I would like to start this article with a BIG DISCLAIMER that, I am not a GST expert & have only a limited knowledge of GST. This article is merely intended to share personal observations derived from my experience with GST compliance and litigation. I emphasize that this is not an attempt to promote my practice in any way. Few of my advice will not be line with the provisions of GST law.
As we all professionals are aware that the deadline for passing an order under Section 73 of the GST Act was August 31, 2024. For the year 2017-18 & 2018-19 had already passed 8-9 months ago. (I will refrain from discussing the extension of these dates u/s 168A, because it will be again debatable issue that has already been challenged in various High Courts)
In simple words we can summarised it and say that NO MORE GST NOTICE or assessment for the initial 3 years of GST i.e. 2017-18, 2018-19 & 2019-20 subject to some exceptional cases which are covered under section 74.
Over the past few months, many of you may have faced the similar notice or order, either in your own case or on behalf of your clients. If you haven’t faced such situations, consider yourself luckiest person in this GST era. Personally, I consider myself lucky, as I’ve had only 3-4 such instances arise where notice issued, I was managing the GST Compliances for around 150 plus clients including big and small since introduction of GST till 2023. FROM LAST ONE YEAR, I am completely into handling the GST litigation including Intimation, SCN and appeal for GST, Service Tax and Refunds.
Through this article, I would like to share my learning experience of GST Litigation and my personal observation, that helped safeguard my clients from GST disputes and effectively minimized litigation.
(Again, I am saying that this is my personal observation only and it may not align with the provision of GST rules & regulations, Therefore, I advise not to relying without verifying the relevant provisions of law)
Observation on allegation raised in GST Notice.
- Not filing the annual Returns (GSTR-9 & 9C) in optional cases; I have adopted the policy for GST compliances such as ‘Do only what is mandatory’. So, I never filed any annual returns (GSTR-9 & 9C), where it was an optional to file. I believe this may a reason to reduce the litigation.
- Not Reporting the Exempted Income in GSTR-9: I have gone so many cases / notices where the consultant / client shown their Interest & Other Non-GST income like Dividend, interest income reported as ‘Exempted Income’ in GSTR-9 to match the revenue with books.
In all of these cases, department issued the Notice and asked to reverse the proportionate ITC. However, on submission of Audit Report/ IT Returns it will be easily resolved, but in case of failure by any reason, it may result very adversely to the taxpayers.
I never reported any such Income as exempted income in GSTR-9 which may have benefited both my clients and myself.
- Quarterly Reconciliation of output tax & ITC; I was used to follow the practise of timely reconciliation of GSTR-1 & 3B and GSTR-3B & GSTR-2A. These practises helped us resolve the any such difference on time.
- Advised not to show the professional fees as legal & professional fees in P&L– It is not very uncommon that professional fees paid to other than advocate booked under Legal & professional fees too. This will create un-necessary point of litigation and department will be asked to pay the RCM on the same. Hence, I advised to everyone that book the legal fees only when it actually paid to an advocate, not to other than advocate. On similar manner so many expenses are there such as cab expenses, Car hiring, sponsorship exp etc.
- Advised for Not to use words like Sample, free of Cost in PL; From the initial time, I used to advise to the clients that never use few words in face of P&L such as Sample Expenses, Free supply etc. As these words are attracting the eyes of GST officials and they asked for proportionate ITC reversal on the same and creating an un-necessary ITC.
Observation on one of the burning issues of GST i.e. Blocked ITC u/s 17(5)
When discussing blocked ITC under Section 17(5), it’s important to note that these types of ITC will be reflected for all taxpayers, regardless of whether they have availed them or not. In this regard I would like to say only that if your jurisdiction or your client’s jurisdiction falls under Central authority (CGST) , then again you & your client are fortunate in the GST era.
- Why I am saying like this?
The reason is the State GST (Gujarat State, not sure about other state GST) has implemented a tool developed by IIT Hyderabad, which scrutinised our all-filed returns and GSTR-2A and tool generates a list of suppliers based on their registered HSN codes. If these HSN codes are close to those blocked under section 17(5) of the CGST/SGST Act 2017, it could indicate that we have claimed ineligible ITC, even if we have not actually availed it.
- So, what makes us fortunate if our jurisdiction falls under the Centre?
I am saying fortune, because Centre GST are not scrutinised the GSTR-2A in this manner and they don’t have any such type of tool. CGST department are scrutinised the details of filed GST Returns such as GSTR-1, GSTR-3B, GSTR-9 & 9C and GSTR-2A overall (Not HSN wise) only.
I have gone so many GST case in last one year, but not found any allegation on blocked ITC u/s 17(5) in GST notice issued by Centre GST, except taxpayer selected for departmental audit or search has been conducted by CGST.
Now you can understand why I was saying fortunate taxpayers whose jurisdiction is Centre in GST Era up to FY 19-20, not sure for future. Because recently Central GST also migrated from old portal to GSTIN portal.
Taxpayers engaged in taxable as well exempted services.
Many notices issued only on the allegation of Non-reversal of ITC availed on exempted supply. If taxpayer availed the only ITC pertains to taxable supply and reported the exempted income in their GST returns, even then department will send the notice and asked to reverse the proportionate the ITC. In this situation, taxpayer have no other option to clarify the same with substantial documentary evidences.
In this type of situation, where client is engaged in taxable as well exempted supply then I advised him to take the separate GST Registration. For example, a hospital and its pharmacy. We can take the multiple registration on same PAN.
“Thank you for dedicating your valuable time to reading this, I hope that it was worth your time.”
Your comment and feedback are most welcome. I can be reached on [email protected].
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