Recent Updates in GST till 03rd May 2024

Recent updates in the Goods and Services Tax (GST) landscape of India reflect a dynamic economic scenario. With projections indicating robust growth, government initiatives shaping policies, and challenges on the horizon, understanding the nuances of GST becomes imperative. This article delves into the economic forecasts, policy developments, challenges, and the evolving nature of GST in India.

According to FM, India’s economic growth for March, 2024 may be 8% or more, resulting in 2023-24 having a GDP growth 8% or over 8%. The growth was 8.4% in Q3. India is likely to be set for another year of robust growth in the financial year beginning April 1, 2024 (2024-25, or FY25), with inflation projected to ease closer to the Reserve Bank of India’s comfort zone, which may allow it to start the rate-cut cycle. However, risks may stem from global factors such as slower-than-expected global growth, higher commodity prices, and geopolitical turbulence, which may adversely impact growth and macro-stability.

According to UNCTAD, Indian economy may grow @ 6.5% in FY 2024, which makes it one fastest growing economy in the world. IMF has also upgraded Indian growth forecast driven by continuing strength in domestic market to 6.8% for FY 2025. It is 6.6% by World Bank and 7% by Fitch and ADB. For FY 2024, IMF has projected a growth to 7.8%. Asian Development Bank (ADB) has also raised India’s growth projections to 7% for FY 2024, up from 6.7% projected earlier. Further, as per one of the member of EAC-PM, India’s economic growth performance is good and that efforts shall be needed to sustain the growth. However, the external global situations pose a challenge. IMF has revised India’s growth outlook for FY 2024 @ 7.8% which is higher than the Government’s own forecast of 7.6%. However, it has projected 6.8% growth for FY 2025.

Accordingly to the MOF monthly report, India’s growth story should continue. It projects a good monsoon and ease in inflation. Also, India continues to be the fastest growing major economy with positive growth outlook.

The process of selection of Members for GST Appellate Tribunal is on and the last date for applications is over. Now the applicant’s screening, interview etc shall commence and we may have benches of Tribunal in place soon. It is hoped that the selection process shall eventually turn out some best of talent, intellect and honest people to sit on the benches. The President of GSTAT has been appointed for a period of four years vide order dated 01.05.2024. The role of GSTAT is going to be the challenging as the phase of litigation in GST is all set to roll. While first seven years of GST in India focused on procedures and smoothening the processes, now is the time for settlement and resolution of GST disputes. It should be ensured that resolution is fast, honest, and sustainable in future judicial scrutiny. There should be no room for allowing pendency to build up into huge back-logs.

CBIC has issued guidelines for CGST field formation in maintaining ease of doing business while engaging in investigation with regular taxpayer. Obviously, this is a welcome move, may be at this time when country goes to polls.

As at the end of financial year 2022-23, there was an amount of more than Rs. 29,000 crore locked up in indirect tax demands at various levels, i.e., demand raised but not realized comprising of service tax, central excise, customs duty and even CGST and IGST. This ranges from 1 year to over 10 years. The maximum amount is of service Tax followed by Central Excise, Customs and GST. These are cases with confirmed demand but assets or assessee are not traceable. Further, over Rs. 1.73 lakh crore cases are stuck-up in disputed tax liabilities.

In yet another revealing data, GST to GDP (ratio of GST collection to GDP of country) has been showing an increasing but slow trend. While it was 6.23% in 2019, it has inched upto 68.6% in financial year 2024. The gross GST collection has nearly doubled with Rs. 11.77 trillion in financial year 2019 to Rs. 20.18 trillion in financial years 2024. The total indirect tax collection including central excise and customs duty for financial year 2024 has exceeded the revised estimates of Rs. 14.84 trillion.

Vijay Kelkar, Chairman of 13^th Finance Commission has advocated for a need to introduce 12% single rate of GST in the country which can be decided by the ensuing Government. Constitutional amendments may also be required for equitable sharing of GST proceeds among the centre, states and local Governments.

It is expected that the new Government may take up the tax reforms including simplification and rationalization in GST law. Infact, one of the most important reforms in India in last decade has been introduction of GST. The present decade should now witness major reforms in GST based on seven year’s experience. This should include simplification in provisions, rate rationalization and business friendly tax law. It should focus to achieve median tax close to Revenue Neutral Rate (RNR) which is the need of the day. With tax collections getting better and stabilized, aim should be expand tax base as well as increase the tax revenue by rationalizing rates as well as exemptions.

CBIC is understood have developed a common bank audit plan for central and state GST officials for auditing the banking entities under GST law across the country. This will ensure common minimum audit plan and consistency in approach. It will also ensure synergy between the central and state tax authorities in implementing indirect tax laws.

GST collection has hit the record highest collection in April, 2024 at 2.10 lakh crore for the first time. GST revenue collection in April, 2024 is highest ever and has breached Rs. 2.10 lakh crore. The growth in GST collection is 12.4% on Y-O-Y basis. Thus also vouches for the economic growth. It may also be higher on account of year-end adjustments.

 India is under election mode and the new Government will be known on 4^th June, 2024. If the same Government is repeated, continuity of policies and reforms will get a boost. The same would apply to GST also. Keeping election in mind, there will be no GST Council meeting till new Government comes in i.e., no GST Council meeting in first six months of 2024, which may delay crucial GST decisions and reforms.

 Guidelines for GST Investigations of Regular Taxpayers

• CBIChas issued Guidelines for CGST field formations in maintaining ease of doing business while engaging in investigation with regular taxpayers.
• These guidelines shall be followed in the CGST Zones while engaging in investigation, subject to legal provisions or instructions.
• The (Pr.) Commissioner shall be responsible for developing and approving any intelligence, conducting search, and completing investigation in a case and the relevant subsequent action, including in the divisional formations, etc.
• For information / intelligence inter CGST field formation, it shall be forwarded by the (Pr.) Commissioner to the concerned CGST field formation or DGGI, as the case may be.
• Conclusion of investigation may also take the form of recording that investigation is not being pursued further as nothing objectionable was found in terms of matter investigated.

(Source: Instruction No. 01/2023-24 GST (Inv.) dated 30.03.2024 issued by Ministry of Finance, Department of Revenue)

 CBIC SOP on Preventive Vigilance Mechanism during election

• CBIC has issued Standard Operating Procedure for stepping up of Preventive Vigilance Mechanism by the jurisdictional CBIC field formations and to prevent flow of suspicious cash, illicit liquor, drugs/narcotics, freebies and smuggled goods during elections.
• This is in compliance of instructions issued by Election Commission of India regarding reporting of Major Seizures (more than rupees one crore) during the elections and implementation of Electronic Seizure Management System (ESMS) for reporting interception/seizures made by various enforcement agencies on real time basis.
• This will ensure coordinated and focused attention including proper sharing of information by the field formations of CBIC and all other agencies concerned for ensuring smooth and fair elections. In this regard, the below mentioned SOP is to be followed by formations of CBIC to ensure conduct of free and fair elections.
• The Pr. DG, DRI, Pr. DG, DGGI, Pr. Chief Commissioner/ Chief Commissioners of Customs, Customs (Prev.) and CGST Zones concerned shall be responsible for bringing any matter that is highly sensitive or grave to the immediate notice of the Chairman, CBIC/ Member (CM), CBIC/ Commissioner (Investigation-Customs), CBIC with a copy marked to Commissioner (Investigation-GST), CBIC.
• The Pr. DG, DRI and Pr. DG, DGGI shall establish a Central Control Room at Hqrs. and a Control Room in each State/ UT concerned. They shall also designate a Nodal officer at Hqrs. and in each State/ UT concerned.
• The Central Control Room in the States/ UT’s and Nodal Officers concerned shall maintain a proper record of incidents and activities that have a bearing on the free and fair election process and immediately inform the same to the Pr. ADG/ ADG, DRI in the respective State/ UT.

[Source: Instruction No. 06/2024-Customs dated 23.03.2024 issued by CBIC, Investigation – Customs (F.No. CBIC-21/125/2021-1NV-CUSTOMS-CBEC]

 DGGI Guidelines for conducting Investigation

• The officers of Directorate General of GST Intelligence (DGGI) across the country at its Headquarter, the 26 Zonal Units (ZU) and 40 Regional Units (RU) have all-India jurisdiction for the purposes of their role in the compliance management framework of Goods and Services tax (GST) and Central Excise. Under GST, investigation may be made by DGGI or jurisdictional CGST formations or the States.
• CBIC has approved a detailed standard operating procedure (SOP) for officials of the Directorate General of GST Intelligence (DGGI) to improve the ease of doing business and prevent any incident of harassment of taxpayers during tax investigations, summons, and searches.
• SOP mandates officials to stick to Goods and Services Tax (GST) cases within their zonal units for investigation, skip investigation which fall under the ambit of audit and scrutiny and issue summons with specific details of subject of enquiry and clear timelines and not for vague and piecemeal information, which can be submitted in written.
• This supersedes earlier guidelines dated 18.09.2023 as amended on 08.12.2023.

[Source: F.No. DGGI/17/2023-INV-O/o Pr DG-DGGI-HQ-DELHI(1) dated 08.02.2024 issued by DGGI, New Delhi]

 Special procedure for persons engaged in manufacture of specified goods

• CBIC had rescinded Notification No. 30/2023-CT dated 31.07.2023 w.e.f. 01.01.2024 which prescribed special procedure to be followed by a registered person engaged in manufacture of certain goods, i.e., tobacco and related products.
• A new Notification No. 4/2024-CT dated 05.01.2024 was issued w.e.f. 01.04.2024 for the new special procedure to be followed by a registered person engaged in manufacturing of specified goods. The procedure prescribes the details of packing machines, special monthly statement, certificate of chartered engineer, details of the machines, details of the intimation of the machines furnished to other departments, disposal of the packing machines, product details, details of the documents uploaded etc.
• CBIC has now extended the timeline for implementation of Notification No. 4/2024-CT dated 05.01.2024 from 1st April, 2024 to 15th May, 2024. This Notification shall be effective w.e.f. 01.04.2024.
• No reasons have been mentioned for such an extension. However, GSTN portal does not have necessary form on the portal as of now.

 (Source: Notification No. 08/2024-Central Tax dated 10.04.2024 read with  Notification No. 4/2024-CT dated 05.01.2024)

 Conduct of Joint Audits by CGST / SGST Officers

• Commissioner, Central Tax and Central Excise (Audit), Kochi has issued a frame work for conducting joint audit by CGST and SGST officers.
• The CGST and SGST Audit teams would henceforth try to co-ordinate and participate in each other’s Audits.
• Each Audit Circle of CGST shall share the Audit plan for the month with their counter parts in SGST and invite officers from SGST to be included in the Audit Teams. Similarly, officers from CGST may join the Audit teams of SGST as and when possible.
• This is aimed to strengthen the capacities of SGST officers in Audit and also enable officers to exchange critical compliance-related information with each other.
• Circle AC/DCs shall co-ordinate with State GST and come up with/work out the necessary framework so that joint audit work can be initiated with immediate effect.

 (Source: Letter No. GADT/PndC/APLN/4/2021-PandC dated 03.04.2024 issued by Central Tax and Central Excise (Audit), CBIC, Ministry of Finance, Department of Revenue, Kochi)

Non-issuance of notices u/s 73 & 74 in case of voluntary compliance- Kerala Government

• Kerala State have issued instructions for issuing notices under section 73 & 74 in voluntary compliance cases.
• Taxpayers have the option to voluntarily comply with their tax obligations before any formal notice is issued.
• If a taxpayer, upon his own ascertainment or based on the proper officer’s ascertainment, discovers that they have any additional tax liability, they can choose to pay such tax dues along with the applicable interest under section 50
• In case of own ascertainment, it is crucial for the person chargeable  with tax to provide a detailed breakup of the amounts paid, including the tax, interest, and penalty.
• The persons chargeable with tax may inform the manner of computation of such tax dues under the respective heads of IGST, CGST, KSGST and Compensation Cess and the tax period it is attributable to, as per their ascertainment.
• In case of wrong availment or wrong utilization of Input Tax Credit, the persons chargeable with tax may inform the details of such Input Tax Credit wrongly availed or utilized under the respective heads of IGST, CGST, KSGST and Compensation Cess, and the tax periods.
• In case of an erroneous refund, the persons chargeable with tax may inform the details of such erroneous refund received including the tax period to which such refund pertains.
• These can be made by the person chargeable with tax in the FORM GST DRC-03 itself through the common portal.
• If such details are not available in the FORM GST DRC-03, the proper officer can request the same from the persons chargeable with tax through a letter.
• The proper officer on receipt of the written communication/ information in FORM GST DRC-03 of payment, shall not issue any notice for the tax amount already paid with interest; or with interest and penalty as applicable in view of the provisions contained in sub-section (6) of Section 73, and sub-section (6) of Section 74.
• Where it appears to the proper officer that the amount of tax paid with interest as per Section 73(5) or the amount of tax paid with interest and applicable penalty as per Section 74(5) by the person chargeable with tax falls short of the amount actually payable, the proper officer shall issue notice only for the amount which falls short of the actual amount payable.
• In all cases falling under Section 73 of the KGST Act, 2017, the provisions of section 73 (11) shall be adhered to wherever applicable.

(Source: Circular No. 6/2024 dated 06.04.204 issued by Commissioner, State Goods and Services Tax Department, Thiruvananthapuram)

GST Collection in April, 2024

• GST revenue collection for April, 2024 is highest ever at Rs 2.10 lakh crore
• GST collection has breached landmark milestone of Rs. 2 lakh crore for the first time and  gross revenue has recorded a 12.4% y-o-y growth
• Net Revenue (after refunds) stood at Rs.1.92 lakh crore which is a 17.1%  y-o-y growth
• The gross Goods and Services Tax (GST) collection in April, 2024 is at Rs.2.10 lakh crore. (CGST Rs.43,846 crore; SGST Rs.53,538 crore; IGST  Rs.99,623 crore, including Rs.37,826 crore collected on imported goods; Cess Rs.13,260 crore, including Rs.1,008 crore collected on imported goods).
• The sates with negative growth in tax collection are J & K, Sikkim, Arunachal Pradesh, Nagaland, Meghalaya, Lakshadweep and Andaman & Nikobar Islands.
• Mizoram recorded the highest growth @ 52% followed by Goa, Assam, Tripura, Punjab, Chandigarh, Haryana, Delhi and Bihar

 (Source: PIB Release ID 2019262 dated 01.05.2024)

Conclusion: The evolving landscape of GST in India reflects a blend of opportunities and challenges. While economic growth projections paint a promising picture, the government’s initiatives and policy measures aim to navigate challenges and foster a conducive environment for businesses. With robust GST collections, calls for reforms, and proactive enforcement measures, the trajectory of GST in India remains dynamic, with a focus on sustained growth and compliance.