GST Uncertainty …… gone but still in-limbo
The monsoon session of the Parliament has been the most fruitful one in the current year. Unlike the past Rajya Sabha session after session there was no unnecessary blockage against passing the legislative Bills. In this session, it is worth noting that the Lok Sabha passed 15 Bills utilising as much as 110.84% of allotted time for legislative agenda, during a period of 26 days while during the same period, the Rajya Sabha passed 14 Bills with 20 sittings utilising 99.54% of the allotted time for legislative functions.
2. Such a working with co-operation from the opposition parties was a historical one when compared to the utter chaos witnessed in the past.
3. One of the important Bills, the Constitutional (122nd Amendment) Bill, hanging fire before the Rajya Sabha was unanimously passed with a few amendments which were later on approved by the Lok Sabha. The only exception to the 100% unanimity, was the walkout by members of AIDMK party from Tamil Nadu.
4. Many other subjects of national concern were also debated and discussed including the unrest witnessed in Jammu and Kashmir. Almost all parties got the opportunity to raise supplementary and participate in Question Hour. The normal citizens were happy to see that their representatives have started to do their productive job for which they were elected. In fact the session was described as ‘glorious session’ in one of the leading newspaper. In that session however one small unwarranted demand came from some of the Rajya Sabha Members, insisting that their salaries and allowances should be revised upwards. Fortunately for all the taxpayers in general such a demand was not taken to its logical conclusion; may be for the time being.
5. The passing of the 122nd Constitutional Amendment Bill by both the houses, is not the end of uncertainty about implementation of the much trumpeted Goods and Service Tax Law, ushering in the ‘one Nation one Tax’ scenario. Before the Bill becomes an Act more than 50% of the States have to ratify the same. The State of Assam has already taken the lead in that direction. This aspect of the matter itself may consume larger than planned period of enabling provisions to become an Act of Parliament.
6. The passing of the 122nd Constitutional Amendment Bill is only an enabling legislation whereafter the Parliament will have to separately pass the laws relating to CGST and IGST. Similarly the individual States will also have to pass their own State GST. Some of the avowed objects of introducing such a unique measure of indirect tax was to attain simplicity, certainty, avoiding, unhealthy rate competition between the States with one common system throughout the country without long drawn litigations that arose under the multiple taxes levied both by Centre as well as individual States.
7. Similar objects were publicised at the time of introducing the present VAT System under a common basic design by all the States. It is an admitted fact that each State have their own requirement and priority vis-à-vis its formulation of taxation policy. The scenario so cherished however have not yet been achieved even though most of the States implemented the VAT System of taxation from 1-4-2005. It is a matter of great regret that the uniformity sought to be achieved by introducing the said system could not become a reality. Presently each State has different rates of tax on goods sold in their area coupled with the levy of cess, additional tax, surcharge etc.
8. The final GST law to be heralded possibly from 1st of April, 2017, is still not made available to the public at large for their information and the necessary initiation of follow up actions required to be taken up by them in accordance with the new law.
9. The model GST Law placed on site, for the purpose of advance information is full of inconsistencies and loopholes. We would refer such instances in the near future but it is very much important for all to note certain important provisions in so far as they affect the professionals at large.
10. The first and foremost provision relates to appearance by authorised representatives. Section 86 provides for only regular employees, relatives of the assessee, advocates, chartered accountants, cost accountants and company secretaries to be competent to appear for and on behalf of a taxpayer, before GST authorities including the First Appellate Authority or the Appellate Tribunal. In other words, the large number of duly enrolled practitioners presently eligible to represent their clients would not be, as a class, permitted to represent unless the proposed GST Council recommend to include their qualifications to practice on equal footing like the other professionals covered by Section 86 under proposed Section 86(2)(d). In order to avoid undue advantage to the persons who retire from the concerned Dept., from their appearing before erstwhile colleagues immediately on retirement, a cooling period of only one year has been provided in sub-section (3) of section 86. In our opinion the persons who have spent their entire active life with the Dept., should not be eligible to represent any other person similar to the one observed before the Income Tax Appellate Tribunal as well as the High Court. Both the aspects being serious in nature would call for persistent representations from all quarters. The provisions of Section 86 have to be read with Section 34 under which the rules will prescribe the eligibility, conditions, duties and obligations for the Tax Returns preparers authorised to furnish the details of supplies both inward and outward by their principal but statutory responsibility for the correctness of the data, would always be that of the taxable person on whose behalf the details were filed by Tax Returns preparers.
11. The model GST Law would also increase tremendously the table work by all concerned including those representing their clients. Thus the cost of maintaining and furnishing the desired details in the form of supply of goods and services both by the supplier as well as the receiver of such supply will increase substantially. Sections 25 to 34 propose to include the provisions relating to returns to be furnished periodically. Monthly returns will have to be furnished within a short period of 20 days while the persons eligible to the composition levy under Section 8, will have to file quarterly returns within a period of 18 days from the end of the quarter. Such persons would be those whose turnover in the Financial Year did not exceed rupees fifty lakhs. They however would not be able to collect tax nor would they be eligible for claiming input tax credit.
12. The Statutory annual audit per each financial year will have to be conducted by only a Chartered Accountant or Cost Accountant as provided in the proposed sub-section (4) of Section 42. This will adversely affect other classes of professionals who are presently allowed to audit the books, under State enactments. In addition to such audit report, the draft law also provide for audit by tax authorities u/ss. 49 & 50 thereof.
13. With the avowed object of creating one nation one tax it was expected that a taxable person supplying goods or services from different centres located in the same State or in other States, will have to obtain only one registration certificate specifying various locations therein as their additional places. That expectation however is proved to be misplaced, in as, much as Section 19 provides for registration separately in every such State with an option for obtaining separate registration for each place of business located in the same State.
14. We may herein recall that the heart of the entire new law is the Constitution of a Council by the President, as contemplated under Article 279A within a period of 60 days from the date of enforcement of the Constitutional (122nd Amendment) Act. Such Council, however, can only recommend about the matters mentioned in sub-Article (4) of the said Article 279A. Their decision is not mandatory to be followed by all the States. Therefore there is a justifiable apprehension that some States ruled by another party then the one at Centre, may defy the decision of the Council solely for political reasons. Such instances however have to be deprecated by one and all having national interest in their heart.
15. The moot question however still continues is the drafting of individual separate SGST in accordance with the model GST Law. Our experience in that regard is not good because of quite many instances of not adhering to white paper circulated on 17th January 2005 before introduction of the State level VAT prepared as result of collective efforts by all the States in formulating its basic design. We hope such instances would become a part of the history not to be repeated by any of the States.
P. C. Joshi
Advocate
Member, Editorial Board