Many provisions in the draft Bill are worrying
Now that it is almost certain the GST Bill will get passed in the monsoon session and will be implemented across the country from April 1, 2017, the government needs to work on ironing out the remaining glitches. This includes the final rate for GST as well as the issue of dual control—while all indications are that the state governments will tax all those with an annual turnover of under R1.5 crore, it is important that possible sources of harassment be reduced to the minimum. Worryingly, many of the provisions in the draft Bill are quite draconian and leave enough discretion for the taxman to cause problems later. The most obvious of these is the clause that says the onus of proving there is no tax liability or of an eligibility to get an input tax credit lies with the taxpayer. Given the detailed computerised linking of taxpayer information, it is decidedly odd that input tax credit is not to be allowed to, say, Firm B if Firm A—a seller to B—has not deposited its input tax credits.
Considerable discretionary power has been given to the taxman to, for instance, reject the taxpayer’s valuation of goods—goods are to be valued on their transaction value, not their MRPs. Such powers need to be circumscribed quite tightly since, as we saw in the case of transfer pricing, with almost blanket powers given, the taxman managed to ratchet up transfer pricing demands by R2.23 lakh crore between FY12 and FY15. It is only when this got out of hand, that the government decided to try and put in place certain type of rules to guide the taxman on how to handle different type of cases—along with advance pricing agreements, this also provided certainty to taxpayers. No one expects a brand new taxation system, particularly one that is as revolutionary in its reach as GST, to take off without its share of problems, but it is important to try and address all manner of possible problems before April 1. After that, it will be important to constantly monitor the system and have a robust enough system that can quickly identify problems and fix them fast.