The Greek philosopher Heraclitus said, “The only constant in life is change”. Today, it seems, “The only constant in GST laws is change”. GST laws have been subject to change right from July 1, 2017. Many of the recent changes are beneficial in nature and have clearly been made with the forthcoming elections in mind.
Comparing tax paid
The GSTN, which handles the technology backbone of GST, has provided a facility to taxpayers to view and download a report on tax liability as declared in their form GSTR-1 (final sales return) and as declared and paid in their return, filed in form GSTR-3B (summary sales return). This has been done because a need was felt to provide a facility to view liability declared in both the forms in one place. The new facility enables taxpayers to view these two liabilities in one table for each return period, which can be compared. This will enable taxpayers to make good any difference between the two forms filed by them. The GSTN has also provided taxpayers information regarding data of Input Tax Credit (ITC) as claimed in their form GSTR-3B and as accrued in form GSTR-2A, based on the return uploaded by the supplier. This functionality has been provided in the ‘Returns’ dashboard on the GST portal under the heading “Comparison of liability declared and ITC claimed”
To settle the dust over payment of GST on income tax collected at source (TCS) on purchases of select items, it has been clarified that GST does not apply on the TCS amount. In an earlier circular, dated December 31, 2018, the Central Board of Indirect Taxes and Customs (CBIC) had said GST should be levied on the entire amount of purchase, including the amount added due to TCS. The TCS is usually applied to a list of about 10 items, which includes cars costing above Rs 10 lakh and scrap articles.
New return formats
The GSTN released the revised return forms, which businesses would need to comply with from this year. The new forms will be operated on a pilot basis from April 1, 2019, and will be mandated across the country from July. The new and revised return format would obviate the need to furnish returns under the family of GSTR-1, GSTR-2 and GSTR-3, but the annual return GSTR-9 might continue. The GST Council had suspended GSTR-2, a purchase return, and GSTR-3, input-output return, because of the complex form structure. On the other hand, GSTR-1, a sale return, and GSTR-3B, summary input-output return, remain.
The new return formats — christened “Normal”, “Sahaj” and “Sugam” — would make the compliance process simpler for the smallest of businesses, wherein taxpayers up to a turnover of Rs 5 crore would have an option to file any of the three forms. For the revenue department, the new format would help in matching the invoices of the seller and the purchaser, and would help the department check evasion to a great extent. But at the same time, it is likely to increase clerical and administrative work for businesses. The Harmonised System of Nomenclature (HSN)-wise details need to be provided at the invoice level rather than the summary level. In addition, while details of 4-digit HSN codes are required in the current format, the new format would need those details of the 6-digit HSN.
Under the new format, invoices can be reported and viewed by the counter-party on a continuous basis. This would enable decisions to be taken on accepting/rejecting/amending the invoice in real-time. One can only hope that the GSTN has done many dry runs of the new system of filing and fixed any bugs. Many GST taxpayers still do not trust the portal completely, and any glitches in the new system could result in these taxpayers thinking of ways to beat the system.
In its latest meeting, the GST Council decided to reduce the GST on houses under construction to 5% without the benefit of input tax credit. It is possible that the sector may tend to lose out because inputs, including capital inputs, would form a significant portion of any real estate project. The industry also has the option to either go for the 5% scheme or charge 12% and claim credit. The new system of filing returns should be able to nab those in the industry who issue invoices only for the sake of issuing invoices. In this background, the decision to retain cement in the 28% slab defies logic. GST rates as they stand today can be said to be more or less appropriate, save for a few needed adjustments.
Till now, litigation under GST has been restricted to the Authority for Advance Rulings. In about a year’s time, GST assessments should commence, which could lead to litigation. The GST Council should ensure that there are sufficient benches of the tribunal that are adequately staffed to handle litigation. The turnaround time under Central Excise and Service tax laws to dispose of cases was quite long. Litigation under GST should not end up the same way. An easy solution for the council to minimise litigation is to ensure that the Notifications/Circulars are easy to read, understand and implement.
The new government that takes office by the end of May will have to grapple with methods to increase GST revenues without undoing the plethora of GST concessions that have been given to taxpayers in the build-up to the elections. One gets the uneasy feeling that the onus of increasing GST revenues will be placed on the GST officers as no government would want to boil the ocean on coming to power. If so, taxpayers need to be prepared for battles with the tax officers. Hopefully, they will not turn into wars.
(The writer is Bengaluru based tax expert)