One of the key objectives of GST should be to ease the tax compliance in doing business in India. At present, for large and medium enterprises having business across India, one has to get registered in each of the State and Union Territory, have tax persons posted in major big sates for ensuring regulatory compliance under these separate VAT Acts including filing of Returns and Assessments separately for each state.
System should be introduced to reduce the above cumbersome procedure at the time of introduction of GST, a model to be developed, so that there is a single Return to be filed in a consolidated manner instead of separate Return for each state and Assessments are done centrally. This will go a long way in reduction both in terms of manpower costs and as well as litigation cost for dispute arising in different states. If such a procedure is adopted, than in true sense, even though having federal system in India, it will really act like one market with single compliance system under SGST and CGST.
This article tries to provide an alternative method which can be adopted for dealing with large and Medium Enterprises under SGSTs .
1. Under GST Regime also, it is proposed to have separate Registration for each state which will be at par with existing VAT system. For the purpose of ease of business and reducing the cost of compliance, in my opinion, deliberations should be held about the feasibility to introduce the concept of Central LTU, wherein large and medium enterprises having business operations across India should have the option to get itself registered at principal place of business under SGST covering all states instead of having separate registration in respective states and introduction of single Return covering all states. Unless such concept is introduced, there will be no reprieve for the industry from the issues it is facing under VAT Regime wherein similar matter settled in one state by Commissioners/Tribunal/Courts is not given cognizance by another state even for the same company leading to multiple litigation costs.
2. Further to make the above system fool proof, provisions to be made in the statute to setup a audit team comprising of Departmental officers of different states who will be authorised to conduct the audit and recommend assessment on issues wherein it is felt by the team that certain issues, of specific states, need to be investigated by the respective states. If some of the states are having different interpretation of law in comparison to what is interpreted by the assessee or any fraud or bureau report is available against the assessee, they may approach the audit team to investigate on the issue and report its findings.
3. If the above said concepts as said in 1 and 2 are introduced , it will be win -win situation for assesses as well as for the states. For assesses , the compliance cost will be drastically lowered in terms of reduction of manpower cost as they can work with centralized team at corporate level.All top companies are IT driven companies having centralized data system and providing Pan India data will not be issue to the audit team. Further disputes arising with the states will also be lowered as there will be more consistency of interpretation of the different provisions across the states.
On the other hand, for respective states, they will have access to all the issues the assessee is facing in other states and revenue leakage if any can be stopped timely in their own state. Further, any administrative decision to be taken with respect to assessee will be more mature as they will be bettered informed and can also stand on strong footings before the Court which is the other way around in the present VAT Regime.
4. As per the report published, it is observed that multiple registrations for different verticals within the same State will be allowed. In my opinion in GST Regime, the same should not be allowed as it will lead to complications for the department as well as for the assessee. There should be one principal place while all other places should be added as additional place of business within the same registration certificate. In case separate registration are taken than, ITC as proposed will not be available across verticals which will further lead to disputes with the department. For assesses , having multiple registration in the same state with one vertical having major input tax with no output tax and other having only output tax will be required to set off the input tax of other vertical which will give rise to various complications during admissibility of the claim.
5. As per the report published, method of calculating turnover for calculating threshold limit indicates that the exempted turnover shall also be included .Such intention is against the spirit of existing law laid down by Courts. Further taking a clue from the above procedure, the state GST authorities may also include such turnover for the purpose of disallowing any Input Tax credit as per provisions where the input tax credit is required to be restricted for inputs not related to exempted Turnover.. Hence, in all circumstances ,it is suggested that only Taxable Turnover should be considered for all purposes.
6. It is also mentioned that in case of Services , the present system of ISD under Service Tax law will continue. The office after obtaining the Registration can transfer the ISD credit to various units for adjustment with output tax. Restricting such transfers only for services is not as per the spirit of the GST as if such transfer of goods are not allowed, cost of product will not reduced as input tax add up in the cost.
7. As per the report, the registration certificate will mention details of only top 5 commodities and 5 Services. In my opinion details of submitting all or more commodities and Services may be introduced so that the same can be corroborated with the Returns filed by the assessee.
Therefore , if the above recommendations are considered and alternate method for registration are allowed , it will certainly ease the way in doing business in India.