The GST Council should consider issuance of public rulings, prevalent in other jurisdictions
By G Gokul Kishore
The BJP coming back to power should provide impetus to fine-tuning the GST regime. The GST Council is likely to meet in June. Two key amendments to the CGST Act are required. To address the issue of divergent positions adopted by the Advance Rulings Authority in various states, the GST Council had recommended an amendment to provide for a centralised appellate authority for such rulings instead of state-wise appellate authorities.
As these bodies determine crucial issues affecting business, it is necessary to include judicial members. Currently, both first-tier and appellate advance ruling authorities are manned by bureaucrats. Bodies vested with judicial power to determine questions of law should invariably include judicial members. The GST Council should consider provisions for issuance of public rulings as prevalent in other jurisdictions.
Absence of judicial members is also a major lacuna in the National Anti-profiteering Authority (NAA), which has saddled companies with huge liabilities on the ground that the amounts computed by it were profiteered and should be paid back. It proposes monetary penalties and cancellation of registration. Despite being conferred with such judicial powers, NAA comprises of only high-ranking officials sans any member from the bar or bench.
It should be headed by former Supreme Court judges or chief justice of High Court (HC). The number of technical members should not exceed that of judicial members. Right from the start, the lack of a methodology to compute the benefits arising out of rate reduction or increased credits has been highlighted.
NAA has held that reducing the sale price based on GST rate reduction is a simple mathematical exercise. Section 171 of the CGST Act on anti-profiteering and related rules needs revamp. In the absence of any remedy of appeal against NAA’s orders, taxpayers are compelled to invoke writ jurisdiction of HC. Statutory right of appeal should be provided in the CGST Act against NAA’s orders.
Cross-charge of expenses along with GST by head office for corporate support services provided to branches located in other states is a concern for business. Advance rulings have been in favour of the department to the extent of inclusion of even salary cost while charging GST. Such inter-company transactions where receiving branch avails input tax credit (ITC) of tax charged by head office are revenue-neutral, and add to compliance burden.
Considering the legal provisions where units in different states of same company are treated as distinct persons requiring charging of tax, it is desirable to provide for appropriate exemption to such transactions. This doesn’t require an amendment; a notification will do.
The Council had recommended amending the CGST Act to provide for interest liability only to the extent of cash payment of tax. If a taxpayer has sufficient balance of ITC, then interest will not be demanded in cases of inadvertent short payment of tax. The Telangana HC had noted this proposal but dismissed the petition against demand of such interest. The GST Council should recommend retrospective effect to such amendment.
Scores of petitions have been filed in various High Courts with the largest number in Kerala to obtain relief from arbitrary detention of vehicles and goods for minor infractions in e-way bills. The powers to detain conveyances and goods under GST law should be provided with appropriate checks to stop harassment of both taxpayers and transporters.
The simplified returns were to be introduced on a pilot basis from April and rolled out en masse from July. But prototype of such returns has been placed in public domain recently, seeking feedback from users. So, new returns will be implemented after this process is complete. Tweaking such forms based on stakeholders’ comments will aid in resolving practical issues faced by taxpayers.
The learnings from operation of summary return of GSTR-3B and outward supply return GSTR-1 should also help. The annexures to new returns ‘Sahej’ and ‘Sugam’ seek a plethora of information. The GST Council should consider further simplifying annexures and decide on a phased roll-out of new forms after providing sufficient time for taxpayers to assimilate the changes.
Cancellation of revocation of registration, processing of refund claims, execution of letter of undertaking for exports and verification of invoices on the pretext of non-matching of details reported by supplier with that of recipient are areas where one can feel the pain of industry. Overhaul of such processes based on taxpayers’ feedback should top the agenda before the GST Council.
Cement attracts the highest rate of 28% GST along with sin goods. This needs correction to 18%. The recent special regime for real estate with reduced rates along with restriction of ITC has not benefited the industry. Developers who opted for the old rate with ITC intact for on-going projects are under strain as new customers seek reduced rate of 5%. Further rejig to benefit the sector and homebuyers should be considered.
(The author is an advocate with Lakshmikumaran & Sridharan Views are personal)