All India Federation of Tax Practitioners
(An Association of Advocates, Chartered Accountants & Tax Practitioners of India)
Eastern Zone Address for 2020
Gel Church Complex, Ground Floor, Eastern Side, Main Road, Ranchi – 834 001, Jharkhand
(0)0651 – 2330057
Sandeep Gadodla, Ranchi Roy, Kolkata
M : 9431170741 firstname.lastname@example.org
Santanu Chaudhuri, Kolkata
M : 9830037262 email@example.com
Vivek Agarwal, Kolkata
M : 9433207785 firstname.lastname@example.org
Bhaskar Sinha Roy, kolkata M: 9836006096 email@example.com
Ref. No. …………………………………..
The Hon’ble Union Finance Minister,
Govt. of India, Ministry of Finance
Sub: Post Budget Memorandum with reference to streamlining Direct & Indirect Taxes Provisions
We would humbly like to submit following issues in this representation for the kind consideration and possible solutions from the GST Council.
‘All India Federation of Tax Practitioners’ established in 1976 is an Apex Body of Advocates, Chartered Accountants & Tax Practitioners consisting of more than 9,000 individual members spread over the entire Country who are practicing on Direct & Indirect Taxes. Most of the leading Senior Advocates, Advocates, Chartered Accountants and Tax Practitioners from different parts of our country as well as 135 leading Tax Professional’s Associations/Tax Bar Associations from 18 States are Associate Members of this unique Federation.
AIFTP has an ‘Indirect Tax (GST) Representation Committee’ as well as ‘Direct Tax Representation Committee’ to monitor and suggest the right path for a well-designed and ideal Indirect & Direct Tax Regime as well as to educate the tax fraternity about the finer aspects of the Tax Law implemented in our country.
We at AIFTP think that Simplicity, Clarity and Transparency’ are essential elements of a good system of collection of Tax.
We would humbly like to submit following issues in this representation for the kind consideration and possible solutions from the GST Council.
PART-A — DIRECT TAXES
1. Proposed amendment in Section 254 of the LT Act,1961 should be withdrawn or deleted immediately:
The Finance Bill 2020 has proposed for amendment in section 254 whereby ITAT, after considering the merits of the application filed by taxpayer, shall grant a stay for a maximum period of 180 days provided that taxpayer deposits not less than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under ITA or furnish security of equal amount.
However, as per current provisions, ITAT may grant stay considering the merits of the case for a period up to 180 days and further, the ITAT may extend the same on application filed by taxpayer subject to condition that aggregate period or periods of stay does not exceed 365 days, where delay in disposal of appeal is not attributable to the taxpayer.
Now, the proposed amendment is going to have wider ramifications and will adversely affect the tax payers. The main issues with this amendment can be summarised as:
Hence we strongly feel that the proposed amendment in section 254 should be deleted immediately.
2. Original provisions of section 115BBE should be restored:
Section 115BBE of the Act, as amended by the Taxation Laws (Second Amendment) Act, 2016 w.e.f. assessment year 2017-18 has enhanced the applicable tax rate in a significant manner whereby the amount of Income Tax calculated on the income referred to in sections 68, 69, 69A to 69D is @ 60 per cent (plus surcharge @ 25% on such tax and cess, as applicable). Thus effectively the rate comes to 77.25 per cent if such income is reflected in the return of income furnished u/s 139. It may be noted that if such income is not reflected in the return of income furnished u/s. 139, then penalty of 10 per cent on tax payable u/s 115BBE shall be imposed u/s 271AAC. In such a case the burden including penalty will come to 83.25%.
As we understand that the main purpose of such amendment was to curb the tax evasion on account of demonetization transactions. But in many cases it was noticed that the said section is being misused by the tax officers to harass the taxpayers. So now it is felt necessary that this section should be re-amended to restore the old position.
The assessment for the demonetization period are also completed by the officers within the statutory timeline of 31st December,2019 so it is suggested that such draconian provisions should be eliminated with immediate effect and the original position should only be restored so that no innocent assessee do not fall in the trap of such draconian provisions.
3. E-assessment scheme should be made effective only for ‘Limited Scrutiny’ cases for the first couple of years:
We appreciate the concept of E-assessment introduced by the Govt. last year. The main intent for introducing the same was complete removal of human interaction and curbing the corruption and harassment. But with our little experience we faced certain difficulties in E-assessment scheme as:
Hence it is felt that the scheme should initially be run on pilot basis only for the limited scrutiny cases and gradually the complete scrutiny cases should also be shifted under the scheme.
4. Time frame for disposal of appeal by the CIT(A) should be in- built in the law:
As per the existing provisions of section 250 there is no timeline prescribed for passing of the final order by the CIT (A) which results delay in getting justice in many deserving cases. Hence we suggest that once an appeal is taken up for hearing, there should be a time limit for its disposal as well. Further, there should be a time limit for assessing officers to submit remand reports to the CIT (A). If the report is not received from an officer in that time, it should be presumed that the officer has nothing to say in the matter and the CIT (A) can proceed with the disposal. Further, a list of pending appeals with date of filing should be prominently displayed in the income-tax offices for each CIT (A) and also on the Income tax department’s website to bring in transparency and accountability.
5. Due date for crediting the contribution of employees to the respective fund — Section 36(1)(va) read with Section 2(24)(x):
This particular provision is unnecessary burdening assesses with notices u/s 143(1) (a) and filing of rectifications time and again. Thus it is suggested that the due date defined under Explanation to Section 36(1)(va) shall be amended and accordingly the due date shall mean the due date for filing return of income under section 139(1), thereby bringing it at par with the due date specified for the Employer’s contribution under Section 43B of the Act.
6. Benefit of Presumptive taxation under section 44AD should be extended to LLP also:
Tax on presumptive basis should be extended to all assessees, including a LLP. Only section 44AD excludes LLP, for which there appears to be no cogent reason. Otherwise under the Act, a LLP and a Firm are treated at par. Hence the benefit of said provision should be given to LLP assessees also.
7. Streamlining the provisions of section 143(1) (a) whereby automatic demand is created:
In numerous cases CPC processed orders u/s 143(1) (a) raises demand when full tax was paid and such tax is reported in 26AS, but CPC has not given full credit of such tax (advance tax as well as self assessment tax). Similarly the order u/s 143(1)(a) also do not consider 43B paid dues and raises demands again. Such arbitrary demands create mistrust and confusion amongst the tax payers. Thus this auto calculation or auto adjustment mechanism should be made full proof so that no unnecessary demand is created.
PART-B — INDIRECT TAXES (GST)
1. Technical Glitches in the GST portal should be removed:
GST portal should be made glitches free and should work in a robust manner. Further the capacity of the server should also enhance so as to cater a large number of taxpayers at any given point of time. Since very inception, GST portal is not working properly and time and again we have brought this problem to the knowledge of the Govt. but no permanent solution is provided yet and still everybody is struggling to work with the portal.
Hence it is our sincere request to make the portal glitches free so that in the era of new return w.e.f 01.04.2020 no such issue arises.
2. Refund window for the expired refund claim of the past periods should be re-opened:
That Madam, provision of section 50 entitles the taxpayers to file refund application within a prescribed timeline of two years. But in the initial period, there was lack of knowledge on the part of the taxpayers coupled with confusion with regard to the forms, (manual or online) authority before such refund claim could be filed etc. So it resulted into the lapse of the prescribed timeliness of two years for claiming refund is few genuine cases.
Hence we request, in genuine cases the Chief Commissioner should be empowered to pass a speaking order extending the time for such expired refund claim to allow the taxpayers to claim the same.
3. Refunds provisions under export and under inverted duty structure should be streamlined:
That presently refund to the exporters and those under the inverted tax structure are not being issued as promised by various circulars and orders. There is further problem in generation of JSON file for the same. Instances are there where refund is delayed and not issued within the prescribed timeline. Hence, we request to review the refund system and fix accountability of the revenue authorities so that genuine hardship to the tax payers can be avoided.
4. Filing of GSTR-10 return should be abolished:
Madam, GSTR-10 is the final return under GST which a taxpayer needs to file once he opts for cancellation of registration. Such a return is over and above Annual return to be filed. Further such return is filed only when the cancellation order is issued by the tax officer. It would be difficult for the taxpayer to find when exactly such cancellation order was passed by the tax officer. Further the portal levies Automatic late fee for delay in filing such form upto a maximum amount of Rs 10,000/-.
Therefore we request to do away with GSTR-10 filing and further re-design the form GSTR-9 itself in such a manner that the taxpayer need not require to file separate final return rather the last Annual return itself should serve the purpose of the same.
Cancellation of registration is normally under adverse circumstances; therefore, we request to waive the late fee of GSTR-10 paid or to be paid by the taxpayers as one time measure to remove hardship faced.
5. Interest calculation under section 50 of CGST Act,2017 should be on the net liability only :
Presently, the tax department is issuing notices to pay interest on the full output tax figures i.e. before adjustment of Input Tax credit. This has resulted into double burden on the tax payers inasmuch as they have to pay interest on the portion of ITC which is already paid to the supplier while getting services. Interest being compensatory in nature should be collected only on the net amount payable by the tax payers. The same view was taken by the GST Council in its 31st meeting. But it is not yet implemented which resulted into dispute and in fact few of the High Courts have supported this view and/or granted interim stay to the some of the tax payers in this matter.
In our submission, the amendment should be treated as clarification to make it applicable to all past periods..
6. Availment of ITC u/s 16(4) should be allowed as one time measure in cases of belated filing of returns with late fee :
That provision of section 16(4) is appearing to be draconian on the dealer because it restricts availment of ITC beyond the prescribed period. GST is yet at infant stage for the taxpayers who are not much aware of the nitty gritty of the law The result is delay filing of tax returns even beyond the prescribed timeline of availing ITC u/s 16(4). However, it should be appreciated that tax returns in such cases were filed with payment of due interest and late fee as well. Further the supplier of goods and services has also paid GST on such transactions.
Further many taxpayers got the credit of ITC in GSTR-2A only when their supplier uploaded GSTR-1 from July’2017 onwards the due date of which was allowed upto 17.01.2020. So it was beyond the control of taxpayers to avail ITC within the prescribed timeline when such ITC was not appearing in GSTR-2A at earlier point of time
So it is earnestly requested to allow such ITC for F.Y.2017-18 & 2018-19 beyond the prescribed timeline. It will minimise litigation and remove genuine hardship.
7. Rule 36(4) should be abolished for the fraction of the year :
Madam, Rule 36(4) was inserted with the objective to curb the menace of fake ITC. The same was inserted w.e.f.09.10.2019 to restrict ITC to 20% for the missed invoices and w.e.f.01.01.2020 it was further reduced to 10% for missed invoices in GSTR-2A. The said provision is creating a lot of administrative inconvenience to the taxpayers. It is very difficult to maintain complete records or details or track of such transactions on monthly basis because time and energy of taxpayers required doing same.
W.e.f.01.04.2020 the new return forms are to be introduced. So in view of the same it is requested to omit the said rule for the fraction of the period which will be hardly less than six months for its effectiveness.
8. Liberty should be given to the tax payers to file appeal in the State where he is registered:
Presently, if a registered taxable person of Meghalaya procures goods from Delhi and while in movement if such goods are detained by the tax authorities of UP and tax and penalty is levied. In such cases the registered person has no option but to file appeal in the State where the cause of action is initiated. This exercise not only put genuine hardship but will also saddle the tax payers with unnecessary cost of travelling and engaging local tax consultant in the other State.
So, we sincerely request Hon’ble FM to kindly look into such cases and allow the taxable person to file appeal to his jurisdictional authorities who in turn will call for case records from his counterparts located in other State and decide the case
9. Late fee under GST should not exceed tax liability :
Though the Govt. has already reduced the quantum of late fee but still there are some issues involved with the levy of late fee under GST. The late fee on account of delay in filing tax returns is causing some disturbances in those cases where the figures of late fee exceeds the payable tax. In such a situation it is really harsh to demand late fee more than the tax payable. If we refer the Income Tax law also (which is a Central legislation) section 234E is having provisions for late fee payments for delay in submitting TDS statements. But under that section also the maximum amount of late fee payable is restricted to the quantum of tax payable.
Thus it is suggested to rationalize further the provisions of late fee payment under GST.
10. AAR to be centralised :
Presently, the authorities of advance ruling are interpreting the same subject matter differently in their own unique way in different States. This is creating utter chaos and confusions in the minds of tax payers and tax professionals. The situation becomes more complex in case of a corporate entity which is registered in multiple States and getting contrary ruling on the same subject matter in different States. Now, the question arises that as a corporate entity which ruling to be followed precisely for discharging tax liability or what provision to be made for taxes in the books? Though the Govt. has already announced its intention of setting up a Centralised AAR but till such date it comes into force the Govt. should come out with clear cut guidelines to remove the difficulty and allow the ruling which is favourable to the tax payer. We further submit, this Central whenever formed, should have Benches in all Metropolitan cities.
11. Date of amount credited to cash ledger should be considered as the date of pavment of liability:
The provisions of GST in respect of payment of tax and levy of interest are quite peculiar. The assessee has to pay interest till the time amount is debited to his Electronic Cash Ledger. It is immaterial how much balance lying to his Electronic Cash ledger but the interest liability will be calculated till the date amount is debited to Electronic Cash Ledger. Until and unless liability gets offset/debited the assessee need to pay interest from the due date of payment till the date of offsetting liability. This is really a harsh provision and should be amended. An assessee who has already parted with the money and his cash ledger, thus the money is in Government treasury, he should not be called upon to pay interest for the intervening period. The difficulty multiplies where an assessee runs its affairs by means of bank finance /loan. In such cases on the one hand he/she needs to pay interest to bank and on the other hand due to not offsetting or late offsetting of liability the GST law demands interest inspite the fact the assessee has got sufficient balance in cash ledger.
12. Removal of requirement for reversal of input tax credit on account of non -payment to the vendor within 180 days:
The present provisions section 16(2) requires that ITC needs to be reversed in cases where the payment is not made to the concerned vendor (on whose invoice ITC has been claimed) within 180 days from the date of said invoice of the total invoice value. The tax amount will be allowed as re-credit on eventually making the payment. The law further provides that interest shall also be applicable on such reversal.
It casts an onerous responsibility on the taxpayers to maintain elaborate documentation to demonstrate the payment made within 180 days and reconciliation of credit amounts including re-credit amounts, without any substantial benefit to the Government.
Hence the said provision needs to be deleted completely with immediate effect.
Hoping for a very favorable and early action.
With highest regards,
For All India Federation of Tax Practitioners
(Pritann Baruah- Vice-Chairman, AIFTP East Zone)
(Sanjay Sureka- Member AIFTP East Zone)