Way forward – GST 4.0

The GST was launched at midnight on 1 July 2017 by the President of India, and the Government of India. The launch was marked by a historic midnight (30 June – 1 July) session of both the houses of parliament convened at the Central Hall of the Parliament. We have completed three years of implementation.

Our honourable Prime Minister called it a ‘Good and Simple Law’, however it is not as simple as thought. In this honeymoon period, tax payers gone through a lot of amendments, changes, judgements, etc. May time to revisit the entire law and considering the best practices across the world make it easy for compliance and cure the defects in the law. This should not be the responsibility of the executive who is to administer the law. However, their representatives would contribute.

Government had also made some amendments favouring the tax paying industry/ trade on many representations being done or Courts ruling in favour of the tax payers. These are as under:

• Interest on net liability;
• Few changes in Place of supply (except for intermediary services)
• Amending Schedule II of CGST Act as a clarificatory nature;
• Covering High Sea sales, Merchanting Trade in Schedule III of CGST Act;
• Amendment in section 17(5) vide CGST Amendment Act, 2018 curtailing the extent of restricted / blocked credit;

As we are entering into 4^th year of implementation (GST-4.0), based on the experience of three years, the paper writers wishes to suggest the following way forward for better implementation of GST:

Expected modifications in revenue & law from Industry –

1. Even though the laws changed, the perception / mindset of department officers has not changed. Still the assessees are treated as thieves or tax evaders instead of part in nation development.

2. For everyone, the law was new when implemented. Rigorous training with evaluation required for the officers who are handling day-to-day affairs especially State officers with respect to issues relating to services where they didn’t have prior experience.

3. The Government should accept the technological failure happened and plan for phase-wise implementation of matching should be done like staggered manner of filing GST returns done considering the load on the last day.

4. As promised by the Government, the retrospective amendments should be avoided to have a fair play.

5. The bodies of Authority for Advance Rulings and Anti Profiteering has to be removed. It would take years to clear the mess created by these authorities by delivering revenue biased judgments.

6. ITC is the soul of GST. Still, the department treating it as a ‘concession’ or ‘favour’ by the department to the assessee. Recently released advise on transitional credit is an evidence for this. Department should accept that it is a vested right of the tax payer upon satisfying the conditions specified.

7. The helpdesk created by the GSTN has to be improved. Simply for the sake of numbers, statistics / records replies are received as ‘resolved’ for the complaints raised even though it is not resolved.

8. Circulars issued by the department most of the times instead of clarifying they are creating mess. In most of the times, except the words ‘to clear’ all the other things are unclear. Department should understand the ‘principles of the law’ or ‘intention of the law’ instead of merely relying the rules.

9. Without having proper technological backup, the department has started harassing the assessee by way of issuing the notices. Few examples could be notices for GSTR-2A Vs 3B, Notices under section 16 (4) and the list goes on. Proper facility should be given and reasonable opportunity should be given before passing the adverse orders.

10. The purpose of annual returns / annual audit needs to be understood and the form needs to changed in accordance with that. Present forms do not add much value to the department / the assessees but it looks like a summary of figures mentioned in monthly returns.

11. ‘Technological glitches’, the word much used after implementation of GST. All thanks to Infosys and GSTN for the same. It looks like most of effective professional time wasted while filing GST returns than that of traffic jams.

There is a big gap between the technological aspects and legal aspects due to lack of co-ordination between the two. Still many decisions taken by the GST Council yet to be implemented. The gap should be reduced

12. Extension of due dates is become very much common in GST. Monthly returns, Annual returns, compliance returns, etc. are extended as and when the need arises. GSTN is unable to handle the load and the technological issues. New returns are still on the paper and yet to see reality.

13. Most of the cases, the legal remedy is not available which resulted in assessees heading to High Courts through Writ applications. It resulted in increase in cost of litigation for the assessees and increase in cases for the High Courts. Even after three years after implementation, not even one Appellate Tribunal formed.

14. Bringing petroleum products, left out transactions pertaining to real estate into GST regime would reduce the cascading effect to the assessees.

15. Even though Check posts removed in most of the States, mobile squads creating a lot of problems even for procedural errors in e-way bill related issues.

16. Fairness should be required in many matters like attaching bank accounts without proper adjudication, recovery proceedings, arrests, etc.

17. Many arbitrary/draconian provisions exist as on date needs to modified or removed. Example of such provisions could be:

• Section 17(5) of CGST Act – Considering the Statement of Objects Clause
• Section 54 – Refund on Capital goods credit when there is no restriction under Section 16 of IGST Act.
• Section 129 – even when “mens rea” not involved – Irrespective of nature of mistake.
• Section 19 read with Section 143 – job work – How can procedural section can prescribe levy ?
• Validity of Schedule I entries (like import of services from related person)
• Rule – 36 (4) without effecting the provisions of section 43A
• Rule 86A – Conditions of use of amount available in electronic credit ledger
• Rule – 89 authorised operations for SEZ unit, limit in value of export of goods to 1.5 times for similar goods in domestic market, etc
• Rule – 96(10) – retrospective implementation – Came on 23.01.2018 effective from 23.10.2017
• Rule 96A – Non export of goods within three months – no supply – duty liability ?
• Rule 96B – Non receipt of foreign currency for export of goods.
• RCM liability on ocean freight.
• Lapsing of credit in specific cases like textile industry
• No refund for invoices not appearing in GSTR-2A
• Non-payment for the supply received beyond 180 days – Payback the ITC with interest
• and many more…………                                                                                   

Possible Way out:

GST an evolving law, where the assessees should show proactively involve in learning the law and make suggestions to meet the objective. The law doesn’t protect ignorant.

The Assessee should be ready to fight to uphold their rights. For being effective one may opt to fight legally through association/ unions – “Together we stand, divided we fall”

Government should implement/provide charter of citizen’s right in tax laws as promised by Hon’ble Finance Minister of India in her Budget speech as follows – “Our government would like to reassure taxpayers that we remain committed to taking measures so that our citizens are free from harassment of any kind”

Conclusion:

GST is in the initial years of implementation has thrown up many disputable areas which were settled in the central excise/ service tax regime. The grey areas needs to be clarified / modified by the Government to make it a Good and Simple Law. Transforming or redrafting the law to be simple, fair and transparent, requires efforts from both the revenue and the assessees. Blame game may not sort out the issues, whereas positive acts from both ends would resolve the same. As quoted by Martin Luther King “Darkness can’t drive out darkness, only light can do that”, hence we being responsible citizens of the country should strive towards making the law respectable in order to respect the same.

Any inputs/suggestions, please write to rajeshmaddi@hiregange.com / madhukar@hiregange.com