A year back when GST was being rolled out, this was a point of time when many state legislatures were in the mode of circumspection. GST was long needed for establishing a robust indirect tax system in the country. It came in at a right time when the ‘Digital India’ campaign had started to succeed in reaching across the length and breadth of the country.
Let’s check out some of the hits that GST has marked for itself :
GST law functioning under a shelter of a robust technology
Despite GSTN having a tight deadline to prepare a robust system to handle various GST compliances like Migration, Registrations, Return filing and Refund processing, a sound and reliable system was set-up for citizens to operate. At times, system software and hardware failed to take the load and hence crashed. Not only this, despite online filing, a manual submission of form RFD-01A – for GST refunds – continues till today. But a look into the legal structure of GST formulated by the GST council and the lawmakers, a proper technology backing is a must. Nevertheless, GSTN is dedicated towards building a strong GST portal in an ongoing effort to resolve tech issues.
Salute to GST council’s statecraft
Uphill task of decision-making that had a nation-wide impact was managed with strong and principled diplomacy. The statesmanship shown by all the members of the state is appreciable. Timely meetings ( offline and through video conferencing ) to discuss various relevant concerns of trade and industry worked well. Handling of the entire process of simplification in GST return filing to make it taxpayer-friendly in short time is welcome.
The revenue figures for May 2018 of GST collected stands approximately at 940 billion, which is above the monthly average GST collected for any previous month.
Despite GST stabilising with anti-tax evasion measures such as e-way bill mechanism, there are few misses that need further deliberation:
Exporters in a frenzy over delayed IGST refunds
Exporters’ funds were blocked with the tax authorities delaying the processing of refund. Digitized system for application did not relieve the exporters from manual intervention in case of scrutiny and processing of application for sanction of refund (application in RFD-01A although filed online to apply for IGST refund, the hard copy of same still needs to be submitted at the facilitation centres for processing). There was ambiguity around this until a clarification was issued by CBIC in this regard. Another underlying issue is the non-transmission of refund application records from the GSTN to DG Systems (Foreign Trade).
Such lapses have to be fixed. Another CBIC initiative to make up for the delay is the periodical refund drives organised to speed up the process of sanctioning pending refunds.
Expect an increase in litigations
Focussing on ‘ease in doing business’ has led to government leaving the businesses to comply far less than what law otherwise expects. For example, with frequent relaxations given in return filing in form of extensions of due date, waiver of penalties or late fees, can be seen as demotivation to business houses to comply with laws. Not only does it affects government’s revenue targets, but these can also lead to a possible rise in litigation surrounding levy of penalties.
Another reason for litigation can be around the place of supply since the consuming states earn the revenue on account of GST being a destination-based tax system.
In the wake of contradictory orders passed by AARs in different states, the government is planning to revamp the advance ruling mechanism under GST by setting up either a centralised authority or four regional authorities.
Conflicts can arise in judgements as each state bench will try to protect their revenue interests while giving rulings.
A stronger judicial participation in all the GST adjudication authorities will resolve this issue. The Secretariat of the GST council has shot off letters in May, 2018 to the states as well as the Central Board of Indirect Taxes and Customs (CBIC) to nominate members to the Appellate Authority for Advance Ruling on an urgent basis so that they can start functioning. Some states have issued notifications for setting up state authority to hear appeals but these have not become operational as the members have not yet been appointed.
Archit Gupta is founder and CEO of ClearTax