The current mechanism entails twin refund sanctioning authority of the central and state tax officers, but that could well change by August when the proposed new structure involving a single authority comes in place.
Finance Minister Nirmala Sitharaman will chair her first meeting of the GST Council on Friday which, among other things, would consider extending the tenure of the anti-profiteering authority by a year, setting up a single point refund system and a mechanism for businesses to issue e-invoices. Sitharaman, who took over the reigns of Finance Ministry from Arun Jaitley last month, will preside over the 35th meeting of the GST Council, which is a federal decision making body comprising of state finance ministers.
The agenda of the meeting will also include integration of GST e-way bill system with NHAI’s FASTag mechanism from April 1, 2020, to help track movement of goods and check GST evasion. Besides, the Council would also deliberate on setting up a national bench of the Appellate Authority for Advance Ruling (AAAR) to reconcile the contradictory orders on similar issues passed by Authority for Advance Ruling (AARs) in different states, a move aimed at providing certainty to taxpayers. The Council is also likely to approve a draft amendment bill to bring changes in GST law to allow businesses to rectify mistakes during payment of GST and applicability of interest only on cash component in case of delayed payment of GST.
With regard to extension of the National Anti-Profiteering Authority (NAA), the Council would consider extending its tenure by one year till November 30, 2020. Soon after the GST was rolled out from July 1, 2017, the government had approved setting up NAA for two years to deal with complaints by consumers against companies for not passing on GST rate cut benefits. The NAA came into existence on November 30, 2017, after its Chairman B N Sharma assumed charge. So far, the NAA has passed 67 orders in various cases and complaints still keep coming in. Also, the Council is likely to discuss a mechanism for single point sanctioning and processing GST refunds.
The current mechanism entails twin refund sanctioning authority of the central and state tax officers, but that could well change by August when the proposed new structure involving a single authority comes in place. As per the single point system being worked out by the Revenue Department, the taxpayer will get full refund from jurisdictional officer once the claim is sanctioned, while at the back-end the Centre and states will apportion the amount to be paid to each other. In a move to check evasion, the Council would also discuss on the proposal of integration of e-way bill with NHAI’s FASTag mechanism from April 1, 2020.
Such an integration would help find the location of the vehicle and when and how many times it has crossed NHAI’s toll plazas and restrict transporters from doing multiple trips by generating a single e-way bill. Transporters of goods worth over Rs 50,000 would be required to present an e-way bill during transit to a GST inspector, if asked.
However, lack of harmonisation under the ‘track and trace’ mechanism in terms of sharing information among different agencies is leading to misuse of e-way bill. The Council would also consider another anti-evasion proposal of issuance of e-invoices on a centralised government portal by businesses with turnover of Rs 50 crore and above for business-to-business (B2B) sales. Analysis of return filing shows that as many as 68,041 businesses have reported a turnover of over Rs 50 crore and accounted for 66.6 per cent of total GST paid in 2017-18.
Further, while these businesses account for just 1.02 per cent of GST payers, they make up almost 30 per cent of the B2B invoices generated in the system. The Council would also consider a proposal for setting up a national bench of AAAR to reconcile the contradictory orders on similar issues passed by AARs in different states. The AARs in different states have passed about 470 orders, of which in as many as 10 cases contradictory orders were passed, a couple of which were later clarified by the Central Board of Indirect Taxes and Customs (CBIC). The GST law would have to be amended for setting up a National bench for AAAR since the Act in its present form does not provide for a centralised authority.
Setting up of a national bench of AAAR would help bring certainty in the GST era as divergent rulings by AARs leave the industry flummoxed about the tax implication of a particular business decision. In view of the confusion created by contradictory rulings, the revenue department had also last year mooted a proposal to set up a centralised appellate authority for advance ruling to bring uniformity in such cases. The GST Council, chaired by Union Finance Minister and comprising state counterparts, was scheduled to discuss it in its meeting in July 2018.
However, the council did not arrive at a decision on the agenda item. Under the GST law, each state is required to set up an Authority for Advance Ruling (AAR) comprising one member from the central tax department, and another from the respective state. The New Delhi bench of the AAR had in March last year held that duty-free shops at airports are liable to deduct GST from passengers. However, these shops were exempt from service tax and central sales tax in the earlier regime. This had created a flutter in the industry.
Similarly, the solar industry too was left in a vexed situation when the Maharashtra AAR said that 18 per cent GST rate would be levied for installation works, but the Karnataka bench of AAR passed an order levying 5 per cent GST on the same. Also, the AARs in Tamil Nadu and Gujarat had passed divergent orders on applicability of GST on catering services in an industrial/office unit, which was later clarified by the CBIC through a circular. Besides, there were contradictory orders passed by AARs in different states on levy of GST on payment made by breweries to brand owner, availability of input tax credit (ITC) on cess paid and also whether ITC is admissible when the recipient settles the payment through a book adjustment.