After a tumultuous year, what's in store under GST regime

During the 180 days that GST has been in existence, the Central Board of Direct Taxes has issued almost 300 notifications/circulars/ orders, innumerable tweets and quite a few FAQs with an intention to clarify various issues that cropped up during the implementation of GST.

The year 2017 has been pretty tumultuous for the taxpayer, the department and to anyone who has had anything to do with GST. This article attempts to crystal-gaze as to what could happen in 2018 on GST. Any changes to GST would be driven by the fact that revenues from GST are dipping and the fiscal deficit has already reached worrying levels.

Budget 2018 would be the first one after GST was introduced. In 2017, a pattern was established wherein the GST Council would meet every month and take some decisions which would be conveyed to the taxpayer. Finance ministers normally use the Budget as a platform to make important policy announcements - one can expect some general statements on GST in Budget 2018 leaving the nitty-gritty to the GST Council.

The GST Council has stated its intention to keep a significant number of items of goods and services in the tax brackets of 12%-18% with essential commodities and some specified goods in the 5% bracket. However, there remains very little scope for further reduction of rates since most of the rate reductions have happened in 2017.

At best, one can expect realignment of a few rates of goods and services. With elections due in many states this year and the big one due next year, one can be sure that essential commodities and popular goods would not bear the brunt of taxation.

After the recent video-conference meeting of the GST Council, it was announced that all inter-state movement of goods worth over Rs 50,000 and those that travel more than 10 km from their origin would be tracked for e-way bills with effect from February 1. Individual states would need to notify their e-way bill rules by June 1.

Some states (like Karnataka) already have a robust e-way bill mechanism while others would toe the line drawn by the GST Council. This is going to create confusion galore (especially in the period February to June 2018), as some states would have a system in place while others would not.

Truck drivers passing through different states between February and June would have to carry a copy of the local GST legislation of each state to find out if they need an e-way bill or not! Since the concept of matching of invoices is yet to be implemented, the Council needed some sort of a control over transactions - this could be one of the reasons for bringing in the e-way bill system.

However, the Council needs to debate whether the threshold of Rs 50,000 needs to be increased liberally. It is apparent that the limit of 10 km in city limits has been put in only to put in some restriction - it would have been easier to fix limits on other parameters such as those based on areas controlled by the municipal corporation.

If the laws relating to e-way bills are not made clear and simple, it would only increase litigation. Already, the Kerala High Court passed a ruling in the case of Ascics Trading Corporation that since there is no centralised legislation for inter-state movement of goods, vehicles could not be stopped for interrogation and detained due to lack of documentation.

Since the National Anti-Profiteering Authority has a life of only two years, 2018 could see a few cases of anti-profiteering being finalised. As per the anti-profiteering rules, an interested party, the commissioner or any other person can make an application in Form APAF-1.

However, filling up the form is not easy since it requires a lot of knowledge about product pricing which could make any interested party lose interest in the anti-profiteering application. It would appear that the commissioners would be the ones filing most of the applications based on complaints they have received.

The current year could also be the year in which one can arrive at a conclusion as to whether GST is really a good and simple tax. It is by now clear that everything under GST will not be online - advance rulings and refund applications are being filed manually now.

Transition credits

Enquiries and notices to those who have claimed huge amounts of transition credits are being issued. It is expected that the taxpayer would have to meet the GST department on more than one occasion in 2018. The success of GST would depend on how this relationship pans out.

If the department is vindictive in its approach (since GST revenues are fluctuating more than the BSE sensex), the taxpayer is going to think of ways in which he can work around the GST provisions. If the department is too soft in its approach, taxpayers would be the most pleased but the Finance Ministry is not going to be pleased.

If the department adopts a middle approach, it could result in rent seeking which would make the taxpayer feel that only the name of the tax has changed and all remains the same.

Since the law is pretty complicated and is changing rapidly, the CBEC should give detailed instructions to the GST officials on how to handle assessments and litigation keeping in mind the interests of the revenue as well as interpreting the law correctly. By the end of 2019, it would be easy to decide whether GST is taking the path of necessary litigation or needless litigation.

Though the concept of matching of invoices has failed in other jurisdictions where GST has been introduced, it is expected to be introduced in some form in 2018 since availability of input tax credit is open-ended as of now being based on a simple 3B form. The GST Council would do well to introduce it for high-value transactions first (say individual invoices Rs 5,00,000) before making it mandatory for every invoice.

(The writer is a Bengaluru-based tax expert)