You know your GST? Well, it just changed again

One should feel for publishers and authors of books on GST, because between the time authors complete the book and publishers publish it, the law is changed. Frequent changes have been the norm under GST, and it seems it will continue to be so. The GST Council recently provided a link on its website to a document that proposes 46 amendments to the GST laws, some of which are significant.

It is apparent that the amendments are being proposed with an eye on the elections next year. As with everything GST, one needs time and patience to comprehend these amendments, since the proposed amendments are shown in red while strike-through has been used to remove words that the lawmakers wanted removed or amended.

Top 3 amendments

Probably the most welcome proposal is the one to amend Section 9(4), after which only notified registered persons should be liable to pay GST under reverse charge mechanism for purchases from unregistered dealers. The rationale given for this proposal is that it would be benefit small and medium enterprises — in which case, the threshold should be set quite high.

Another proposal that would be popular is to permit input tax credit on supply of food, transport and insurance provided to employees, if these are obligatory for the employer. The flip side is that employers are going to have a tough time convincing the tax department that providing transport and insurance is their obligation.

Factories registered under the Factories Act, 1948, can get away with the argument that as per that Act they need to run and maintain a canteen. BPO/KPO companies can take shelter under a notification under Service Tax laws which clarified that for such companies, transporting employees to/from their place of work was permissible for credit. If the GST Council wants to pre-empt such needless questions from recurring, they should remove the words “if it is obligatory for the employer”. It is proposed to permit banking companies and financial institutions to avail input tax credit for transportation of money.

The proposal to permit revision of GST returns would get a standing ovation from the entire nation as the inability to revise a return now has caused immense hardship to many a taxpayer. It is proposed that a single credit note can be issued against a bunch of invoices, instead of having to tag them to a single invoice as at present. As per the existing provisions, a person seeking registration shall be granted a single registration in a state or union territory (UT).

However, if he has multiple business verticals in a state or UT, he may obtain separate registrations for each business vertical. It has now been proposed that such persons should be allowed to obtain separate registrations for each place of business in a state or UT, a welcome move.

In case of import of goods, by virtue of circular no. 3/1/2018-IGST, IGST would be payable only at the time of clearance of goods from Custom bonded warehouse for home consumption. This deferment of levy of GST is done so as to avoid double taxation. To put the issue beyond any doubt, it has been proposed that such situations should be mentioned as ‘No Supply’ in Schedule III of the CGST Act, 2017, itself.

Departments of government or a local authority get some relief from audit requirements. In case their books of accounts are subject to audit by the CAG or an auditor appointed under any law, they need not go through the rigours of another audit by a professional firm as provided in Section 35(5) of the CGST Act. Entities set up in special economic zones (SEZ) will get separate GSTINs to distinguish them from their own entities that are outside the SEZ and from other group entities within the SEZ.

The proposals make it clear that the government is proposing changes to the return filing procedures. A new Section 43A is being inserted in the CGST Act to enable the new return filing procedure. Although details are sketchy, it appears that the supplier will have to upload details of his supplies, which the recipient can verify, validate, modify or delete. Availing input tax credit would be linked to these reciprocal actions by the supplier and the recipient.

Taxpayers will be glad that lawmakers are willing to lend their ears to hear genuine grievances. What they will not be glad about is that only a chosen few get the benefit of the relaxations. Undoubtedly, the proposals provide an assurance to taxpayers that even in the future, the government is willing to take a relook at onerous provisions in the GST laws.

Fixing administrative issues

Having taken proactive steps to fix the law, the GST Council should now focus on fixing some early issues that have cropped up at the administrative level. Based on the experience so far, it appears that some taxpayers are being issued notices even for alleged offences that they did not commit. During the first year of GST, both the tax department and the taxpayer have been watching each other carefully to see who makes the maximum mistakes. The verdict is, both have committed an equal number of mistakes.

In the second year of GST, both sides should be careful to see that needless litigation becomes the exception rather than the rule. The tax department has made the first move in being willing to amend the tax laws. The taxpayer should now respond by paying GST within the ambit of the law. The government should ensure that neither party slips up while they go about discharging their duties under a law that is constantly evolving.

(The writer is a Bengaluru-based tax expert)