Goods and Services Tax is on the verge of completion of its first year in our Country. The first year was full of doubts & dilemmas. Apart from Tax payers, Tax practitioners and Tax officers were also seen struggling to answer various questions. The Govt. has taken every possible step to do away with the confusion by publishing various literatures, write ups, flyers, webinars etc. But the problems still persists. The complexity was further added by numerous notifications, circulars, press releases etc. which always cannot be tracked by common masses.
All the steps so far taken by the Govt. in making GST simpler are really a welcome move. We are thankful to the Govt. for understanding the problems of common mass and resolving the issues. But there is still a long way to go and GST law is yet to be made simpler. As on date traders, Tax payers and Tax practitioners are getting problems with the complexity of GST and now it is high time to do away with such complexity. If Govt. makes this law simpler and user friendly then it is really going to be a reform of the decade and will boost our economy. It is further seen that people don’t have problems with the GST law rather problems are coming in its compliance, tremendous increase in paper works, improper functioning of GST portal etc.
There are various problems being faced under present system of GST. However the author has identified some core issues which need immediate attention of the Govt. In order to make GST law simpler the following are the few suggestions to the Govt. and the author is not only sure but confident enough that the Govt. will take care of each and every issue in the coming period. The key points are:
1. Simplification of GST return and rectification/revision facility:
GST returns are posing a big problem since its implementation. Today there is a common question all around as how to rectify/revise GST returns of the earlier tax period? Though the Central Govt. has come out with a Circular No. 26/26/2017-GST dated: 29.12.2017 wherein detailed procedure of correction is specified. It has been explained that mistakes of the earlier tax returns can be cured by making addition /subtraction in the figures of the current tax period. But this circular has given birth to some new problems.
So it is suggested that Govt. should either make provision of filing revised /rectified GSTR-3B else add a separate tile/column for prior period adjustments in the GSTR-3B so that mismatch can be avoided.
2. Facility of a Common Cash ledger to be introduced:
Presently, under GST law there is a concept of Cash Ledger wherein cash payments are being made by the tax payers under the three major heads viz: CGST, SGST & IGST. These major heads are further sub-divided into five different minor heads viz: Tax, Interest, Fee, and Penalty & Others. Now, a tax payer has to pay tax under one major head and under one minor head combination. Further tax paid is credited to that particular major & minor heads and is adjustable with the liability under such heads only. Even if a tax payer has a surplus amount under one head and deficit under the other he has no option to offset. He needs to pay the deficit amount and to claim the surplus amount either as refund or to carry forward it for future liability. Due to such a bar the tax payer’s not only working capitals is blocked but also they are saddled with the burden of claiming refund.
Thus it is suggested that the Govt. should collect money under one common cash ledger and allow assessee to adjust the liability there from as per their need and requirement.
3. No further interest liability once money is credited to the Cash Ledger:
The provisions of GST in respect of payment of tax and levy of interest are quite peculiar. The assessee has to pay interest till the time amount is debited to his Electronic Cash Ledger. It is immaterial how much balance lying to his Electronic Cash ledger but the interest liability will be claculated till the date amount is debited to Electronic Cash Ledger. Until and unless liability gets offset/debited the assessee need to pay interest from the due date of payment till the date of offsetting liability. For example, if I am having IGST tax liability of Rs 1000/- for the month of May’2018 and my cash ledger is already having balance of Rs 1100/- under IGST. Now, the due date for filing my tax return for the month of May’2018 is 20th June 2018 and if I do offset my liability on 25th June 2018 I have to pay interest on account of delay of 5 days. This is really a harsh provision and should be amended. An assessee who has already parted with the money and his cash ledger is also having balance he should not be called upon to pay interest. The difficulties become double where an assessee runs its affairs by means of bank finance /loan. In such cases on the one hand he/she needs to pay interest to bank and on the other hand due to not offsetting or late offsetting of liability the GST law demands interest inspite the fact the assessee has got sufficient balance in cash ledger.
So it is suggested that Govt. should change/amend GST rules suitably and make sure that wherever the assessee has balance in cash ledger no interest will be collected even if offsetting of liability is done after the due date.
4. Definition of ‘Aggregate Turnover for the purpose of registration should be changed:
As per the provisions of section 22(1) of the CGST Act, 2017 if the aggregate turnover during a financial year exceeds Rs 10 lakhs/20 Lakhs then one has to obtain registration number under GST. Now, section 2(6) of the Act has laid down the meaning of ‘Aggregate Turnover’ which includes exempted and non-taxable turnover as well. This provision of law is causing some genuine hardship to the small assessees and they are very much affected by this provision of law. It can be understood with the help of an example. Suppose, if an assessee of Assam is having rental income of Rs 4.00 lakhs (which is taxable under GST) and Interest Income on Fixed Deposits worth Rs 7.00 lakhs (which is not subject to GST) during a particular year. Then by virtue of section 22(1) read with section 2(6) the aggregate turnover of the assessee is exceeded Rs 10.00 Lakhs and he needs to take GST registration and do other compliances. It is really surprising that inspite of having taxable turnover of rental income Rs 4.00 lakhs which is much below the threshold, the assessee has no option but to pay GST.
Such provisions of law are really disturbing and thus it is suggested to remove such an anomaly by amending the definition of ‘aggregate turnover’ suitably for the purpose of registration.
5. Late Fee should not exceed Tax liability of an assessee:
Though the Govt. has already reduced the quantum of late fee but still there are some
issues involved with the levy of late fee under GST. The late fee on account of delay in filing tax returns is causing some disturbances in those cases where the figures of late fee exceeds the payable tax. In such a situation it is really harsh to demand late fee more than the tax payable. If we refer the Income Tax law also (which is a Central legislation) section 234E is having provisions for late fee payments for delay in submitting TDS statements. But under that section also the maximum amount of late fee payable is restricted to the quantum of tax payable.
Thus it is suggested to rationalize further the provisions of late fee payment under GST.
6. Provisions of Composition Scheme to be amended further:
Under present provisions an assessee is debarred from opting Composition Scheme if one has got stocks left out of the Inter-State purchases and Imports made.
Further if an assessee is having more than one business then he has to either opt composition for all such businesses or to opt regular /normal provision for all those businesses. He has no option to opt composition scheme for one business and normal to others. We understand that such provision of law was made to stop assessee from playing with the tax rates. But the situation become worst in a scenario where an assessee is having various businesses and one of them is relating to providing of service (other than restaurant). In such cases he is completely debarred from entering into the composition scheme even though he is meeting threshold criteria etc. He has to take registration under regular /normal scheme and pay tax and file monthly return. It is immaterial how small his business is. His fault is only that he is rendering services other than restaurant. But in real the provision of law should debar from entering into composition in respect of that particular service rather not for all his businesses.
Further composition tax payers are also not allowed to make inter-state sales though the Govt. has made announcement in respect thereto.
Thus it is suggested to make the scheme more comprehensive and make suitable amendments in the light of above problems.
7. Settlement of earlier taxation laws disputes through ‘Kar Samadhan Scheme’:
GST is going to complete its first year and now the assessment and appeal provisions are likely to play their respective roles. But until and unless old long pending disputes are settled tax officials will hardly find any time to deal with GST disputes. Therefore Govt. should introduce a ‘Kar Samadhan Scheme’ whereby one time opportunity should be given to the assessees to settle their old pending disputes. Further such scheme should be made available only for a prescribed time frame. This will give an opportunity to the assessee to settle their disputed matter without any further litigation. Not only the time and money will be saved by this but early collection of taxes will also be ensured.
8. Issues related to GST Registration should be resolved:
Though the registration provisions under GST are quite simple and easy and one can get registration certificate without visiting tax dept. Further GST law has provision for early issuance of registration within 3 days if documents submitted are found to be correct and complete. But practically the registration process is taking longer than prescribed time. Further Govt. should also think of Centralized registration of a few sectors like Banking, Insurance, Telecom, Govt. departments etc.
Presently, the registration certificate do not have date of actual liability and complete name, address and jurisdictional code of the issuing authority. Also if an assessee is having more than one trade then the trade name of all businesses should appear in the registration certificate issued. But present system lacks such facilities. Hence Govt. should take appropriate steps to resolve the matter.
9. Centralization of Advance Ruling Authority:
Advance ruling authority under GST is the first forum to get clarification on any disputed matter. Thus the ruling issued by the authority is of paramount importance. But since recent past it is seen that some of the rulings were not backed by the provisions of the law. Furthermore, being a State specific body, different authorities from different States are interpreting the same subject matter in their own individual manner. It has resulted in some discrepancies in the ruling issued which created chaos and confusion and more litigations. This has also somewhere disturbed the theme of ‘One Nation- One Tax –One Market. Hence the Govt. should seriously take note of this matter and would try to constitute a Centralized Advance Ruling Authority so that all the rulings can be issued from a common platform.
10. Provisions of Input Tax credit should be more comprehensive:
Section 17(5) of the CGST Act, 2017 has blocked input tax credit on certain goods and services which inter-alia includes input tax credit in relation to ‘Motor Vehicle’. There is a long debate with respect to the input tax credit available to the works contractor in respect of Plant and Machineries which are also covered under the definition of ‘Motor vehicle’ under the Motor Vehicle Act 1988.
But till today there is no clarity in law whether input tax on such machines (motor vehicles) which though purchased for the furtherance of the business can be taken or not. ‘Works Contract’ business is mainly dependent on heavy machines. Major part of their fixed assets comprises of such machines. So if the input tax credit on such machines is denied then there will be a huge loss to the Industry which will result in high cost. Thus Govt. should come out with suitable clarification to put the matter at rest.
GST will be the biggest Tax reform of this decade and in the coming days it will break all the records of revenue collection in the Country. It will surpass the age old Direct Taxation law of the Country. Agenda of Govt. to make law simpler is going to be a path breaking reform. The dream of One Nation-One Tax-One Market will sooner achieve its objects in totality.
Note: The above write up is prepared keeping in mind the recent problems faced by the tax payers & tax practitioners. The views expressed above are the personal views of the author. Thus it is requested that before acting on the basis of same, please check and confirm relevant provisions of the laws/circulars/notifications etc.