GST LAWS: an Overview:
“IT’S VERY EASY FOR US TO REACH THE MOON MR. LODHA [GP], IF SOME ONE SAYS MR. PARDIWALA AND MRS. THAKORE – HIS JUSTICES OF HON’BLE HIGH COURT OF GUJARAT- WOULD YOU LIKE TO TAKE A TRIP TO MOON WE WOULD TAKE A CHANCE BUT UNDERSTANDING YOUR POLICIES AND YOUR INTRICACIES OF THIS TAX OH GOD!! WE FOLDED HANDS WE SAY THAT IT’S BEYOND OUR CAPACITY TO UNDERSTAND”
– Justice J.B.Pardiwala of GUJARATHigh Court on GST Laws:
A:MANUFACTURERS and TRADERS maintain record of their business deals which would take in purchases/ sales/ direct expenses in relation to manufacturing and trading and indirect expenses etc. which constitutes their BOOKS OF ACCOUNTS. These books would also constitute basic records with reference to which the dealer works out his tax liabilities – both direct and indirect taxes. Over the years these books formed the basis for the various returns they are required to file INITIALLY under the State and Central Sales Tax Laws and THEREAFTER under the State Value Added Tax Laws. While under the State and Central Sales Tax enactments, dealers were, subject to exemptions, required to pay taxes at stipulated rates at all pointsof sale – fairly simple and straightforward with only limited number of “Forms” to be filed –when the point of levy was shifted to FIRST SALE, it marked the beginning of “requirements of filing more than one Form”. However, the replacement of State Sales Tax Laws with State Value Added Tax Acts marked the era of “multiple forms”– to indicate the value additions and “input” entitlements.
B: The authorities have chosen to “digitalise” the operation of the GST Act/s in order to have a “common site” or “platform” where all transactions are “exhibited” and enables the assessee to lodge their claims and display their liabilities and the Department [and assessees also] is able to “verify” such transactions/ claims and liabilities. CONSEQUENTLY WE NOW HAVE THE GST Site. C: The Site provides for details of purchases made by a dealer [as per the Sellers – Form], sales made … …. So far so good: But … …
– THE OPERATION OF THE GST ACTS HAVING BEEN DIGITALISED – prescribing VARIOUS FORMS/ STATEMENTS/ DECLARATIONS etc. FILING OF F0RMS have reached such a level that IT IS IMPOSSIBLE TO TRACK THE NUMBER OF FORMS THAT A DEALER/ MANUFACTURER IS REQUIRED TO SUBMITin the course of an year – monthly/ quarterly and yearly.
D: SCRUTINY OF THE various Returns/Forms prescribed under the GST Enactments would disclose that these returns/forms are ONLY TOOLS which would enable the Department to consolidate data from different sources – like SUPPLY/SALE by a Dealer and correspondingRECEIPT/PURCHASE by the other Dealer, amounts collected by a dealer on supply/sales and the corresponding tax paid by the recipient/purchasing dealer to the supplier/seller etc. etc.However, the Department appears to have overlooked this basic fact and presently it has reached a situation where BOOKS OF ACCOUNTS ARE BECOMING REDUNDANT !!! This is so because every assessment/ action by the department against an assessee appears to be – presently – based on DATA AVAILABLE AT THE GST SITE and NOT BASED ON THE BOOKS OF ACCOUNTS – which apparently cannot be the intention of the Legislature when the Parliament decided to bring in Goods & Services Tax Act/s:
E: Further, technical glitches have been ruling the field for a fairly long time causing deep hardship to assessees. Equally so, since the assessing authorities “proceed” on the basis of data available on the site – for purposes of alleging “suppression of receipts/purchases”/ “suppression of supplies/sales”/ “ineligible claim of input credit”etc. – without reference to the books of accounts maintained and basic records and documents available with the assessee irreparable loss and injury is being caused to the dealers. This is what has led the Hon’ble Supreme Court to observe thus:
“as in our opinion, these decisions have not dealt with the cardinal aspect of statutory obligation fastened upon the registered person to maintain books of accounts and record within the meaning of Chapter VII of the 2017 Rules, which are primary documents and source material on the basis of which self-assessment is done by the registered person including about his eligibility and entitlement to get ITC and of OTL. Form GSTR-2A is only a facilitator for taking an informed decision while doing such self-assessment.
“The whole objective of digitalization is to convenience the tax payers and not to harass them. We are conscious that the GST system is still evolving in its implementation. We are of the view that merely because there were no technical glitches in the GSTN with respect to the Petitioner’s TRAN-1 which 11-02-2022 was admittedly filed in time, the claim of the Petitioner, if it was otherwise eligible in law, cannot be rejected for no apparent fault on the part of the Petitioner. This cannot be the objective of the GST system or digitization. Such a situation cannot be countenanced as it would be wholly unfair and unjust”.
GST ACTS vis-à-vis GST SITE:
1: The operation/activities/actions under the GST Act/s are governed by the Provisions of the Act/s and for proper implementation of the Act/s, entire operation has been digitalised and GST Portal prepared where – as provided by the Act and Rules – various returns/ statements/ declarations etc. are required to be uploaded by assessees. Sufficient safeguards are also provided in order to enable the assessees to notice and rectify defects/mistakes in the records/ documents uploaded pursuant to the provisions of the Act/Rules. HOWEVER IT IS NOTICED THAT EVEN TODAY, ALL PROVISIONS OF THE ACT/RULES HAVE NOT BEEN INCORPORATED IN THE GST PORTAL AND SUCH OMISSIONS/COMMISSIONS ARE BEING SUPPLEMENTED FROM TIME TO TIME – giving room for the comment “WAS GST ACT IMPLEMENTED IN A HASTE ??”
FURTHER,a close analysis of the provisions of the Act and site would show – probably because of the unnecessary haste applied in the matter of developing the Site – that in several matters THE SITE HAS NOT BEEN CREATED IN CONSONANCE WITH THE PROVISIONS OF THE ACT: Many are the instances where the Site brings in RESTRICTIONS which are NOT AUTHORISED or PROVIDED FOR by the Act/Rules. Such “excesses” on the part of the GST Site has very serious repercussions in the operation of the GST Acts:
…:TO START WITH …
2.1: The GST Act/s provide for grand of registration under the Act – after following the procedure prescribed. Once registration is granted, the assessee is required to submit his Returns and other statutory forms – by uploading such forms on the GST Site. Such forms include Form GSTR 1 [disclosing the details of outward supplies made during the previous month] which is to be filed on or before 11th day of next month.
2.2: The Act further provides that if an assessee FAILS TO FILE “GSTR 1”/”GSTR 3/3B” CONSECUTIVELY FOR SIX MONTHS, the registration held under the Act would be cancelled: This is NOTWITHSTANDING that the Act/Rules provide for levy of penalty where there is either an omission to file or omission to file within the time prescribed, GSTR 3B – please see Section 29 and Rule 22 of the Act/Rule: Equally so, the Act also requires effecting payment of GST due [GSTR 3B] on such supplies reported in GSTR 1 within the specified period or along with the return with interest and penalty being prescribed for failure to effect such payments within the time stipulated. Thus as per the Act/Rules, failure to file GSTR 1 and GSTR 3 are distinct and separate “offences” – with separate penalties being prescribed.
HOWEVER, THE SYSTEM WILL NOT ACCEPT GSTR 3B UNLESS THE DETAILS OF PAYMENT OF OUT-PUT TAX – after adjustment of pre-paid taxes as well as “input tax” available – IS PAID !!! In short, if an assessee fails to pay the tax payable as per GSTR 3B, the system WILL NOT ACCEPT THE RETURN OF OUTWARD SUPPLIES – resulting in “failure to file Return”: If such failure continues for six months, the Registration will stand cancelled !!! cancellation being NOT FOR FAILURE TO FILE GSTR 3 – but for FAILURE TO PAY THE OUTPUT TAX !!! – a contingency which is read into the Act while framing the GST Site WHICH IS ACTUALLY NOT THERE.
Further, the Act considers each “calendar month” as separate “units” providing for separate “penalties” for failure to “file GSTR 3B” as well as failure to pay the taxes due for each month separately. However, if an assessee is not able to raise sufficient funds to pay the tax as per GSTR 3B for one month [say April] while he is able to generate funds for paying the tax due for the subsequent month[May] and attempts to file GSTR 3B, the system will not accept the Return for May without “filing” GSTR 3B for April – another contingency that is NOT PROVIDED BY THE ACT !!!. In short, if an assessee is unable to find resources to pay the taxes for April, he will not be able to file the Returns for the subsequent months – even if he has no tax liability for the subsequent months – which could invite cancellation of GST Registration for failure to file returns for six months and more:
Equally so, where late fee is provided for failure to file any statement/ return in time – despite the fact that the Courts have held that “levy of late fee” without issue of notice is not legally sustainable – the GSTSite “auto-generates” the “late fee” payable in respect of the earlier return/s when Return/s for the next month/period is filed and such “returns” will be accepted by the Site ONLY IF THE OUTPUT TAX FOR THE MONTH/PERIOD and LATE FEE FOR THE EARLIER MONTH/PERIOD IS PAID.
Equally so, the Site has been “upgraded” effective from January, 2022 to “auto-generate” the interest payable on the delay in payment of out-put tax – with respect to which the Court has held that interest for delayed filing of return is to be levied automatically but through a separate order – with the result that the SYSTEM WILL ACCEPT A RETURN IN GSTR 3B FOR A SPECIFIEDE MONTH ONLY IF THE ASSESSEE PAYS OUTPUT TAX INDICATED IN THE RETURN ALONG WITH [a]: Late Filing Fee u/s 47 of the Act for the previous month – as computed by the system and [b]: interest for delay in payment of output tax u/s 50 of the Act – as computed by the system [a] and [b] being not provided by Act and Rules. Apparently, in this case also, framers of GST Site have ASSUMED contingencies NOT PROVIDED BY THE ACT AND RULES. The result is that though the Act provides for cancellation of Registration where there is failure to file Returns for six months, in effect, the REGISTRATION GETS CANCELLED FOR FAILURE TO FILE RETURN FOR “ONE” MONTH !!
In short, the GST Site does not appear to be framed in consonance with the provisions of the GST Act. This issue is now specifically consideration of the Kerala High Court in WP[C] No. 11808/2022 where cancellation of GST Registration for failure to file GSTR 3B for more than 6 months.
Rishal K is an Associate at Raghunath & Associates Specialised in GST & Income Tax
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