GST Law is about to celebrate its third anniversary and it has been a roller coaster journey for the law. The GST Council and the government have been very proactive in making amendments in the law to give benefits to various stakeholders including consumers, businesses and field officers. However, there are still some concerns that are turning out to be roadblocks and not allowing the law to settle down completely.
In recent years, the Government has given a big push to digital India and it reflects in GST law also. In our country, where computer literacy ratio is around 6% only, implementing a law that is heavily dependent on technology, is a reason for big worry. GSTN portal, itself has been a matter of concern as well as a major setback to the whole legislation.
GSTN frequently chocks during peak hours and due to this government had to extend time limits for filing of tax returns. According to a survey conducted by a trade body, 59% of users are not satisfied with the capabilities of the GSTN portal, 96% felt that improvements were required in the working of the portal.
India produces one of the biggest technical experts in the world, still, we ourselves are unable to implement a scratch-proof digital network to implement a nation-wide transaction tax in the country even though by now our government would have spent billions on the same.
Menace of Authority of Advance Ruling
Under Goods and Services Tax law, AARs are quasi-judicial authorities, established state wise for taxpayers to provide them clarity on the interpretation of GST laws. AAR mechanism is a powerful tool that plays a dynamic part in providing up-front relief in major technical issues and possible litigations. However, since implementation, more than 80% of rulings are revenue biased. It shows a general trend of biasedness towards exchequer violating very basic principles of legal justice. Since AARs have to be established in state wise fashion there are many contradictory rulings creating ambiguity. Though AAR rulings are binding on the applicant and jurisdictional officer only, still it forms part of jurisprudence performing a critical role in the interpretation of tax law.
Prima facie reason for these biased rulings could be the constitutional framework of AAR, being presided over by tax officer of the Central tax and state. This format of justice creates an intrinsic conflict of interest, as the people from revenue would naturally have a bent towards government only. The advance ruling structure needs an overhauling at the highest level. To achieve the intended objectives of a fair and unbiased justice mechanism an independent high-level Central body shall be constituted over and above state-level bodies.
Interest to be charged on Gross Amount instead Net Amount
Recently Telangana high court pronounced a ruling which has given the industry a major scare. The Hon’ble court ruled that under section 50 of GST law, interest is to be paid on gross tax liability without setting off the amount available for input tax credit setoff. This in simple terms, means that taxpayers will have to pay the interest on that component as well which is available to set off with input tax credit. This Judgement will deeply hurt those taxpayers who are having a substantial amount of input tax credit, however unable to file tax returns due to liquidity crunch leading to non-payment of cash component.
Another disappointment is that the GST council in the month of December 2018 had already taken cognizance of this anomaly and confirmed an amendment in section 50 requiring the taxpayers to pay interest on the “net tax liability only”. However, this change has not been implemented by the government as of yet.
GST Appellate Tribunal
Central Government, in January 2019, announced the creation of the National Bench of Goods and Services Tax Appellate Tribunal (GSTAT) similar to the CESTAT of the earlier regime. This body would work as a common forum for dispute resolution.
However, recently Delhi High court passed an interim order against the formation of GSTAT. Hence for time being GSTAT constitution is on hold. Had it been formed, it would have helped in preventing any unwarranted litigations and issues causing delays. Further being a common forum it would have been crucial in addressing disputes under GST and ultimately helping in quasi-judicial legal precedents.
Anti-Profiteering measures in GST ensures that every time there is a reduction in GST rates, the benefit is passed on to consumers. Therefore, every upward change in prices is expected to be supported by an operational justification of such price rise.
This is a draconian law without sufficient rules and regulations prescribed under its umbrella. Taxpayers are generally worried on few broad level issues related to anti-profiteering machinery which includes that A complaint can be filed by “Any Person”, no rules are prescribed on the calculation of “commensurate benefits”, an applicant cannot withdraw his application and it is hard to find out whether the price increase is on account of tax savings or some operational reason.
Many taxpayers have faced numerous issues in claiming GST refunds. These issues pertain to errors in the processing of tax claims, technical issues in the GSTN portal, the mismatch between relevant GST filings, errors in filing of shipping bill, frequent circulars, Manual refund filing procedure and reluctance of state tax officers in processing refund claims related to services.
GST in India is still in nascent stages. The government has made numerous changes to rationalize the legal provisions and procedures. However, India is still in the learning curve phase and many aspects of this great law need to be improved over a period of time. Hope the government would address the above issues faced by taxpayers so as to make invincible tax law. All eyes would now be on the government to take GST to the next level.
- Rajat Mohan is Senior Partner at AMRG & Associates. Views expressed are the author’s own.