In order to win the confidence of the taxpayers, the administration needs to work efficiently as a facilitator rather than just being a tax collector.
On 1 July 2017, GST was launched with a lot of expectations of reducing the cascading effects of double taxation which in turn will reduce the overall tax burden on goods and services making them more competitive in domestic as well as international markets. Further, it was expected that the indirect tax system in India will be simplified as many taxes were subsumed under GST. Additionally, GST was expected to bring in more automation in the indirect tax ecosystem. While the introduction of GST has helped in the achievement of significant changes and attainment of objectives, some more work needs to be done to fully accomplish the goal of calling GST a ‘Good and Simple Tax’.
Presently, a lot of focus and discussion is on rate rationalisation which was also discussed in the 45th meeting of the GST Council held on September 17, 2021. Undoubtedly, rate rationalisation is required but GST rates don’t seem to be an issue as it majorly has four to five rate baskets which are required considering India’s population and diversity. It cannot be compared with the EU or Singapore VAT system.
From an industry point of view, their ask is for more clarity on the tax classification and other related matters. While they have been given the facility of applying for advance ruling in case they have taxability issues, the same has not met its full objectives as majority of them are in favour of revenue. The AAR approach should not only lead to revenue enhancement but also provide relief or guidance to the taxpayer.
Further, the power provided to the tax authorities should be judiciously utilised to avoid any inconvenience faced by the innocent taxpayers. Today we have so many writs being filed on certain practices followed by tax authorities, whether it’s for blocking of credit, mismatch of credit, interpretation on export and many more. We cannot deny the fact that there have been tax frauds, but if we see the quantum of such fraud cases, it might be a very small fraction. Most taxpayers are diligently following the law and paying appropriate GST.
In order to win the confidence of the taxpayers, the administration needs to work efficiently as a facilitator rather than just being a tax collector. All the investigations should be undertaken in such a manner that only non-compliant assessees are questioned or held liable. If it’s otherwise, diligent taxpayers, who are honestly following the law and paying correct taxes, get affected. There are penal provisions under the GST law for fraudulent practices undertaken by the taxpayer, there should also be similar provisions to hold the tax authorities accountable to avoid harassment to the assessee by issuing unnecessary notices or passing wrong orders resulting in years of litigation. There is a lot that’s been said on the tech savvy compliance practices to be followed by an assessor, there’s a need for similar accountability from tax officers as well.
A change in mindset along with efficient methodology is the required step to make GST a ‘Good and Simple tax’ both for the taxpayers and the governing officers.
(Sachin Menon is Partner and Head – Indirect Tax, KPMG in India and Kirti Oswal is Chartered Accountant)