GST Problems which Requires Immediate Solution

The GST is at vital stage at present.The Department is concerned about revenue and the Taxpayers are anxious about actions to be initiated against them for technical and innocent Mistakes done by them while trying to follow the back to back stringent GST procedures without any intension of evasion of tax. Number of Notices is increasing day by day and there is no solution of real problems. This situation will certainly damage the GST and in turn the Indian economy.

Nobody is wrong here. Department is doing its own work and following the law which is part of statute. The procedures are also written in the Law books so the Department has to follow them as the same in the Law Books.

This is the deadlock of the situation and the sufferer is Indian Taxpaying Public and ultimately the Indian Economy. Here the law was made in such a way that some problems remained unresolved and here the lawmaker’s role is very vital.

The lawmakers should review the GST law and search the solution of the problems and immediately introduce the same and in most of the cases retrospectively.

What is written in Law is a fact and it is the Law of the land which can only be relaxed and change by The lawmakers but there should be a solution and a bold step is required to solve the problems associated with the GST at initial stage and this will be good steps towards the betterment of the economy through ease of doing business for Indian Trade and Industry.

GST has already completed more than 30 Months but still it is not established perfectly and there is a clear lack of stability is there   and the problems, most of them are technical, are increasing day by day. Indian Government has taken a very prudent and intelligent step and introduced the GST in 2017 in the country and it was a very bold step for the upliftment of the Indian economy and for ease of doing business for Indian Trade and Industry.

GST was essential for the Indian Economy and now whole the economy is dependent on the success of the  GST but after 30 Month of its introduction GST is not fully settled in the country and now the Trade and Industry in the country is facing so much problems from the GST and its stringent procedures and these problems require your lawmakers’ immediate attention otherwise these problems will become very serious and in long term these will harm the financial Interests of trade and Industry of the Country and that will ultimately will harm the Indian Economy.

1. RECTIFICATION OF TECHNICAL MISTAKES

There are lot of innocent technical Mistakes made by the dealers in the initial two years of the GST and since GST is A New tax system and Indian Trade & Industry with the help professionals have given its 100% to GST and it’s procudres but since the tax was new hence lot of technical Mistakes were done by the dealers though the same did not have any financial effects or any intension to avoid the tax.

The main problem is GSTR-3B which was introduced as a stopgap arrangement but later it was inducted as a return in the Law books but Revision facility of GSTR-3B was not given.

Some of the mistakes made by the dealers is GSTR-3B are irreparable since revision facility is not given. The examples are the credit of SGST and CGST is taken in IGST wrongly or vice versa. Tax is wrongly set off etc. These are initial mistakes and the reason is new tax regime and unique and back to back procedures.

The Law makers should introduce one time amnesty to rectify all these technical mistakes and further allow one time revision of GSTR-3B filed in the Financial Year 2017-18.

The GST is introduced for simplification of existing VAT, Central Excise and Service Tax Laws but in all these Taxation laws there was a facility to revise all the returns and even in Income Tax Return there is a facility to revise the returns but it is missing in the GST.

The revision of return was a facility in erstwhile laws and GST has replaced them with a view to simplify the indirect taxation system of the country and this essential facility is withdrawn? To make the law viable and easy to follow and make it logical please give facility to revise the earlier returns otherwise the Annual return will not serve any purpose at the time of assessment and every assessment will be made after issuing the notices and this not the purpose of GST.

Let us see one Example where the dealer has committed a technical mistake but at present there is no solution:-

The dealer say X has claimed ITC as IGST of Rs. 5.00 Lakhs instead of Rs.2.50 Lakhs SGST and Rs. 2.50 CGST in July 2017 due to accounting software/accountant mistake and unfortunately the mistake was noticed at the time of preparation of GSTR-9.

Now at present there is no solution though it is not the tax evasion and it is only technical or clerical mistake.

Even in VAT one can rectify this mistake on or before filing of annual return but in GST, which is introduced in the name of Simplification, there is no solution of this type of problem.   

No Loss of revenue to the Government but there is No solution of this type of Mistakes. There are lot of cases of this type of mistakes.

2. INTEREST ON GROSS TAX – A CONTROVERSY

The intention and notices of the department to collect the interest on Gross amount of tax in case of delay in filing the returns instead of charging the interest on Net due payment- The cash payment is creating very big problems for the Trade and Industry.

Even GST council and the Government is not agree with this arrangement and a amendment is moved in this respect in Budget-2019 and a proviso to section 50(1) is inserted to mitigate this hardship but it should be made retrospective instead prospective so that the problem of the Trade and Industry in this respect can be solved.

In public interest the Lawmakers should make a retrospective amendment in this respect and further disposal of this matter in logical way, please instruct the department not to issue notices in this respect.

3. RETURN LATE FEES

GST late fees are very big problem for the dealers and this one more point is attached with the late fees. At one point of time the Government has waived the late fees for the dealers who did not file their returns but in that case most of the dealers filed their return before that time with late fees and if a late fee is waived for the defaulters, the late fees collected from these dealers should be refunded to them. But this is not done hence dealers have regrets due to this discrimination.

The law makers should make a  provision for refund of late fees to these dealers and further introduce an amnesty scheme for rest of the dealers so that they can file their returns. Further cancelled dealers should also be given one more chance to clear all their formalities without payment of Late fees and/or penalty.

Further Late fees on GSTR-1 is waived till 10^th JAN 2020 and general perception is that after that there will be late fees on this form also which will create more problems for Taxpaying dealers. This should not be done since it is a taxation system which should be there to collect tax and if there is a delay  than interest is always there so  at every time there is no need to impose late fees.

GST itself is at experimental stage hence provisions like late fees should be avoided to make the dealers to understand the system, follow it and pay the required tax with interest.

.The GST was introduced to simplify the indirect system of the country but now it is being as described as  “A Tax which is collecting the late fees only” and this is not good for a tax which is introduced for simplification of the Indirect taxation system of the country.

Further one more point to be noted here that the dealers who have surrendered their RC and does not have any tax liability and having no stock have to file a final return GSTR-10 and in most of the cases these returns are NIL but if forget they have to pay a late fess amounting to Rs. 200.00 per day subject to maximum of Rs. 10000.00. The form GSTR-10 in most of the cases have NIL information hence this late fees is a harassment and big burden on the dealers who have already surrendered their registration certificates.

This GSTR-10 has to be filed after order of the cancellation of the RC and it is a big problem. Sometimes it is ordered within 15 days of applying the surrender and in some cases it took 6 Months so the dealers who surrendered their Registration to keep in touch with this formality.

The Lawmakers should consider the problem associated with this form GSTR-10 and practically this form should be taken with the application of surrender of RC and in NIL cases if the return is not filed please waive the late fees further the NIL GSTR-10 has no purpose hence it should be made optional for the dealers who has something to file in it.

3. PAYMENT OF TAX IN BANK AS THE DATE OF PAYMENT OF TAX

The dealer has deposited the tax in the Bank and on the same day it is transferred to the Government exchequer but as per the interpretation of the Law the interest is charged till the date of set off of the tax hence in case late returns the Interest may be charged on the amount of tax which is already paid but not set off. Setting off the tax is just a technical procedure but charging interest till that date is not justified because tax is already paid to the Government by the dealer from his bank account through required challan hence the law makers are required to look into this aspect and take immediate steps to solve this problem. Why dealers are being made scapegoat of an illogical and impractical provision or illogical interpretation of a provision.

4. GST NETWORK :- THE BIGGEST PROBLEM

GSTN is creating problems since inception of the GST. It is not well equipped with required capacity hence filing of return is always a problem. The GSTN always crashed before one or two days before the due date of every return. Recently it is advised to file the returns 3 days before the due dates but sir, this is not the solution but it is acceptance of the shortcoming of the GST Network.

Recently on 20^th Dec. 2019 at last date of filing of GSTR-3B GST network was working perfectly when internet was blocked for security reason in some part of the county and it shows that GSTN can work smoothly but the capacity is the problem.

The law makers should accept the problem and consider the enhancement of the GSTN capacity so that it can work smoothly and solve the problems of Dealers in this respect,

GSTN is a national portal of Indirect Tax and our country and its working, capacity and speed should be a prestigious issue for us since we are the top IT country of the world but the working of GSTN is not up to the mark.

As per the accepted principal of IT Industry the IT system should be construed with visualising the demand of Next 10 years but the GSTN is a not up to mark since first day of its operation .

The Lawmakers should compel the service provider of GSTN to increase its capacity and if is not possible then changing the service provider in the best interest of the general Public.

The problems of GSTN will not be solved by giving all the responsibility to the Dealers and professionals. It is just a “capacity and speed” problem which can be solved by introducing the technical solution of this problem.

GSTN is biggest hurdle in smooth Procedural implementation of GST and the lawmakers should look into the problems related to GSTN and solve them ASAP.

5. GST MISMATCH PROBLEMS

The provision of 10% Input credit provision should be postponed and it should be introduced again with proper preparation and planning of the time. The time limit given in the provision is very impractical and the dealers should be given at least 3 to 6 Months time for clearing the Mismatch of the input credit. Here I am not supporting the tax evasion or non payment of tax but if the tax is paid by the dealer to the seller then it should not be collected from him again on the ground that there is delay on part of the seller in filing his returns Since the purchasing dealer has no control on return filing activity of the selling dealer.

There may be several reasons for delay in filing of the returns and if in the same month the ITC – Input tax credit is withheld or blocked and purchaser is asked to deposit the same is not a practical solution. It will unnecessarily block working capital of the dealers.

In any case the tax will be paid by the purchaser if it is not paid by the selling dealer with interest but he should be given a time of 3 to 6 Months to control the transactions of the seller and compel him to file the returns and clear the mismatch of the ITC.

It is very easy to say that “Choose your vendor wisely” and the RC is also given to the seller by your Government so it is the duty of the Government to compel the seller to deposit the tax instead of punishing the purchaser who has already paid tax to the seller.

The lawmakers should see section 36(4) and made suitable arrangement to give relief to dealer from this hardship and allow them 3 to 6 Months time so solve this problem.

6. RCM:- REVERSE CHARGE MECHANISM

The provision of RCM on inward supply from unregistered dealers is a very impractical provision especially in the cases where the paying dealer is getting the instant credit of the same. It has Zero revenue effect in most of the cases.

GST is a new tax and RCM is a very innovative provision hence in most of the cases dealers has made default in paying the same though they have paid the full tax as per their tax liability and in these type of cases the RCM is just a technical formality and these type of unnecessary procedural formalities should be kept at minimum at the initial stage of a new taxation system. These provisions are always a burden on the tax payers and further in this provision the Government is also not getting nothing hence it is an impractical provision.

The law makers should consider the problems of these types of dealers who defaulted in paying the RCM and taking credit of the same due to complications attached of this provision though they have otherwise paid their full tax liability and law makers should abolish the same since inception to give relief to these types of innocent dealers.

Here is an example how RCM has no financial effect on the revenue:-

A dealer has to pay tax amounting to Rs. 5.00 out of which RCM is Rs. 50000.00, the dealer failed to pay RCM but paid tax Rs. 5.00 Lakhs.  

The same dealer has paid Rs.50000.00 as RCM and paid the normal tax as Rs.4.50 Lakhs since he is eligible to get ITC of Rs. 50000.00 paid by him as RCM. Hence in this case also total tax deposited is Rs. 5.00 Lakhs. Rs.50000.00 is paid as RCM and Rs. 4.50 Lakhs paid as Normal Tax.

The RCM u/s 9(4) was introduced on 1^st. July 2017 and it was postponed on 13^th Oct. 2017 and after one more postponement the provision was practically scrapped. Why the provision which was postponed for its impracticality is applicable up to 13/10/2017? The lawmakers should consider this aspect also and give relief to the dealers in this respect.

In these types of cases the RCM is just a technical formality and having no financial effect so please scrap it since inception of GST i.e. 1^st, July 2017.

7. EXPIRED INPUT CREDIT   

As per section 16(4) the input credit can only be taken up to a definite period but at the initial 2 years of GST lot of dealers make a mistake of not taking the credit within stipulated time but in that case the Government has already received the tax under consideration.

If this credit is not give then it will be tantamount to double taxation on a single transaction because at first stage the purchaser has paid the tax to the Seller and at second stage department is not giving him the credit so he is required to pay it again. It is a big hardship to these dealers though GST itself is at initial stage at that time and not fully stabilised.

The Lawmakers should give suitable relief to the sufferers of this provision at least for initial 2 years.

8. SIMPLIFICATION IS MISSING IN GST

GST is a big taxation reform for simplification of indirect taxation system but unfortunately it was introduced with stringent procedures as a Tax to curb the evasion of tax instead of collection of collection of tax. So stringent procedures were made at the initial stage for which even the Law making agencies were not ready. There should be an atmosphere of “Respect and Trust” on the dealers and tax payers instead of making stringent procedures to make their day to day life complex and confusing. After all the dealers are also working for the nation and collecting the Tax.

GST is not the last destiny of economy and it is only the vehicle to help the smooth running of the economy and its main purpose should be to help the Trade and Industry and the ultimate aim is make strong economy of the country. GST should be the “As Simple as Possible” but unfortunately  it appears that in our country it was introduced with the hidden slogan “How to make difficult GST” and now after 30 Months the problems of trade and Industry are increasing day by day. Certainly it is not the intention but the actions and the results are supporting this contention hence efforts are required to solve the problems of GST and make it simple.

9. SERVICE SECTOR THRESHOLD LIMIT

Respected sir, GST is “One nation One Tax” and it was introduced as a tax with threshold limit of Rs.20.00 Lakhs both for Goods and Services but later when threshold was enhanced, it was enhanced only for Goods and not for services. Small service provider should also be given benefit of the same and for them also the Limit should be extended to a certain level to make it “One Nation One Tax”. 

10. EXTEND ANNUAL RETURN DATE TO 30/06/2020

The utility for the Annual Returns for the Assessment year 2018-19 is still not properly released till writing of this article and vital point in the utility are missing. The dealers and professionals will need the time to file this return up to 30^th June 2020. At present the due date is 31^st. March but till today i.e. on 28^th Feb 2020 the proper utility is not there at GSTN hence it is prudent that at the time of introduction of utility the final date should be declared at 30^th June 2020. At least 90 days should be given from the date of introduction of proper utility. 

11. NOTICES! NOTICES!! NOTICES!!!

Further The number of Notices issued in recent days are too much and it is clear indication that tax payers are not very comfortable with the GST procedures hence technical mistakes are too much . More Notices means more paper work and more appeals and more litigation but these were not the exact objectives of GST. So something is really wrong with GST and requires immediate action from the side of Lawmakers. The Lawmakers’ GST team should consult some real GST experts who are working on Ground level and facing the real problems. They are facing the real problems hence it is better to consult these experts for practical solutions of GST Problems. 

(SUDHIR HALAKHANDI) 

sudhirhalakhandi@gmail.com