GST was implemented with two major objectives – To remove the cascading effect and have seamless flow of credit in indirect taxes. In Pre-GST era, indirect taxes were suffering from tax on tax and weak chain of credit. To overcome all these hurdles and bring the indirect taxes into true spirits – GST was introduced by government of India. But it is sorry situation that GST loses its spirit. To bring it on true path and implement it in true spirits, I recommend the following points: –
1. Where is seamless flow of credit?
Taxpayers were expecting a sign of relief when GST was likely to introduce that there will be no ineligible credit list as that was in Service Tax era. It is beyond logic and understanding that what is the purpose of putting certain supplies in block credit list. Section 17(5) of CGST Act, 2017 listed out certain supplies which are ineligible to avail the Input Tax Credit i.e. Rent-a-Cab, Outdoor Catering, Insurance, goods lost or destroyed or distributed as gifts etc. How can it be presumed by government that these credits are not related to business and credit should not be allowed. Where Section 16 of CGST Act, 2017 – governing section of chapter Input Tax Credit in CGST Act starts with eligibility to avail ITC is when it is related to furtherance of business. How come government go beyond its own law? There is no point to block any credit on presumptions and assumptions of its own. Government must come out with clarity on it and block the credit for certain sectors where there is logic for it but not for everyone.
It is difficult to understand what the logic is of not allowing the transition of cesses from Service Tax to GST. Logic provide by the government is out of mind as there are no cesses like education cess and Krishi Kalyan Cess in GST, hence the credit of these cesses can-not be carried forward.
Next one to discuss is that if the supplier is not paying the taxes and not filing its returns, recipient cannot avail the ITC of these supplies because these supplies are not appearing in GSTR-2A. How come it be the responsibility of recipient to ensure that its supplier is fully compliant. Why the GST department is running from its responsibility to catch the defaulters by putting the onus on recipient to ensure the compliances by supplier otherwise ITC is not allowed. It seems that GST department lives in an imaginary world.
Above discussed issues making a dent on the very much objective of bringing GST i.e. seamless flow of credit. These kind of draconian provision in GST law is against the spirit of GST.
2. Time limits to avail the ITC / issue debit note or credit note must be increased.
Can taxpayers expect when GST was about to introduce that government is going to control their business transactions through GST law. How the GST law imposed the time limits of only 6 months to issue debit / credit note/ avail ITC. How come it be? Where is the intention of bringing GST – Ease of doing business in India – Creating a business friendly atmosphere? Time limits of six months from end of financial year to avail ITC, issue debit or credit notes are very less and needs to be increased.
3. Revision of returns must be in stipulated time
To err is human. But GST is for superhuman, who are from a different world, who are perfect, having a strong mindset, who cannot do mistakes. Because mistakes are not allowed in GST – Once a return is filed means filed, it cannot be revised. Major two returns GSTR-1 and GSTR-3B. Where GSTR-1 can be amended through making corrections in next period return, mistakes in GSTR-3B can be adjusted through changes made in next period returns. So, what happens next – an era of mismatches and reconciliation starts. What why because returns filed under so called Superhuman tax GST cannot be revised. Situation become more worsen when the revision option is also not allowed in annual return GSTR-9 and auditor reconciliation GSTR-9C. GST returns are like those bullets which once shoots from pistol than it cannot bring back.
4. Accountability of officers
Biggest problem in GST law is that there is no accountability of officers. Notices are issued without application of mind and in haste manner. There is an issue of cross empowerment – central officers must limit their jurisdiction to central only and state officers must exercise their powers to the state jurisdiction, but the reality is far more bitter & poor and we all know how these powers are used.
Certain points which I feel need to address by government on priority which hits the business a lot and relates to accountability of officers.
-Delay in sanction of refunds
-Wrong arrest of person – without concrete evidence and proper documentation – SOP is required in that respect.
-Issuing notices to taxpayers without clarity and proper understanding of business transactions? It causes undue hardship and defame to business houses.
-Need brain-storming on the court / tribunal cases where department lost the case? Analyse the reasons and set the accountability of officers.
5. Utilities must be more user friendly.
Biggest problem with GST utilities for return or refunds or any other form is biased? How come? Because GST law is of both goods and services, but GST utilities are either favouring goods or services? Take the example of Statement – 3 (Used in Refund application) – It don’t accept invoices or remittance details twice – what the person will do – who received remittance in part payments? Also, there is no option of giving remarks. Refund application can never be gone correct in that case.
6. E-way bills
Introducing the concept of E-way bill is not less than revolution. But these provisions should be flexible and simpler. Making cases based on clerical mistakes in E-way Bill, Trucks on wrong route is not in spirit of GST law. These should be looked upon seriously by government.
7. Clarity on litigative issues like performance incentive, notice pay recovery etc.
Burning issues of Pre-GST era is still there in GST. There is no clarity from government side regarding taxability of performance incentive to dealers, notice pay recovery, reimbursement of expenses to foreign counterpart etc. is taxable or not.
Also various issues regarding powers of intelligence officers, provisions regarding attachment of property and arrest of person is still not clear. Circulars and SOP issued by department in this regard is rarely followed by officers. However, situation is improving. Approaching court for every matter is not showing the good spirit of GST law.
8. Absurdity in Exports
It is difficult to understand the intention of the government why the export is not allowed for all the services – what is the reason behind debarring the intermediary and banking & financial services from exporters list. Are they not earning foreign exchange, is their recipient is not located outside India? Mere saying that these are not actual service providers is not a genuine reason. Sigh of relief which was expecting at the time of introduction of GST is not there. Exporters are still hoping from the government for relaxation in it.
9. Advance Rulings
Authority of Advance rulings of different states giving different decision in similar cases shows the expectation mismatch of taxpayer with GST. There should be uniformity in decisions. National level advance ruling is need of the hour.
– Faulty Utilities
Refund utilities are not user friendly. Refund utility only accept invoice and remittance only one time – but what about those exporters who received part payments – how they will file the refund application.
-No refund of capital goods
Pain of exporters is that they are not getting the refund of ITC on Capital Goods.
– Deficiency Memos
There is no control of department on officers in issuing the deficiency memo. Deficiency memos issued are not comprehensive one and issued merely by saying that supporting documents not attached or supporting documents not legible. This is not the correct way to issue the deficiency memos, these should be specific and address the issue.
There is tussle in remittance proofs. Where GST law asked for BRC / FIRC for remittance proof and banks have stopped issuing FIRCs and BRC only generated by those who are operating in STPI. Banks issuing remittance advises. GST departments must be flexible on that condition and accept remittance advice as proof of remittance.
11. Reverse Charge Mechanism
Reverse Charge Mechanism (RCM) is revenue neutral. Where on one side liability is paid and other side ITC of the same is available (Except Block Credits like Rent-a-Cab). Intention of government to bring RCM provision is to increase the revenue collection but it seems that exchequer not getting the desired benefit from the RCM. It is advisable that RCM list must be limited to those supplies where the ITC is not available.
12. Other Absurdities in law
– Supplier must be paid in 180 days from invoice date, otherwise ITC is not allowed.
– ITC is available based on GSTR-2B. GSTR-2B prepared on the basis of GSTR-1 filed by the suppliers. What if the supplier filed the returns with extraordinary delay – say after September of following year. Then ITC benefit is not allowed to recipient?
– Refunds are allowed for those supplies which are appearing in GSTR-2A. What is the fate of the supplies for which we have paid but supplier has not filed the returns?