There is absolutely no doubt that anyone visiting the JW Marriott Hotel in Chandigarh is not going to order bananas. This is the impact that actor Rahul Bose created when he posted (on Twitter and Insta) photos of a bill for two bananas issued by the hotel. The selling price of two bananas was Rs 375 to which GST of 18% was added thus making the total amount Rs 442.50 (Rs 221.25 for each banana). We do not know if he consumed the bananas and paid for them since the atrocious price on the invoice hogged all the limelight. It is believed that the hotel has been penalised Rs 25,000 under Section 11 of the CGST Act and that the hotel has appealed against the penalty.
Under the Harmonised System of Nomenclature (HSN) Code, bananas fall under Code 0803 - Bananas including Plantains - for which the rate of tax is 0%. An explanation to Section 11 of the CGST Act states that where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both.
A closer look at the bill from Marriott reveals that the word banana has not been mentioned at all but the words fruit platter and food have been mentioned. It is quite possible that Marriott was classifying the fruit platter not under HSN Code 0803 but under some other HSN Code applicable to food products. Yet, the rate appears to be incorrect since no food products fall under the 18% category. It is also possible that Marriot can make a statement that they have collected the tax and paid it and hence they have done no wrong apart from charging an incorrect rate of tax.
A hotel can be supplying multiple services with different rates of tax and it would be difficult to split an invoice into goods and services. Hotels are predominantly service providers and the usual rate for services is 18%. The hotel industry has been at the receiving end of a number of anti-profiteering notices. Probably one of the first invoices that was put out in the public domain was of Sangeetha Veg Restaurant in Chennai. The customer who put this out had a mini-meal on November 14, 2017, which cost him Rs 105 plus GST at 18%. On November 16, he had the same mini-meal expecting it to cost him less as the GST rate was reduced from 18% to 5%. To his surprise, he found that the base price had been increased to Rs 112 and GST charged at 5%. Such pricing changes would fall squarely under the realm of anti-profiteering under Section 171 of the CGST Act.
Though the Marriott incident is neither a case of profiteering or anti-profiteering, it sends out a couple of reminders to the Central Board of Indirect Taxes and Customs.
The HSN Code list is too lengthy and begs simplification. The CBIC should move towards having only product headings for the HSN Code and not insist on sub-products within products. The Fitment Committee should be entrusted with the task of ensuring that, to the extent possible, rates of tax under a Chapter heading should be uniform. Another take-away for CBIC from the Marriott episode is that there is no penalty specifically for cases such as this. GST laws details of a list of 21 offences for which a taxpayer can be penalised- incorrect invoicing is not specifically included in this list. The penalty of Rs 25,000 seems to have been imposed for incorrect invoicing. Fake claims for input tax credit and fake invoices continue to exist in the GST system. It is hoped that the proposed new system of e-invoicing would reduce illegal claims for input tax credit and fake invoices.
Electric vehicles: In their recent meeting, the GST Council decided to bring down the rate of GST on electric vehicles to 5%. While this is indeed laudable, the automobile industry, in general, is presently going through tumultuous times. Investments in electric vehicles will happen over a period of time and consumers would shift to electric vehicles only when they are certain that the necessary infrastructure such as charging systems are in place and are working well. The GST Council should probably meet quickly and decide on a breather from GST for the non-electric automobile industry and their ancillaries. This would enable them to get over their present woes and be ready with electric vehicles when customers are ready.
The breather could take the form of a rate cut or stepped up input tax credit. There is a flip side to such industry-specific breathers: other industries would not waste much time in queueing up before the Council to prove that the problems in the automobile industry are small change compared to theirs.
The Council would need to exercise some judgement and discretion to give temporary breathers only to those industries that could get a boost with the breather.
The future
We are now in the third year of GST. Though things have improved a bit from July 2017, issues continue to plague the system. Much would depend on how the new system of invoicing works. The CBIC appears to have thought this through because the system is being phased into the system and introduced on one day. Frauds in availing input tax credit on the basis of fake invoices continue unabated due to the fact that there are very little checks and balances on availing credit today.
The anti-profiteering provisions need to be done away with since no one knows exactly what constitutes anti-profiteering. Going by the number of cases before the Authority for Advance Rulings (AAR), litigation under GST is going to be large. The CBIC should ensure that the Tribunals are set up fast across the country and are manned by competent staff who are able to look at issues impartially before passing judgments. To borrow from Robert Frost, GST laws have promises to keep and miles to go before it sleeps.
(The writer is a Bengaluru-based tax expert)
