TIOL - COB( WEB) - 638
DECEMBER 20, 2018

By Shailendra Kumar, Founder Editor

AFTER a gap of two months the GST Council is scheduled to hold its 31st meeting on Saturday. Unlike the many previous meetings this one is going to be very different for several reasons. One of the critical reasons is obviously going to be the adverse results for the BJP in the recently-held State Elections. I sincerely hope that the assembly results would have sobering effect on all the political parties as they have tangible proof of GST being one of the issues which a good number of voters did consider before voting. Secondly, the impact of GST has turned out to be a little devastating for the MSME sector in many States. Thirdly, the GST top honchos have been excessively harsh on the taxpayers even before the GST laws could be said to be landing in the 'understanding zone' for most taxpayers.

In this background, I optimistically expect the GST Council to take a few taxpayer-friendly decisions in its almost-reconstituted avataar (courtesy new Govts in five States). One of such decisions which has already been taken but will be presented before the Council for its ratification is the deferment of the GSTR-9 & GSTR-9C. Going by the facts that many of the 'building blocks' of the tables incorporated in these returns require recasting of the financial statements of a business entity as they were never captured last fiscal either in the GSTR-1 or GSTR-3B, I would urge the Council Members to be a little more radical and scrap both the Returns for the first year of the GST. Why should it be done? How will it help the Govt?

Let me explain. First, the period for which these returns are required to be filed is only NINE months. So, from audit perspective, and also for the exercise to be meaningful, it is important that the Audit Span should be minimum 12 months. If the Council insists on audit of 9 months supplies, physical verification of first quarter of 2017-18 would be necessitated. Then, the Council needs to realise that the last year was the first year for the New Tax Regime and the political dispensation coupled with the tax administration need to be a little extra friendly and facilitative to promote voluntary compliance. Here, by making the GSTR-9 & GSTR-9C a tricky exercise, the Council may be viewed as promoting the interest of the audit professionals at the cost of taxpayers. Compliance costs under the GST have indeed taken a leap and tax payment in particular has come under criticism even in the World Bank Report on Ease of Doing Business. The time span required has increased and a fresh thinking is required to revamp the tax payment system under the GST.

So, scrapping of the GSTR-9 and GSTR-9C would certainly have a beneficial impact on the taxpayers and it may be measured during the forthcoming general elections. If the Council decides to have some sort of return or audit report, there is no harm in asking only for the consolidated data of GSTR-1 and GSTR-3B. In fact it is also not required as the GSTN has all such data in its belly! All it needs to do is to give some time to the taxpayers to correct the mismatches between the GSTR-1 and GSTR-3B on the GSTN portal. If some taxpayers who have been availing the facility of e-Way bills have not filed their returns, they may be given time till March 31, 2019 and the GSTN itself can generate all such data which a consolidated data provided by the taxpayers can do!

If these options are not really found to be attractive by the Council, the minimum it should do is to raise the turnover threshold for the GSTR-9C from the present Rs 2 Crore to at least Rs 10 Crore. One quick benefit of such a decision will be - a large swathe of small taxpayers would be out of the purview of the audit. Secondly, a manageable number of taxpayers would be covered - less than 5 lakh. This will be manageable also from the standpoint of the Audit Commissionerates and the quality of their work within a time-frame.

Let me now urge the Council to do what it should have logically done two months back. Since the GSTR-9 & GSTR-9C due dates have been extended, it should take a decision to allow ITC on invoices or debit notes relating to the Financial Year 2017-18 under Section 16(4) till March 31, 2019. Since the due dates for filing GSTR-1 under the various windows have been extended upto December 31 and some of them may further be extended upto March 31, 2019, it will not have much revenue implication if it is allowed upto March 31, 2019. Secondly, it will also give a sense of fair play to the taxpayers who will have no option, in its absence, but to go in writ to claim the same.

Apart from granting ITC upto March 31, 2019, the Council also needs to waive or at least partly reduce penalty for all such taxpayers who have not filed their GSTR-1 or even GSTR-3B. Ideally, the due dates for all kinds of FORMS should be extended upto January or February, 2019 so that March returns are complete and satisfying for the businesses claiming ITC.

This brings me to another vital issue of granting some relief to the MSME sector. Although a GoM is yet to submit its report to the Council but the Council needs to realise that when the distinction between the Goods & Services is gone under the GST regime, why a compartmental tool is being applied to treat goods from services! Why should there be any sort of discrimination against the services. The Composition Scheme treats services as unwelcome migrants in some part of the world. For small service providers who tangibly contribute to the GDP, there should be a window of Composition and the threshold may be kept lower. This one little option would go miles to grant relief to small-time businesses which feel harassed today.

Apart from these, it is high time the Council rationalises the Cash Ledger architecture which appears devoid of merit. When cash is cash with no colour why to artificially lend it a colour which creates only inconveniences and no good to the Exchequer. Why should there be three tight and closed compartments? If a taxpayer has cash in its ledger he should be free to use the same to discharge his liability irrespective of CGST or SGST liabilities.

Before I conclude it must be reiterated that it is getting late for the Council to take a call on the National Authority for Advance Rulings. ARA rulings have stopped doing any good to the larger cause of the GST. A Centralised body is required to be set up within three months so that some sort of sanity could be injected in the decisions before they are implemented. I guess the Fitment Committee is also going to make some suggestions on rate rationalisation for some items but I am sure the Council does not enjoy much comforting revenue space to do much at this juncture! Anyway, a reduction in rate for any commodity would certainly be welcomed by the taxpayers.