Looking Back….. Looking Ahead…..
“GST – One Year”…….
• Normally, the completion of first year is celebrated with all the pomp and funfairs. Keeping that in mind, the Government of India and other States did arrange programmes highlighting the brighter side of the new tax reform by introduction of Goods and Services Tax, w.e.f. 1st July, 2017. If the result of the year is to be described in the shortest possible term, one can say that, though belonging to different ruling parties, the Finance Ministers, the authorities and concerned bureaucrats, have united themselves for one common cause i.e., to get the maximum revenues from the citizens of the country.
• Nearer to our Federation, the implementation of ‘one nation, one tax’ has at least brought all the members of the Federation practising Indirect Taxes, on one common platform wherein complexity and intricacies of the new law can be gone into threadbare without being influenced by the statistical data published in the media. This gain is a permanent one as far as this Federation is concerned because under VAT Regime, the provisions were not pari materia amongst all the States and therefore while relying on the case law, we had to first consider the relevant provisions and the controversy before the court, that would not be now necessary because one uniform law is enforced in the entire nation without any exception including the Union Territories. Such a situation is a welcome one by all professionals with one voice.
• Looking back to the scenario witnessed in the months of May and June, 2017, everybody was uncertain about the manner in which three laws namely CGST, IGST and State GST would simultaneously have application on transactions both of Intra State as well as inter-State nature. Such a situation coupled with the unsatisfactory working of the network (GSTN) led to multiple glitches. Many of the dealers could not migrate themselves from excise or VAT arena, some others after successful migration could not file GSTR-3B in time with the result, the due dates thereof as well as for GSTR-1, 2 and 3 had to be repeatedly extended or postponed. Some of the matters also reached the High Courts, wherein the irregular working of GSTN was highlighted. Such a scenario was noticed by the GST Council as well that resulted in considering, the complete takeover of GSTN itself by the Govt. Our experience of working by Govt., institutions is not that happy and therefore it would be very much advisable that the present set up of GSTN being handled by independent private hands should continue. The GSTN Company is doing its best to serve the large number of taxpayers. In that regard our observations would be that the taxpayers should not wait for the last date of submission but should arrange their affairs in such a manner that they would be in a position to submit the returns with the help of GSTN without much difficulty. It is reported that 72% to 80% of the problems with GSTN have been sorted out. The number of compliances for submission of GSTR-3B was initially about 70% which by now must have risen to a higher rate.
• It is heartening to note that implementation of GST has led to substantial increase in the number of taxpayers by at least 50% of the number as on 30th June, 2017.
• Referring to the quantum of payments of GST, the recent survey mentioned that only about 0.6% of the firms account for 38% of the total turnover, 87% export and 63% of the GST liability are in the hard-core formal sector. Another 12% of the firms account for 41% of the turnover, 13% export and 37% tax liability. The survey also mentioned that bulk of the transactions were business-to-business (B2B), exports as stated
above also covered 30% to 34%, while business-to-consumer (B2C) transactions were only 17%.
• The survey also referred to certain States like Maharashtra, Gujarat, Uttar Pradesh and Tamil Nadu having highest number of GST registrations while Uttar Pradesh and West Bengal recorded larger number of increase in new registrations. The apprehension carried by major producing States that their Revenue would be adversely affected have proved to be incorrect. Readers are well aware the GST is a destination and consumption based tax. The above scenario is true for urban areas but the real test of the network is in rural areas. It is facing the problems of reconciling the figures qua supplier and recipient of goods / services.
• In order to improve the compliances, the authorities have also taken up certain measures especially against the suppliers who still believe in continuing their transactions without bill. Such an attitude is required to be discouraged by one and all because each citizen has a vital positive role to play in the success of the GST Regime.
• The search and survey carried out by State authorities have yielded quite a large number of tax evaders. In such a list, Uttar Pradesh tops the same with 8,413 which is followed by Andhra Pradesh at 5,974 and Kerala 1,538. List of the States also have shown that their officers are conscious of their duties. It is surprising to note that so far no action seems to have been taken by various other States including State of Maharashtra, Tamil Nadu and West Bengal. None can think even for a moment, that there are no black sheep in those States and all suppliers have overnight become disciples of Harishchandra.
• The 25th Meeting of the council held at Delhi on 18th January, 2018 scaled down GST rates on 29 items and 54 categories of services; the council also considered steps required for simplifications of the returns to be filed both by the suppliers and recipients of goods and services. With the reduction in the rates, the anti-profiting provisions were also activated alongwith the creation of Consumers Welfare Fund. It is reported that one big company has offered 119 crores in compliance with the anti-profiting notice because it was unable to pass on benefits on some of the stocks in pipeline, after the reduction of the rate from 15th November, 2017. As the time passed by it was realised by many States that their revenue related to compensation payable by the Centre out of cess collections, and the unutilised Integrated GST have been affected adversely. Whether such an impression is correct or not can be ascertained after all the aspects are taken into consideration but if true, the council will have to take the corrective steps.
• As for example, Delhi alone pointed out the blocking of 1.35 lakh crore in IGST account which according to the State was lying idle like escrow account with an advocate. Some of the States affected by non-utilisation of IGST Funds also demanded the abolition of IGST in entirety. Such a proposal in our view is not in the interest of the nation because the levy of IGST is mainly on goods imported as well as, the transactions of inter-State nature whereunder the consuming State is the beneficiary as against the dispatching States under
• The above scenario led to tightening of administration and implementation of the E-Way Bill by amending Rule 138 drastically. Though it was proposed to be brought into force from 1-2-2018, the same could not be done because of failure of GSTN on the very next day ultimately, the same could be enforced from 1st April, 2018 after substituting Rule 138 by Notification No.12 of 2018 dated 7th March, 2018. Different dates were announced by the States for the intra-State movements. The sole purpose of introducing the e-Way bill system to be generated in advance i.e. before the commencement of movement of goods from one State to another, was to check tax evasion and improve tax compliance coupled with speedy movement of the trucks across the border of one State traveling to another. For a layman, e-Way bill is like a token that can be generated online to regulate the movement of goods. Once the e-Way bill is generated, there would be no need to refill the same information in the tax returns that may follow the commencement of the movement because the details in E-waybill have been linked with GSTR-1. It has also been specifically decided that during the entire journey of the goods, the verification would be only once and not multiple even when the movement involved more than one State. Such a decision is welcome to usher in the ease of business.
• While I was dictating the present editorial, news was received about certain proposals to amend the GST Laws that were stated to have been placed on site of the GST Council, for response from stakeholders. We would therefore refer to a few of the important ones hereunder:
“Section 9(4) of the CGST Act, provides for the payment by the recipient of the service / goods from an unregistered person on reverse charge basis. The provision has not been enforced so far however, the proposed amendment that such a reverse charge mechanism should be applicable only to specified registered persons is not a correct proposal because apart from such a provision being discriminatory under Article 14, the object sought to be achieved in the form of revenue, will get frustrated. On the contrary, the provision in my view would encourage, the unregistered persons to get themselves registered which ultimately would be beneficial to the economy at large.
• The provisions proposed for allowing the taxpayers to amend/rectify the returns filed by them was very much needed because there may be several reasons for the bona fide mistakes crept in while uploading the returns online which have to be corrected no sooner the taxpayers realise or is made aware about it.
• The proposal relating to the statutory audit under the provisions of the law, to be not applicable to Government and local authorities is also welcome. Similar provisions were also made in some of the VAT laws.
Import – High Seas
• The proposal in regard to supplies from customs bonded warehouse to be liable only after the clearance of the goods for home consumption on payment of duty, if any, is also a welcome one. I would, in that regard, suggest that the non-levy of tax on import of goods placed under customs bounded warehouse, should also cover, the supplies in territorial waters because under the provisions of Constitution the border of a State culminate with the lands end or shore while the territorial waters belong to the Union. Such a proposition will increase the business transactions as well as encourage the supplies to the ships going to foreign ports anchored at the berth of the Port for loading or unloading or for collecting the stores required by the ship during its onward journey. It will also encourage the dry dock activities in the nation.
• With the stabilisation of the e-Waybill system and a few changes suggested, I am sure, the second year will result in a better balance sheet than the first one.
P. C. Joshi
Member, Editorial Board