Bid goodbye to anti-profiteering provisions under GST

During the first 18 months after GST was implemented in India, taxpayers used to wait for the monthly GST Council meetings since there were many things that they wanted in terms of changes. Over the last year or so, the meetings of the GST Council have become infrequent and taxpayers have also toned down their expectations from the lawmakers.

It is possible that this is because the government feels that there is not much to do to deserve a monthly meeting while the taxpayer feels that nothing much can be done to a law that was introduced in a hurry.

When GST was launched, it was not a complete law since it was introduced in a hurry. Over the past 27 months, the government has been trying to make the law complete but is finding that events have overtaken them leaving the law still incomplete.

It is now certain that GST revenues would hover around the Rs 93,000 crore – Rs 95,000 crore range and will touch the Rs 1,00,000-crore mark only occasionally. The finance minister promises to further simplify GST to improve the Ease of Doing Business rankings.

There is a clear difference in perception here — GST should be eased with an intention to make life easier for the taxpayers and not secure a spot in global rankings. If life is made easier for taxpayers, the Ease of Doing Business Rankings would take care of itself.

The government appears to be given a patient hearing to some experts who are now recommending that India adopt the Singapore model of GST. This is an option the government had in 2017 too but they chose the South African model, not because of the content of the law but since the country was similar to India in many aspects. It would be surprising if the government embraces the Singapore model which is heavily loaded in favour of the taxpayer.

Invoices and returns were the bedrock on which GST in India was based. While the invoices were pretty much similar to what was there in the erstwhile regime, the government has missed the bus completely when it came to returns under GST due to which it is still trying to play catch-up.

The concept of GSTR 1/2/3 according to which a supplier uploads a return (GSTR 1), the portal matches the invoice for the recipient (GSTR 2) and the adjustments are captured in the monthly return (GSTR 3) never took off. To fix things, a new form GSTR 3B was introduced which was a sort of a voucher which captured supplies and input and the tax payable.Since taxes were paid on the basis of this form, it was assumed that it was a return. However, the Gujarat High Court in the case of AAP & Co, Chartered Accountants v Union of India [2019], ruled that GSTR 3B is not a return that replaces GSTR 3. Smart taxpayers took the rationale of this decision a bit further and concluded that there could be no time limit imposed for availing input tax credit and interest. They also concluded that late fees could not be levied since no returns were being filed and the restriction to issue debit/credit notes before September of the ensuing financial year would also not be valid.

The Central Board of Indirect Taxes and Customs (CBIC) has fixed this anomaly by issuing Notification No. 49/2019-Central Tax, whereby Rule 61(5) has been amended to clarify that if a taxpayer has filed GSTR 3B, he need not file GSTR 3. The ensuing Rule 61(6) on the matching of invoices has been omitted.

It is now expected that the new system of returns would be introduced from April 2020. There is enough and more time for CBIC and the software vendor to get it right this time around. A number of relaxations have been given over the last two odd years to composition taxpayers and those with a turnover not exceeding Rs 1.5 crore/Rs 2 crore.

These should continue in the new invoice regime too which would mean that the new system of returns would be applicable only to a set of taxpayers who have the resources to deal with it. The government can expect revenues to touch the magic figure of Rs 1,00,000 crore every month once the new system of invoices come in since one of the major drawbacks of the present 3B - an open-ended claim for input tax credit with no checks and balances- would be plugged.

Unfinished tasks

It should also be kept in mind that since the GST law that is now available is an improvised version of the erstwhile laws, there is no point in wanting to emulate models from other countries such as Singapore. What the country needs is a GST law tuned to conditions in India.

There is a lot that can be done from the interpretations of the laws as they stand today. For instance, levying GST on inter-office services though no specific service has been rendered should be annulled. Similarly, artificial restrictions on input tax credit such as that on works contract services should be reconsidered.

Filing of GST annual returns has been delayed by about a year. The government should take steps to ensure that the annual returns for the year ended March 31, 2019 are notified soon and the forms are simple to fill in and file. Due to the delay in the filing of annual returns, we are yet to see the first set of GST assessments.

The procedure for filing appeals also needs to be rejigged to ensure that the infrastructure for filing appeals is in place. At some point in time, the government should bid goodbye to the anti-profiteering provisions in the absence of clear rules to compute anti-profiteering. In summary, a lot still needs to be done on GST.

It is said that GST is a journey and not an end by itself. While this is a valid point, it is the responsibility of the government to ensure that the journey is as smooth as possible.

(The writer is a Bengaluru-based tax expert)