Anti-Profiteering
Taking a cue from the Malaysian GST law, this was also
picked up for the Indian law. However, other than a few
lines of legislation and no detailed guidelines on
the subject, this will prove to be the
proverbial "pandora's box" of litigation, especially
when assessments commence. The law requires the benefit
arising under GST to be passed on to the consumers, and
rightly so. Simple enough to read, but extremely complex
to implement. The law is silent (intentionally!), on how
to calculate this benefit - compute for the company as a
whole or on individual stock keeping units (SKUs);
transition expenses incurred permitted as a set-off from
benefits under GST or not; how do businesses in the
service sector evidence passing on the benefit; and the
list goes on and on. An organization's nightmare and an
accountants delight! It would augur well if the
government considers releasing adequate guidelines and
framework, not just for the businesses, but also for its
jurisdictional authorities to prevent unnecessary
litigation for all and sundry.
Supplies without consideration I call this the
"Damocles sword" hanging on every tax payer.
Transactions between related parties, different offices
of same company, even activities between employer and
employee are now taxable even if done without
consideration. Looks quite innocent on first read but as
you delve deeper into the relationships and activities
between branches, other than just stock transfer, the
mischief of this provision hits, and hits hard. Think of
all the activities that are done between various offices
for each other and between the employer and the
employee, and it becomes messier. Included in the
quagmire are the services taken by Indian subsidiaries
from their overseas parent. Now, at the time of
assessment, this pit will be dug deep and tax demand
raised for all such activities identified by the
authorities on which tax has not been paid. The story
does not end here. In addition to payment of interest
and penalty, the tax amount so paid woul also not be
available as input credit to be offset against any
future tax liability. Double whammy!Help is surely
needed here from the lawmakers.
Reverse charge
A provision with the widest import possible was made to
tax all supplies received from a person not registered
under GST. This puts all, and I mean all commercial
transactions in the country in the ambit of taxation
under GST. This means enormous strain of compliances on
the buyers of goods and recipient of services.
Alternatively, it may also signal the death of small
business houses as registered tax payers may not be
willing to deal with such vendors to avoid the onerous
compliances involved. The magnitude of the problem can
be felt when a company buys various goods from the small
shop next door and then has to find out the correct HSN
code and the tax rate for each individual item bought
and pay GST on reverse charge. Thankfully, as of now
this provision has been kept in abeyance and deferred,
but the government may consider simplifying the onerous
compliance requirements before it is implemented in
future.
Revenue neutrality From the concept of a single GST, it
finally became dual GST with 3 tax components viz. IGST
and CGST under the control of Central Government and
SGST under the control of the respective State
Government. And with this in place, the tax payer is now
burdened with not just ascertaining, but also paying the
correct tax. Any tax erroneously paid as IGST instead of
CGST and SGST cannot be adjusted and has to be paid
afresh under the correct head. Of course, recourse has
been given to seek a refund of the tax erroneously paid
under wrong head. But, then, is it harnessing
technology? The government has its own argument in
favour, but from a tax payer's perspective, it is an
unnecessary burden which can be easily taken care of
through technology and electronic adjustments. To add to
the misery, seeking refunds from the authorities has
always had its share of trials and tribulations, in
addition to working capital blockage due to time
involved. Surely, there could be an easier methodology
here.
Advance rulings
A good thing in GST is that advance rulings can be
sought for before initiating a transaction, even at the
planning stage. Bad thing is, there are multiple
authorities for giving rulings, one for each State. The
enormity of the issue will only be understood when
different State authorities pronounce different rulings
for the same issue over different periods of time. The
judiciary will be swamped with litigation and till such
time the apex court gives its judgement, the litigation
keeps getting piled up, year after year. The government
must relook at the provision and provide a mechanism so
that any ruling is applicable to the whole of India.
These and many more such issues will keep the midnight
oil burning for quite a few years. It may prove to be
worthwhile if the government continues to hear the
voices and provide solutions in a pragmatic and
proactive manner.
Source:::
Economic Times , dated 07/04/2018.