even without a hearing. Isn’t it ultravires!
There are enormous other provisions too which sound illogical or unconstitutional. At least, they are definitely not in favor of “Ease of Doing Business”. These provisions shall be surely challenged in the court of law and may even be repealed too. Till then, the honest taxpayer will suffer only. Not done Modiji!!!