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GST ‘ONE TAX, ONE NATION‘ has been completed 5 years from its implementation as on 1’st July’2022. It is time for celebration of 5’th Anniversary of GST. The Government has been taken number of steps for the simplification of GST provisions and easing of compliances of filing of e-returns, e-invoices, e-way bills, etc. There are various amendments of GST law has been taken place for the smooth functioning of GST system as per the recommendations of GST Council. In the last 5 years of GST regime there are 47th GST Council meeting were held to consider the suggestions of the stakeholders, taxpayers and to recommend to the Government for the amendments in GST law.

The Government has considered number of procedural changes to simplify the tax system and smooth functioning of GST in the country. A good number of objectives have been achieved in the GST regime for the implementation of new provisions under GST law for the benefits of the taxpayer and significant decisions were taken by the Government on GST rate on multiple products and services as per the recommendation of the GST Council. Still there are certain issues, which need attention of the Government to correct the procedures in the GST regime.

The major practical issues in the GST regime are summarised as under:

1. Non-compliance of Scrutiny of Returns: The proper officer has been conducting scrutiny of returns and initiating proceedings of Demand of tax / Recovery of Tax from the taxpayers without following the procedures of issuance of prescribes FORMS. The action of the proper officer resulting in non-compliance of Section 61 / Rule 99 due to non-issuance of FORM GST ASMT-10 (Notice for intimation of discrepancies intimation after scrutiny of returns) by the proper officer. By which the taxpayer fails to give proper explanation to the discrepancy in returns in FORM GST ASMT-11 to the proper officer to close the litigation. It is invariably observed that the proper officer is directly issuing FORM GST DRC-01A Part A under Rule 142(1A) – Intimation of tax ascertained as being payable under Section 73 / Section 74 of the Act, without giving reasonable time for submissions clarification by the taxpayer in FORM GST DRC-01A Part B, but in many cases the proper officer simultaneously issuing FORM GST DRC-01A Part A as well as FORM GST DRC-01A (Demand-cum-Show Cause Notice), which is contrary to the provisions of GST Act / GST Rules, 2017. For which the taxpayer is losing opportunities to clarify the litigations and taxpayer is deprived of presenting his case before the proper officer to close the issue. It is pertinent to mention that as an interim measure the C.B.I&C has issued standard operating procedure for scrutiny of returns vide its instruction No.02/2022-GST, dated 22-03-2022. Let us hope the proper officer should follow this instruction without any fail for scrutiny of returns.

2. Grounds of Show cause notice is different from Demand of Order: It is observed that there is mis-match of grounds alleged in the show cause notice versus grounds taken into account for the recovery of demand of tax / demand confirmed with some other grounds. Thus, the grounds have been alleged in FORM GST DRC-01 (SCN) is different from grounds have been incorporated in FORM GST DRC-07 or additional grounds mentioned in FORM GST DRC-07. It is clear picture of violation of Section 75 (4) of the Act, 2017.

3. Imposing Penalty under wrong Section: It is observed that the proper officers are initiating search and seizure of goods in the business premises of the taxpayers under section 67 of the CGST Act and initiating recovery proceedings under Section 73 /74 of the Act but in case of penalty the investigating officer considering charging section 129 of the CGST Act in place of Section 73(1) / Section 74(1) of the Act. It is pertinent to mention that Section 129 is applicable only for detention, seizure and release of goods and conveyance in transit (implies when any person transports any goods or store any goods while they are in transit in contravention of the provisions of this Act). Hence, the proper Officer of GST, while issuing SCN by charging wrong Section for imposing penalty is illegal and harassment to the taxpayers.

4. Simultaneous proceedings by the both tax authorities (CGST /SGST):

It is observed that simultaneous investigation proceedings were being carried by the CGST authority as well as SGST authority in the similar matter for the same financial year is matter of harassment and illegal. Hence, it is difficult on the part of the taxpayer to provide information, documents and records two different authorities in the same financial year at the same time. There is clear violation of Section 6(2) of the CGST Act, 2017. This needs attention of the Government to issue necessary instruction to the filed formations.

5. Non-acknowledgement by the proper officer: It is observed that whenever the taxpayers’ are voluntarily paying tax liability under FORM GST DRC-03 but the proper officer fails to issue an acknowledgement of such payment in FORM GST DRC-04. This is not as per the provision of GST law and the proper should follow the procedures as prescribed.

6. Unsolved problem of Transitional Credits: Problems were being faced by the taxpayers during the Transitional period have remained unsolved. The Transitional credits could not be claimed by the taxpayers for various reasons. The Provision of Transitional credit prescribes under Section 140 of the CGST Act, which permits to carry forward of credit under Central Excise, Service Tax and VAT  as available on 30’th June’2017 in the last returns. This was time bound compliance for furnishing declaration, which was closed on 27-12-2017. But the registered persons who could not have furnished declaration electronically in FORM GST TRAN-1 within stipulated time due to technical glitches on the Common portal. The various High Courts in the number of cases have issued direction to GST Council to consider grievance of the taxpayer and recommend to the authority to allow filing Form TRAN-1 electronically by opening Common portal or accepting Form TRAN-1 manually to provide benefit of transitional credits. A one-time opportunity may be allowed to the taxpayers to avail substantial transitional credits as entitled to them.

7. Revocation / Restoration of Cancellation Registration is not supported by IT system in the Common portal: The taxpayers are facing problem for restoration of cancelled registration and revocation of cancelled registration after passed of appeal orders against cancellation orders or passed suo motu by the Range officers u/s 29 of the CGST Act,2017. Even the orders from High Courts / Appellate authorities to restore registrations cancelled on their own request. The functionality to implement the orders online was not ready; a temporary mechanism to restore cancelled registration was created in the back-end but is not functioning at all upto the satisfactory of the taxpayers. Recently, an advisory dated 23-03-2022 on restoration of cancelled registration has been issued by the Pr. Additional Director General of system & data management, Chennai but it is observed that still under process of rectify the defects / errors has been displaying online system of the Jurisdictional Range officer / Assistant Commissioner ‘s user id of the common portal. Hence, there is need of Government intervention to settle the issue of restoration of registration of the taxpayers.

8. Restriction of availing ITC: The eligibility and conditions for taking input tax credit under Section 16 of the CGST Act, 2017 has undergone significant changes by the legislative policy in comparison to earlier tax regime. In the last budget the time limit extended to 30th November of next year in place of 30th September of next year but ITC is restricted only in respect of Tax Invoices which are reported by filing of GSTR 1 as well as GSTR 3B on or before specified due dates for the month of November of next year for any previous year and recently from 1’st January’2022 ITC only allowed as per auto-populated GSTR 2B.

9. Recovery of Tax during investigation: Section 67 and 68 of the CGST Act, 2017 deals with the search and inspection of the business premises of the taxpayer to safeguard Government revenue, whereas Section 73 and 74 of the CGST Act, 2017 prescribes for determination of tax on the basis of findings of search and inspection or investigation of records of the taxpayers. Section 79 of the CGST Act’2017 provides for recovery proceedings to be initiated against defaulting taxpayers. Thus, the recovery of tax dues during the course of search or inspection or recovery of tax start with the issuance of show cause notice and end with adjudication proceedings. Hence, the deposit of tax without adopting recovery proceedings is the matter of great concern. Whether it is voluntarily depositing of tax liability through DRC-03 or coercion by the department officers for making ‘recovery’ during the course of search or inspection or investigation is the matter of discussion. Since, in the certain cases the taxpayers have approached the Hon’ble High Courts with regard to recovery of tax by use of force and coercion by the officers for recovery of tax from the defaulter taxpayers wherein it is declared as illegal act. Thus, recently, the C.B.I&C, has issued instruction No. 01/2022-23[GST-Investigating] dated 25th May, 2022 and clarified in case of any wrong doing on the part of any tax officer, strict disciplinary action as per law may be taken against the defaulting officers.

There are certain challenges before the Government to mitigate grievances of the taxpayers:  

1. GST registration: In case of new registration , the person has to submit the list of documents are clearly outlined in the GST Rules and the drop down list clearly prescribes the documents with limited choice and the limited digital size to upload the same. But the Registering Authority demanding notarized agreement / affidavit, copy of ROR of the owner, copy of NOC from the owner, which is beyond the statute and at times not practicable. Hence, the GST officer should be cooperative with the new registrant and enhance the Government revenues.

2. Cancellation of GST registration: The legal provision of the cancellation of GST registration has been prescribed under Section 29 of the CGST Act, 2017. A proper officer must have “reasons to believe “that the registration of an assessee is liable to be cancelled on the grounds mentioned under Section 29 of the CGST Act, 2017. But the proper officer has been mechanically cancelling registration without reasons as prescribed under Section 29 and without issuance show cause notice as per amendment of CGST Rules, vide Notification No.94/2020-CT, dated 22-12-2020. This amendment is not only violating principles of natural justice but also the fundamental right Article 19(1)(g) to carry on trade and business and right to livelihood under Article 21 as guaranteed under the constitution of India,1950. The GST department has to ensure simultaneously has to ensure safeguard of revenues and rights of the taxpayers.

3. Stabilised IT infrastructure: The whole GST system is based on IT platform but infrastructure is not upto to the mark by which taxpayers are facing filing monthly returns. Only waiver of late fees and penalty without improvement of IT infrastructure has no end to the problems of the taxpayers. In view of increasing of number of registrants and implementation of e-returns, e-invoices, e-waybills so timely compliances by the all the taxpayers on GST common portal, there is need of further enhancement of IT capacity of GST common portal.

4. Minimization of Notifications / Circulars/Instructions: There are frequent Notifications/ circulars/instructions are being issued by the Government by which creating confusion amongst the taxpayers in the similar issues. The Government should avoid issuing repeated Notifications in the similar matter from time to time and rescinded the unused /old Notifications.

Five Years of GST – Issues And Challenges

5. Lacking of co-ordination between Central and State GST authorities: As per the GST Council recommendations, when the Central Government is going to issue Notifications and Circulars for implementation of certain new provisions and procedures, which needs simultaneously approval by the States Government and to notify / issue circular at the States level for the new provisions. But it was not happening or followed by the most of the State GST authorities. Consequently, taxpayers under States jurisdiction are facing difficulties for compliances of the new provisions as per notifications/ circulars issued by the Central Government. Hence, there is need of proper co-ordination between Central GST and State GST authorities for smooth functioning of GST provisions.

6. Revenue Neutrality Rate: RNR is one of the biggest hurdle or challenge under GST. RNR is the rate at which tax revenue of the Central Government and State Government will remain the same. The GST rate structure comprises of four slabs i.e. 5, 12, 18 and 28%. There is need of minimum GST rates so that it will be beneficial for the taxpayers as well as the Government. The major sources of revenues are going to Centre and States are losing revenues. Hence, the Government has enhanced Compensation Cess payment to the States till 31-03-2026.

7. Non-Formation of National Appellate Authority for Advance Ruling: The Government fails to constitution of National Appellate Authority for Advance Ruling after 5 years of GST. It is pertinent to mention that the GST Council’s in its 31’st meeting had recommended for creation of Centralized AAAR to deal with the conflicting decisions made by two or more State AAAR on the same issue. Even, the necessary amendments in the CGST Act, has been carried but the said provision so far has not been notified by the Government and needs immediate action of the Government for the implementation of the said provision to facilitates the taxpayers across the country.

8. Non-Formation of GST Appellate Tribunal: GST implementation has been completed 5 years but GST Appellate Tribunal has not been established in its place. Due to non-formation of GST Tribunal taxpayers are facing difficulties to file Appeal against Order passed by the First Appellate Authority and unnecessary litigations are getting piled up day by day before the Hon’ble High Courts across the country. Thus, the Government is required to take initiative for the formation of GST Appellate Tribunal in the GST regime.

9. Anti-profiteering Authority objective yet to achieve: The very objective of anti-profiteering measures is to provide benefit of GST to the consumers in terms reduce prices and not allow more profits margins to the businessmen in the cost of rise in prices of goods and services. But the Anti-profiteering Authority fails to achieve the desired targets due to three-tier structure of screening committees to investigate the profiteering complaints. There are number applications of complaints are pending for the disposal. For which the period of Anti-profiteering Authority has been extended from 4years to 5 years to give desired benefits to the consumers by investigating the pending application of complaints. National Anti-profiteering Authority (NAA) is set to be subsumed into regulatory of the Competition Commission of India (CCI), there is no extension being planned for NAA beyond November when its term end.

Conclusion: With the completion of 5 years of GST regime there are several initiatives has been taken by the Government on the recommendations of GST Council from time to time for the simplification and benefits of the taxpayers. There are certain actions needs to be addressed by the Government for improvement in the GST regime. With more simplification / easy of tax compliance makes the taxpayers self reliance not only for GST return filing, GST certification of annual return but also help the Government on policy making in the GST regime. Consequently, the Government revenue will be enhanced with the growth of business of the taxpayers in the coming days.


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April 2024