The introduction of GST has slightly dampened the ‘brand value’ of other taxes such as Income Tax. This can be attributed to the fact that almost everyone’s attention is on GST. The government also appears to be more focused on GST as they have already been there and done what they had to do with other taxes. Evidence of this can be seen in the fact that the government has now taken to branding GST forms with names that they were assigning to Income Tax forms. At the recent meeting of the GST Council, a decision was taken to name two returns that will be filed by small taxpayers as Sahaj and Sugam. These small taxpayers have an option to file Sahaj and Sugam every quarter, depending on whether their supplies are business-to-business or business-to-consumer.
Upload, Lock, Pay
Ever since the concept of matching of invoices faded into oblivion, the government has been saying that another version of the concept is being developed. Broad outlines of this version were published after the Council meeting. All taxpayers, excluding small taxpayers and a few exceptions like input service distributors, have to file one monthly return. It is being stated that the return is simple, with two main tables — one for reporting outward supplies and one for availing input tax credit based on invoices uploaded by the supplier.
Invoices can be uploaded continuously by the seller and can be continuously viewed and locked by the buyer for availing input tax credit. This process would ensure that a very large part of the return is automatically filled based on the invoices uploaded by the buyer and the seller. Simply put, the process would be “Upload-Lock–Pay” for most taxpayers. They would have the facility to create their profiles based on the nature of supplies made and received.
The fields of information which a taxpayer would be shown and would be required to fill in the return would depend on his profile. Taxpayers who have not made purchases or sales would be allowed to file their returns through SMS. The new return design provides facility for amendment of invoice and other details filed in the return. The amendment will be carried out by filing of a return called ‘amendment return’. Payment could be made through the amendment return to help save interest liability for taxpayers.
The GST Council stated that 93% (a statistic that should be taken with some scepticism) of the taxpayers have a turnover of less than Rs 5 crore and these taxpayers would benefit substantially from the simplification measures proposed, improving their ease of doing business. It went on to say that even the large taxpayers would find the design of new returns quite user-friendly. While the ULP (Upload, Lock, Pay) technique sounds good, the government should ensure that there is no denial of input tax credit due to technical issues that taxpayers may face.
The proposals relating to returns should be welcomed as they fix two major lacunae in the present system of filing — no counter-check on availing input tax credit; and, the inability to revise a return once filed to correct unintended mistakes. It is being proposed that the revision of the return will happen through an amendment return and tax would be filed on the basis of the amendment return. The notification that will launch the new proposals for filing of returns should also clarify how many times the amendment return can be filed. Ideally, the taxpayer should be permitted to revise his return only once.
Input tax credit
The scope of input tax credit is being widened, and it would now be made available in respect of most activities or transactions specified in Schedule III, motor vehicles for transportation of persons having seating capacity of more than 13 (including driver), vessels and aircraft, motor vehicles for transportation of money for or by a banking company or financial institution, services of general insurance, repair and maintenance of motor vehicles, vessels and aircraft on which credit is available and goods or services that are obligatory for an employer to provide to employees.
While these relaxations are welcome, artificial restrictions to avail credit still continue due to the habit of picking and choosing services, which the lawmakers have turned into a fine art. For instance, why should owners of motor vehicles with seating capacity of less than 13 be denied credit? How did the lawmakers come up with this magic number of 13?
The term “goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force” is obviously meant for units registered under the Factories Act, who are bound by that Act to provide facilities to employees, such as maintaining a canteen, etc. This is bound to lead to litigation because input tax credit is being denied to some entities just because they do not fall within the ambit of another law.
Instead of cherry picking over the seating capacity of vehicles, the GST Council should think of a negative list of items on which credit would not be permitted. The list should be small and apply to all entities, irrespective of industry.
A welcome clause is the proposal that in case the recipient fails to pay the due amount to the supplier within 180 days from the date of issue of invoice, the input tax credit availed by the recipient will be reversed, but liability to pay interest is being done away with.
The proposed amendments give hope that the GST laws are stabilising and the government is open to amending the law to remove inconsistencies. The GST Council should also sensitise taxpayers on the actual GST collections vis-à-vis the previous tax regime. That would give some comfort to the taxpayers that the changes being made are not temporary.
(The writer is a Bengaluru-based tax expert)