JUNE 30, 2020

By C A K R Ramankutty, FCA

Introductory

1. When the Country is nearing the completion of third year of implementation of GST, I was recollecting some words from a speech by a distinguished personality delivered four months before the implementation GST at Chennai. I had to re-wind it, to listen to that prophetic speech once again. The opening words of the speech are " …in my personal view GST is the most terrible thing that will happen to this country...In my personal view GST is a horrible idea whose time should not come but unfortunately it will come…I still cannot fathom how anybody can conceive and implement this concept of GST that is going to come from 120 days from now." Initially, when I heard the speech I could not agree with him for many reasons but now when the country is nearing the third year of implementation of GST, I have to agree because of the practical difficulties in complying with the law on one side and the possibility of loss of Input Tax Credit (ITC) on the other side. An effort is being made to evaluate the situation arising out of some of legal provisions and lack of support from GSTN to carry out certain functions which is required as per CGST Act 2017 or CGST Rules 2017.

ITC related legal provisions of compliance

2. The eligibility of the input tax credit availed is subject to the conditions specified in Section 16(2)(a) to (d) of the CGST Act, 2017. One of the conditions impossible of being complied with is with regard to the payment of GST charged in the invoice by the vendor. The GSTN portal does not provide any method by which the tax paid by the vendor can be found out. It is learnt that neither the GSTN nor the Department has any mechanism to ascertain that payment of GST was made against an invoice on which ITC was availed. If the department cannot ascertain whether GST was paid by the vendor on the GST charged in the invoice compliance of the sub-section must not be insisted upon; alternatively the operation of the sub-section must be kept in abeyance till the GSTN provides a facility to the registered person availing the credit to ascertain from the portal that the tax was paid by the vendor. In the case of a litigation on non-compliance section 16(2)(c) one can plead the doctrine of Lex Non Cogit ad impossibilia'.

Time limit for availing the Input Tax Credit (ITC) and for correction of returns

3. Section 16, sub section (4) prescribes the time limit for availing ITC. Credit cannot be availed after the due date for filing return under Section 39 for the month of September following the end of the financial year to which such invoice relates or furnishing of the relevant annual returns whichever is early. Similarly proviso to Section 39 sub section (9) provides for the time limit for correction of mistakes or omissions in the returns already filed. A correction has to be made before the due date for filing return for the month of September or the actual date of furnishing of relevant annual return whichever is early. Due to many reasons including the lack of readiness of the GSTN portal the annual return was never possible of being filed before the due date of filing the September return for the previous financial year. For the financial years 2017-18 and 2018-19, it is pertinent to note that in September 2018 and September 2019 annual return was not available in the GSTN portal and the dates for filing the annual return for both the years were extended by CBIC. For the correction of the returns already filed for the financial year 2017-18 CBIC issued press release dated 3rd July 2019 where it was clarified that corrections can be made through annual return GSTR-9. When it is not possible to file the annual return before the end of the due date for filing September return, it is appropriate that the above sections are corrected as "whichever is later" instead of "whichever is earlier" appearing in Section 16(4) and Section 39(9) proviso. As per the existing provisions if the corrections are not made before September return due date, it cannot be corrected as per the Section but correction is permitted through GSTR-9. Therefore, the said provision in the statute has become redundant.

Time limit for applying for refund

4 Section 54 of the CGST Act provides for the refund of GST paid and interest thereon within a period of two years from the end of the relevant date in such form and manner prescribed by law. Relevant date is defined under explanation to Section 54 sub section (14). Except for the specific situations dealt with in the definition of relevant date, it is the date of payment of tax. The excess or short payment of tax can be ascertained only during the reconciliation of the financial particulars with the tax paid details and such adjustments are made in annual return GSTR-9. It has been clarified by the press release dated 3rd July 2019 that excess or short adjustment can be made through GSTR-9 and eligible refund can be claimed on the basis of GSTR-9. In other words GSTR-9 is the authentic document for claiming refund of excess tax paid as per the board circular. As the dates for uploading GSTR-9 was extended for the year 2017-18 and 2018-19, on one side the taxpayer is entitled to refund based on GSTR-9 read with 3rd July circular, on the other side the demand is getting time barred by the date of payment criterion in Section 54. The anomaly needs to be rectified by amendment of Section 54 to provide for the time limit to run from the date of uploading of final return.

Adjudication order RFD-06 and filing of appeal online facility not available in GSTN portal

5 As per Section 107 of the CGST Act, 2017 read with CGST Rule 108 an appeal against an adjudication order has to be filed in Form GST APL 01 either electronically or otherwise notified by the Commissioner. The number of adjudication orders is more in the case of rejection of refund claims than orders confirming the demand of GST. Appeal cannot be filed electronically in the case of refund rejection orders due to the facility not being made available in the GSTN portal leading to physical filing of appeals for which notification is to be issued by the Commissioner.

5.1 In the case of Adjudication order issued in RFD-06, the order does not contain the address of the authorities issuing the order and the address of the authority where first appeal is to be filed. The profile in the GSTN portal does not provide the address, e-mail address or contact number of Range officer or Jurisdictional Assistant Commissioner. How the appeal can be filed if the appellate authority's address is not provided in the adjudication order Preamble to the order as in the case of Central Excise and Service Tax adjudication orders is discontinued and the order is reduced to one line remark with no discussion on the submission made by the tax payer rendering such orders non-speaking orders which can be very easily quashed at the appellate stage.

GST application for refund online - not fully operational

6 For filing refund application RFD 01 various categories are provided in the GSTN portal. Where RFD 01 is to be filed for a refund arising out of wrongly paid tax on account of place of supply wrongly determined, online application cannot be made as "Order No." is to be provided in the mandatory field. Where refund application is made after paying the correct tax as per Section 77 of the CGST Act or Section 19 of the IGST Act voluntarily, refund as provided in law cannot be applied for as this mandatory field cannot be filled up. For the first year of GST, the amount wrongly paid has become time barred as application as the respective module could not be used.

6.1 No fault of Trade and Industry, all expected GST would be a 'Good and Simple Tax' but even when the third year of completion is only a day away, one has to conclude that the "terrible thing has happened". GSTN and Tax Authorities may look into the operational issues and resolve it for the minimum requirement of compliance and assuring the Input Tax Credit. As a gift for the third year of GST implementation, Govt may remove the operational difficulties, anomalies in the law and provide the tax payer a minimum agenda of protecting his right of appeal by providing with the address and e-mail of the appellate authority in the orders passed in RFD06 so that appeal can be filed by e-mail as other modes of filing is not possible in the COVID-19 context.

[The views expressed are strictly personal.]