GST law is implemented in our Country with effect from 01.07.2017. It is now five years have been completed since the introduction of this new law. In these five years, we have seen many ups and downs in this law. Rather it would not be incorrect to say that this law is now more popularly known as ‘Business Reform’ instead of a ‘Tax Reform’. This law has changed the mindset of the taxpayers. Persons who hesitated in the earlier regime to file returns timely are now giving first priority to the GST compliance only. Now, they have become very much serious and concerned about tax compliance. This experience is completely different from the previous tax regime. Today filing tax returns on the due dates of the 11th and 20th of each month is the topmost priority for the taxpayers. The main reason for such change is the fear of paying late fees and the non-appearance of input on the portal of the buyer. GST has changed the behavioral aspect and transformed the thought process of the people. Taxpayers have now moved towards the digital era and making their transactions through computers only. This has also somewhere strengthened the dream of “Digital India’ visualised by our Hon’ble Prime Minister. GST has also given a major boost to the ‘Make in India’ initiative of the Government of India by making the goods and services produced in India competitive in the national and international market.
On the occasion of the completion of five years of GST, the author through this write up has made an attempt to portray Five Benefits offered by GST, Five Problems faced in GST, and Five Suggestions for improvement of GST.
Five years ago, no one could have imagined that a businessman can run their business even without visiting the tax department. Traders were supposed to visit the Tax department on an almost daily basis for getting Permits, Tax Clearance Certificate, ‘C’ forms, and ‘F’ form,s, etc. This was not only consuming their valuable time but also increased costs. But now this picture has completely changed. Today, all the activities can be done online by sitting at home at one’s fingertips. Making E-invoice, E-way Bills, applying for registration and amendments, replying to notices etc. etc. is being done online in a hassle-free manner.
GST has subsumed various local State laws like -VAT, Entry Tax, CST, Luxury Tax, etc., and implemented only one law in the country from Kashmir to Kanyakumari. Further, all the goods and services are now being taxed at the same rate. Further same return is being filed across all the States through the Common portal only. This has integrated the scattered tax laws in different States into one law. Now, one can file tax returns from anywhere at any time without even appointing a separate tax consultant in each State. This has resulted in a One-Nation-One Tax -One Market.
In GST, each and every activity is taken care of by the computer only. So now taxpayers have to upgrade themselves in learning computers and working in an IT environment. This has made them Tech-savvy and their skills or knowledge has also increased significantly while working in digital mode. So, it would not be incorrect to say that the GST has also made taxpayers literate in the sector of Information & Technology. Apart from this, the information technology industry of our country has also got a boost and of late India has emerged as a great service provider in this field.
MSME sector is the backbone of our Country. This sector has always received best of the attention from the Govt. since the inception of the GST law in the Country. The Govt. was always seen as very active and keen to amend the GST law for ease of doing business and for the benefits of MSMEs. Take the examples of – Facility to file quarterly returns, Introduction of composition scheme for the service providers, Waiver of the late fee, Exemption from filing GST Annual return, Exemption from GST audit, Relaxation in putting HSN codes in tax returns, etc., etc. which are meant for the benefits of MSMEs only. The aim of the Govt. at all points in time is to protect its interests and boost the MSME sector.
The Central Govt. had long-pending agenda of scrapping all the check gates which existed in the erstwhile law of VAT in the Country. The Govt. was of the firm view that such check gates were not only increasing the delivery time of the goods but were also increasing the cost significantly. Accordingly, as per the plan of the Central Govt. all the States have scrapped /removed different check gates established in their respective States. This has enabled the free movement of goods and delivery time is also reduced. We get rid of the long queue at the check gates and as a result, average delivery time is very less as compared to the pre-GST regime. This has also resulted in maintaining or keeping low stock and which further minimised working capital requirements for the business houses.
One of the important features of GST law is that a trader can avail of input tax credit of services (except blocked items) and a Service provider vice-versa can also avail of input tax credit of goods (except blocked items). This has removed cascading effects of tax and reduced costs.
GST portal has been a puzzle and cause of concern for many taxpayers since its inception. There is a lack of harmony between the provisions of the law and the functionality offered on the GST portal. The portal works in its own unique manner without synchronizing itself with the provisions of law. Further, it takes months to update the portal on account of changes in law, etc. Also, the GST portal is full of technical glitches. Every now and then, there are some problems – whether non-reporting of figures in GSTR-2B, whether double reporting of the figures in GSTR-2B, whether the change of tax rate of 6% on certain items, etc. – etc. On a lighter note, often taxpayers comment that in five years even a child learns to walk but the GST portal is still crawling. Hence a strong, high-quality, and glitch-free portal with robust working is the need of the hour.
For the last five years, there has always been a demand from various sections that facility should be made on the common portal to allow revision of GSTR-3B return. Further it is also said that it is the right of every taxpayer that if they have made any mistake in filing the return, then they should get a chance to rectify such mistake. Unfortunately, this matter received attention of the Govt. only in the fifth year of GST. Recently, in the 47th GST council meeting held the Government has announced its intention to allow revision of GSTR-3B return. This is really a welcome step and a sign of relief for taxpayers.
But the author believes that a separate column should also be inserted in the GSTR-3B return form for adjustment of figures for the previous month / previous year, so that there is no mismatch occurs in GSTR-3B vs. GSTR-1 and GSTR-2B vs. GSTR-3B and comparison can be done only in respect of current period’s figures.
The Government has made many changes in the GST law since its implementation. Such changes are made through Gazette notifications, ordinances, circulars, clarifications, removal of difficulty orders, instructions, press releases, etc. Now the actual provisions of the law are lesser in comparison to such changes made. This itself is sufficient to prove that the GST law is not yet settled. Due to such frequent changes taxpayers and tax administrators often faces difficulties to keep a track of those changes. Although, the intention of the Govt. is to make the GST law simple, but too many changes are really making it clumsier.
Whenever a new law is enacted, law makers ensure that an effective dispute/grievance redressal mechanism is also created so that the difficulties can be resolved instantly. Today, its five years completed since the GST Act was enacted. But yet, no effective grievance/dispute redressal mechanism has been formed. The situation is that even for petty matters, one has to approach to the court for getting justice. This has resulted in undue pressure on the judiciary and the pending cases are piling up. Though on the recommendations of the GST Council a Grievance Redressal Committees was constituted at the regional/state level for redressal of grievances of taxpayer in each State. But unfortunately, the said committee is also not seen much active. Therefore, there is not only a necessity of an effective grievance/dispute redressal mechanism but it is mandatory.
Tax refund is one of the important statuary rights of the taxpayers. If one is entitled to get refund under the provisions of law then he should be allowed such refund in a hassle free and timely manner. But it is often seen that the refund is not being paid to the petitioners on time. The delay in refund payments not only shakes the confidence of the taxpayers but also costs interest to the Govt. Post COVID-19 pandemic refund has become a very important source of funding for certain categories of tax payers like exporters, SEZ units etc. Though Govt. is trying to leave no stone unturned to release the pending refunds. But still there is scope of improvement in the refund mechanism. Therefore, efforts should be made to make the refund system more efficient and robust.
As per the present GST mechanism the buyer will get the input tax credit only if the seller has filed its GSTR-1 return on time and has paid the tax amount to the government account and it is also reflected in the buyer’s GSTR-2B on the GST portal. But in cases where due to some reasons or others if the seller has not filed its return timely or has punched wrong GSTIN of buyers, then the buyer will not be able to take the input tax credit of such supply in the very same month. Thus, in those cases where buyer has made purchases in good faith and also paid full amount including tax thereof to the seller then in such a situation due to the fault of the seller the buyer should not be denied the Input Tax credit.
But as per the current practice, the tax dept. is not allowing input to the buyers in such cases which has caused hardship to the genuine taxpayers. On the one hand they have paid full tax to the seller and on the other hand they are denied input tax thereof creating double burden on them. Such a system has become a major headache for the taxpayers. Of late, the judiciary has also taken this matter seriously and granted relief in such bonafide and genuine cases on the ground that the buyer has no control over seller. So, if due to the fault of the seller the buyer should not be restrained from input claim. Therefore, the government should amend matching provisions of input whereby genuine cases should be allowed.
Further seamless input credit was one of the important features of GST. But it appears that the said provision has vanished now. The Govt. has put various conditions and restrictions in respect of availment of input tax. This has created a big hindrance in the seamless flow of input. There are certain goods and services listed under section 17 of the CGST Act,2017 whereupon input is barred. But in the opinion of the author the said provisions need review. Otherwise, there will be again cascading effects of tax on such goods and services.
In the initial phase of GST law, many taxpayers have unknowingly or mistakenly committed some kind of mistakes. Such mistake is generally in the nature of -mismatch in GSTR-1 and 3B, mismatch in GSTR-3B and 2A (although it is disputed whether 2A was applicable in the earlier period), claim of input beyond time limit prescribed in section 16(4), non-payment of interest payable, mistakes/glitches in transitional credit etc. Therefore, the government should bring a one-time settlement scheme/amnesty scheme whereby all such taxpayers may be allowed to settle their cases with minimum of burden and in a prescribed time frame. The author feels that such a scheme is very much necessary for the year 2017-18 and 2018-19. This will ensure disbursement of pending cases and timely collection of disputed revenue. It will be a big relief to the taxpayers as well.
At present there are four tax departments which administers the affairs of a taxpayer. If we take the example of the state of Assam, then there is- Central GST Tax Department, Assam State GST Tax Department, BIEO and DGGI which are fully active. All these departments exercise their jurisdiction to investigate matter and to issue notices etc. If we check the provisions of law, then the section 6 of the GST Act, clearly states that proceedings can be initiated by the proper officer from either Central or State Dept. There cannot be a concurrent jurisdiction of both the Central and State Tax officer on the same subject matter. But despite this, the concurrent / parallel jurisdiction is being exercised by all these departments invariably on the taxpayer on the same subject matter. In such a situation, there is tremendous pressure on the taxpayer to attend different departments simultaneously. This causes inconvenience and it is also double burden and irrational. But in spite of this, the GST council has recently authorised / given powers to both the Central and State officers to issue notices etc. on the plea of protecting interest of revenue. Thus, it appears that in near future the troubles of the taxpayers seem to be double. Due to a few handfuls of tax evaders, innocent taxpayers will now have to face the difficulties.
The author presumes that the main reason for this problem is the lack of mutual coordination amongst all these departments. Further presently there is no mechanism available under GST to know and ascertain which department has when exercised its jurisdiction over the taxpayer. Therefore, if the government makes such a system on the GST portal itself whereby if any department issues notice, summons etc. to any taxpayer then such information should be immediately punched on the GST portal by the issuing dept. and flashed on the GST portal so that other parallel tax dept./officers can come to know and easily understand about such ongoing proceedings against that taxpayer. Further such information should be flashed on the profile of the taxpayer against his GST number. In such a situation multiple or parallel jurisdiction can be avoided.
Section 65 of the CGST Act,2017 empowers tax department to select cases for departmental audit based on certain parameters. Further GST law also provides mechanism of scrutiny of returns, assessment of non-filers etc. Further the upper ceiling for completion of such assessment or issuance of notice is within five years from the date of filing the annual return. The author feels that this is the high time to complete such departmental audit and assessments at least for the financial year 2017-18 and the year 2018-19 without waiting till last moment. This will help in realisation of tax timely and further taxpayers will also feel free and relieved once pending matter is completed. Therefore, it is suggested to take appropriate steps in this direction to complete the assessments for the period 2017-18 & 2018-19 as soon as possible.
We all know that each and every decision in GST is taken only in the meeting of the GST Council wherein both Centre and the States are involved. After the meeting of GST Council, the government often issues press release announcing the decisions taken in the meeting. But unfortunately, it takes six to eight months to implement those decisions in the statue book. The government has its own compulsion to first get those decisions passed/ratified by the Parliament and then get them passed/ratified by the Legislative Assembly of each State and only then those can be implemented. On the other hand, in the eyes of the tax department, those announcements or press releases do not have any legal sanctity until and unless corresponding changes are made in the law. In such a situation, the taxpayer often faces problems and inconvenience. Therefore, the government should ensure that whenever any announcement is made the same should be implemented within a reasonable period.
The above write up clearly reveals that the government has done lots of work in making GST a simple law. In this journey, the tax evaders also left no stone unturned to swindle the government. Fake bills and fake inputs remained the major headache of the government. Further government’s efforts in catching hold the unscrupulous taxpayers is also commendable. The revenue of the government under GST has increased significantly. Though government has tightened the norms of input and introduced other enforcement measures but due to some dishonest taxpayers, even the honest taxpayers are also facing the brunt of these norms.
If we talk about the biggest change in the GST law, then it is certainly change in the mind-set of the taxpayers and their attitude towards tax compliance. This law has brought behavioural change in the taxpayers. Today everyone wants to do business only with those persons or entities, which comply with the law. To be very honest, GST has established a self-discipline mechanism amongst the taxpayers. They have understood very well that their victory is in the compliance.
Further the government has to change the economic scenario of the country by making GST stronger on the basis of its five years of experience gathered. If we have to reach five trillion economies, then contribution of GST should be phenomenal. The author knows that the Government is committed to this and will make GST such a tax system that will set an example all over the world. Jai Hind!
CA MANOJ NAHATA is a Chartered Accountant by profession and this article has been prepared on the basis of his experience gathered in his practice. All views given in this write up are purely personal and other views on this matter also cannot be ruled out.