MARCH 23, 2022

By M G Kodandaram, IRS, Assistant Director (Retd.), Advocate and Consultant

WE are proud the ‘Comprehensive GST law with uniform procedure' is in the process of bringing about the desired unification of Indian markets, trade, and commerce as well as digitally driven effective tax system. The data governed GST, with reduced barriers through reforms like e-way bill for movement of goods and e-invoicing for accounting purposes have added the much vital element to the system in the form of transparency and catalyzing the entire process. The tax rates, being uniform for a particular type of supply of goods and services across India have further strengthened the supply chain, as the Indirect taxes are no more an arbitrage in determination of the value of a transaction. The cascading effect of the tax in business activities, due to extension of input tax credit in the multi-stage supply chain across the country, have been reduced to a bare minimum. The hosting of all the front-end activities through the digitally driven GST network, the backbone of GST reforms, saved time and cost to all the business entities and the administrations.

The self-assessment regime with voluntary compliance in place benefitted the honest taxpayer as they could conduct their commercial activities without interference in the day-to-day affairs by the administration. The front-end system in the current GST regime is evolving itself into a successful venture as it continues to adopt the user-friendly approach to develop newer utilities in the GST network to meet the requirements of all stake holders. But at the same time, the non-uniform distorted approach in implementation of GST followed by the GST administrations have diluted much of the gains and benefits received as a result of continued reforms, adding to the miseries of the registered taxpayers and the supporting tax-compliance service providers.

The systems and methods adopted by the central and state Authorities at the backend for administration, as of now, are varied and unreliable, as they are not standardized. The registered persons and the supporting service providers are finding it extremely confusing to understand the measures taken. It has become a daunting task to comply with the requirements of the Administrations in a fair manner, as the operating procedures adopted by the administrations are not uniform. The mandated uniform law and procedure are being executed in diverse ways, much to the discomfort of the trade and Commerce. The uniformity driven by the comprehensive legal framework could reach the tax paying persons and benefit them, only if there is a uniform and sincere approach in implementation of them. There is need of huge reforms to be carried out by the central and all the states administrations in their backend functions to meet the objective of uniform implementation of GST.

As a starting point, the digital utilities used at the administrative end by all the authorities, need to be re-jigged for this purpose with the formation of common standard operating procedure across all administrations. All backend functions are to be implemented only through GST network as the common platform. An attempt is made here to deliberate on some of the backend system reforms that could be taken up by the administrations. There is also need of more administrative reforms to be taken up within the administrations, which will be part of subsequent writings. Such timely reforms alone could take the present indirect tax regime towards the simple and good GST.

Uniform DIN System for all correspondences

The Central Board of Indirect Taxes and Customs (CBIC) has made quoting of Document Identification Number (DIN) mandatory on all communications of the Central GST which includes the search authorization, summons, arrest memos, inspection notices issued while administering GST (Circular 122/41/2019-GST dated 05/11/2019). The CBIC has come up with this initiative to secure all the communication sent by the central tax officials to the registered taxpayers by digitizing the communication. [Please also read DIN tagged communications in Tax regime by the author] This has driven transparency and trust factor into the communications with the Central Government as the fake notices are identifiable by the Noticee. Further, the department can have proper audit trail of communications, bring accountability into the working of the executive. This has also resulted in taxpayers' rights being protected to a greater extent. As this has not been implemented by the state authorities, the benefits derived on this reform are either being lost or diluted. There is no uniform approach by the authorities in this regard. This facility should have been hosted in the GST common portal, to be followed by all the administrations, similar to e-way bills, for all correspondences. This should be initiated without much delay so that there is uniform method of authenticated communications by all GST administrations.

Audit plans and execution

The audit procedures set out by each Authority are based on different methods and unique SOPs which has caused huge slipup about the way of attending to requirements of the audit. The selection criteria for audit need not be uniform, but at the same time it is imperative that conduct of the audit should be based on uniform approach so that compliance by the assessee could be transparent and just. The existence of common GST provisions has not resulted in the uniform planning and execution of the audit function. The registered person, especially with establishments spread across states, will have to run around to meet for different needs of each group of auditors who visit the premises. There is need of a common audit manual and plan in place that every administration must adhere to, so that it is possible for the assessee to comply with the legal requirements in a proper way. As on date, some of states have their own audit manuals or SOPs who follow their unique approach aligned to practice in vogue. The Audit procedure adopted by the union administration are principally based on the erstwhile EA-2000, which is not pertinent to the new progressive digital compliances. At present it must be noted that almost all the transaction data are digitally available and accessible in advance by the administrations. [Please read SOP for GST Audit - need of the hour by the author]. Most of the audit tasks could be completed using the in house data, if properly managed. The varied methods followed now in execution of audit mandate has created hurdles and disruptions in complying with the audit process by the registered persons.

Preventives and Demands procedures

Similar condition exists in preventive and anti-evasion measures undertaken by different authorities as they continue to follow their own invented methods that are not in line with the aspirations of GST law and procedure. There is a need of coming out with a comprehensive preventive manual along with cyber forensic methods, protocols included, to be used as a method for investigating GST cases by the administrations. There is lack of uniformity in investigations that are being conducted, which may face the wrath of the courts for deviating the legally accepted ways.

The procedures set out in the Rules are not followed regularly by the authorities as they find it easier to replace with their earlier practices. To cite an example, there is need of ‘Pre-notice Consultation' {CBIC vide F No. 1080/09/DLA/MISC/15 dated 21/12/2015} before issuing a show cause notice demanding duty, interest etc., As this was not followed in GST regime, the GST law were amended by inserting Rule 142(1A) in CGST /SGST rules i.e.., ‘Rule 142 (1A) The proper officer shall, before service of notice to the person chargeable with tax, interest and penalty, u/ Sec 73/74, as the case may be, shall communicate the details of any tax, interest and penalty as ascertained by the said officer, in Part A of FORM GST DRC-01A.' Further procedure to be followed are also guided through this prescribed route. But to everyone's surprise, this is not followed by most of the authorities which is an indicator of non-adhering to the mandated procedures. This has resulted in unnecessary issue of SCNs causing embarrassment to law abiding registrants.

As a way forward, it is inevitable to have a uniform approach to implement the GST law and procedures at the backend so that trade can comply in a better way. All the GST related correspondences are to be routed through the GSTN so that there is accountability for the functions of the administrations. As on date, different backend approach have resulted in a distorted way of implementing GST, which is undesirable. Serious thoughts are to be given to combine the backend activities by the administrations in the coming council meeting so that we can dream of uniform implementation of GST.

[The views expressed are strictly personal.]