Implementation of Goods & Service Tax (GST) w.e.f. 1st July 2017 is one of the historic moments in the Indian Economic history. When draft GST Law was prepared and thereafter in the manner GST was supposed to be made Good & Simple Tax, we need to have the reality check, whether implementor of GST, GST Council and Department of State & Central Govt. i.e. CBIC and State Commercial Tax Offices have achieved the object of Good & Simple Tax in the minds of common man and taxpayer?
Nobody including the government officials will state that, they could design the system the way it was envisaged. We can cite number of examples, since technology so far implemented was not sufficient enough and hence understanding the technological difficulties, the law which was envisaged has not been implemented and now rather than changing & upgrading the technology and removing the difficulties, GST Council preferred to change the law, which was envisaged. Some of the illustrations can be cited below:
GST Act was required to be amended number of times on account of the same:
- Finance Bill 2022
- CGST Act, 2017 as amended up to 31.08.2021.
- IGST Act, 2017 as amended up to 01.10.2020.
- CGST Act, 2017 as amended up to 01.01.2021.
- THE TAXATION AND OTHER LAWS (RELAXATION OF CERTAIN PROVISIONS) ORDINANCE, 2020.
- UTGST Amendment Act 2018.
- Compensation Cess Amendment Act 2018.
- IGST Amendment Act 2018.
Major changes in the above amendments are on account of not able to implement the matching provisions, the way it was envisaged originally and therefore, resulted in not only the technical glitches but added to number of sufferings to the trade & industry and
substantially added compliance cost. While efforts are ON for upgrading the system and making data easily accessible and retrievable, but undoubtedly, compliance cost have gone substantially higher.
Format of GSTR-9 & GSTR-9C requires lot of modifications :
e.g. Table 8 of GSTR-9 provides:
- OTHER ITC RELATED INFORMATION:
| A | ITC as per GSTR-2A (Table 3 & 5 thereof) |
| B | ITC as per sum total of 6(B) and 6(H) above |
| C | ITC on inward supplies (other than imports and inward supplies liable to reverse charge but includes services received from SEZs) received during 2019-20 but availed during April 2020 to September 2020 |
| D | Difference [A-(B+C)] |
| E | ITC available but not availed (out of D) |
| F | ITC available but ineligible (out of D) |
| G | IGST paid on import of goods (including supplies from SEZ) |
| H | IGST credit availed on import of goods (as per 6(E) above) |
| I | Difference (G-H) |
| J | ITC available but not availed on import of goods (Equal to I) |
| K | Total ITC to be lapsed in current financial year (E + F + J) |
This table do not provide the details to be given w.r.t. ITC reversed subsequently; ITC reversed in subsequent years pertaining to current year. Though, the transactions of current year are not reflected in GSTR-2A for the financial year might be reflecting in subsequent financial year and ITC can be availed of such amount upto 30th Sept and therefore this reconciliation as stated in the table 8 adds more confusion and resulted into issuance of SCN by the department without appreciating the facts as mentioned above. If ITC is not availed due to ineligibility, it is charged off to the expenditure and therefore there cannot be separate tracking for ITC available but not availed OR ITC available but ineligible. Press release was released in 2018 that these figures are not mandatory to be provided and as such do not serve any purpose other than adding to the compliance cost.
Desk Review:
Departmental officer can download details of GSTR-1, GSTR-3B, GSTR-2A/2B & can scrutinized each return and thereafter check their observations in Annual Report in the form GSTR-9 and reconciliation of books of accounts in the form GSTR-9C. Taxpayer is permitted to file the annual return and also reconcile with the books of account and make the necessary corrections of errors & omissions in GSTR-1 & GSTR-3B and revise the same in GSTR-9 and also pay differential tax, if any at the time of uploading GSTR-9 / GSTR-9C. However, departmental officers don’t do such exercise and number of discrepancies in the form of ASMT-10 are issued to the taxpayers and make them answerable. Even though they clarify all the points, without understanding the facts & submission, departmental officials have started the SCN in the Form DRC-01 and thereby adding number of litigations. Unfortunately, lower adjudicating officers upto Appellate Authority do not provide the judicial orders and taxpayers have to approach high court in absence of formation of tribunal under the GST Law.
Further, when such departmental officers compare the same with audited financial statements (balance sheet and Profit & Loss Account, Tax Audit Report, Cost Audit Report) they issue the blanket letters without appreciating the facts that such taxpayers have number of registrations and such financial statements, Tax Audit Report, Cost Audit Report are for company as a whole. No efforts are done by the departmental officers to collate the information of all registrations from the returns filed by them and then compare. This is adding to lot of compliance cost and litigation to the taxpayers.
Interface with Departmental Officers:
At the time of implementation of GST, it was envisaged and propagated that there will be no interface with the departmental officers. However, when GST Rules were amended lot of documents including invoices pertaining to ITC availment, FIRC against export of goods & services, sample copies of shipping bills & bill of entries, documents w.r.t. evidencing 150% of domestic price of export goods have added lot of interface and have become hurdle to make open & transparent sanction of refund claim. No refund claim is sanctioned without interface with the departmental officers for the obvious reasons. Needless to say, it adds not only transaction cost but also transaction time. System should be designed in the same line of e-assessment and e-adjudication in the line of direct tax, but there are endless hassles for avoiding interface with departmental officers.
Different instructions / circulars from Departmental Officers of different states & Central :
It was envisaged that any clarification or circulars or instructions will be issued only after recommendation of GST Council, whereas there are different circulars & clarifications issued by Central Govt through CBIC & different State Govt through their circulars and they differ a lot with each other. Classic example of audit manual, instructions/clarifications pertaining to audit or issuance of SCN etc. etc. Each State Govt has issued different clarifications / formats etc. contradictory to each other and therefore if any taxpayer have got multiple registration, has to face lot of challenges & cross various hurdles.
September Return Due Dates:
Number of taxpayers have received SCN for availing the input tax credit for such transactions, which has been reported after 30th September of subsequent financial year. As a matter of fact, Input Tax Credit is availed at the time and in accordance with the provisions of Act & Rules at relevant times. From 1st July 2017 till 30th Sept 2019, there was no mechanism of matching and hence only the prevailing conditions as per Section 16 was required to be followed and ITC was availed based on the same. However, if such transactions are uploaded by the supplier after 30th Sept, number of SCN has been issued for objecting thereto. Even though, Section 16(2)(aa) has been made effective w.e.f. 1st Jan 2022, Rule 36(4) was inserted w.e.f. 1st October 2019 and Input Tax Credit was allowed to the extent of 110% / 105% of the eligible credit reported in GSTR-2A. In other words, there is no restrictions to avail the credit even though such transactions might have been reported by supplier after 30th Sept of subsequent financial year, If such amount is within the limit as specified in the rule. However, taxpayers have been issued number of SCN and litigations will go on. Therefore, whether such tax can be considered as good & simple tax is the question mark..
TRAN-1 :
There are number of issues pertaining to scrutiny of TRAN-1 as discrepancy notices / Show case Notices are sent by the department to everyone making it troublesome for the real taxpayers. As the notice requires all the previous records to be available making it a tiresome issue for the taxpayer to provide the details again.
Mismatches on account of delay in compliances / evasion:
The consistent policy rollbacks and amendments, powered by the glitchy GSTN Network, have enabled massive tax evasion, which was evident from unearthing the racket of fake invoices amounting to lacs of crore. The benevolent composition scheme, as well as windows for filing quarterly returns, raise concerns about the intention and execution prowess of the government at the centre. The increased pool of registered taxpayers has had little but no impact on Revenue generation. Only 72% of taxpayers file returns regularly. A major headache is, however, the mismatch between initial and final returns filed by taxpayers. There is an estimated mismatch more than Rs 38,000 crore tax liabilities reported in GSTR-1 and GSTR-3B.
The present GST structure has no mechanism for checking discrepancies found between GST Returns for July-Dec and final returns. About 90 % of the taxpayers were unable to correctly report revenue statements. The discrepancies and e-way bill failure demand that the GST Council now needs to take rigorous measures to tackle the menace of tax evasion through under-invoicing and errors while making e-invoices which is required to be corrected only after month end.
Lack of IT Ecosystem in India:
Indian economy is majorly driven by small business units i.e. SMEs. It will be unfair to expect small-scale business firms to make the transition to an online IT platform and expect no errors in return filing. It is an uphill task for the majority of our working population which has little hands-on experience with IT solutions. Majority of SMEs are too small and even cannot afford cost of GST Return Preparer and due to time constraint and other mismatch of priorities and lack of proper internet connectivity, returns are getting delayed or with errors.
Lack of Facilitation Approach:
Each Commissionerate Office has been renamed as GST Facilitation Centre. However, even the departmental officer irrespective of their ranks do not have any clarity, rather they add more confusion. Lot of refund applications are either rejected or kept pending on non-availability of domestic price, which is required to determine adjusted turnover and considering export price or 150% of domestic price of like goods, whichever is lower. If such goods are not sold in domestic, number of departmental officers are not considering the turnover of such goods exported. Number of examples can be cited and illustrations can be given that there is absolutely no clarity and
have the lack of training to departmental officers. It will be further worst situation when any taxpayer is falling under the jurisdiction of State GST Officers.
Advance Ruling:
Each state have set up Advance Ruling Authorities and there are number of cases to have the different views of different Advance Ruling Authorities. Further, Advance Ruling Authorities is envisaged set up with the objective to reduce the litigation and have better clarity, but what has resulted is multiplied confusion due to contradictory decisions of different State Authorities. Further, majority of the decisions lacks the judicial and fair approach. Almost 1557 advance ruling decisions have been reported and number of advance ruling are still pending. There are 236 appellate advance ruling decisions of different state authorities, which have added further confusion.
Additional Burden on High Courts:
In absence of setting up the GST tribunals and non-judicious orders of lower authorities coupled with high handed approach and attitude of departmental officers, high courts are burdened with number of writ petitions. Fortunately, Indian citizens have got 100% confidence in judiciary of high court & supreme court, but lower authorities needs to really do their duty when they pass the judgement as adjudicating authority and hence they are the quasi-judicial officers and required to provide the judgement judiciously.
Concluding :
It was expected that Goods & Service Tax will be one of the example of Co-Operative Federalism and will really serve the object of One-Nation, One-tax and Good & Simple Tax. However, taxpayer has got the different experience and undoubtedly, we have achieved the objective of one rate and less complex system than that of earlier, but could not achieved the object envisaged to make “Good & Simple Tax” without interface of govt officials and achieving Maximum Governance and Min Government.
***
