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French Parliament passes controversial anti-terror law empowering authorities to shut places of worship and restrict freedom of movementGST - CBEC clarifies on movement of goods within State and from one to another on approval basis + also notifies officers empowered to accept or reject application for GST PractitionerLinking Aadhaar with UAN - EPFO launches service for speedy servicesPM interacts with 380 Directors & Dy Secretaries in Central Govt; advises them to break silos with innovative waysCBEC notifies new Customs exchange ratesCBDT launches 'Online Chat' facility on official website to answer taxpayers' queriesJaipur & Srinagar rated best airports in world in 20 lakh to 50 lakh passenger category: AAI -Registration of Charitable bodies - CBDT seeks inputs to new provision in I-T ActST Not fn. 41/2012-ST - Renting of airport premises at departure module has a direct nexus with 'export sale' being made by duty free shops Refund correctly granted: CESTATIndia earns Rs 13800 Cr forex from tourismGST - Govt notifies list of supplies as deemed exports such as supplies to EoU, against EPCG and Advance Authorisation + notifies Forms for refund to exportersOver 100 preferential tax regimes dismantled across world: OECD (See 'TII Brief')Impact of Brexit - UK needs to keep close ties with EU for sustaining future living standards: OECD (See 'TII Brief')Delay in filing GSTR-3B - Interest waiver only for July month, not for AugustAhmedabad ITAT invites suggestions before goes paperless by Dec 15, 2017China proposes special treatment to SMEs in anti-dumping cases; WTO Members for solution within existing frameworkI-T- Department cannot tax capital gains tax in guise of lifting corporate veil, when there is mere transfer of shares of company and no stamp duty was paid towards plot of land: ITATST - Preparation of examination results on computers - as service is rendered 'in relation to' education, same is exempted by Notif. No. 14/2004-ST: CESTATCX - Element of excise duty on which CENVAT Credit was availed is not includible in AV of manufactured goods - duty demand, attributed to CVD which was not included in AV, is unsustainable: CESTATGovt allows Cipla to import morphine, codeine and baine for use in products to be exportedCBEC reassigns legacy cases pending with Commissioner(Appeals) to reduce litigationGovt to make revised quality standards for caustic soda mandatoryFDI SOP makes it clear no proposal to be sent to Department of Revenue & MEAMinister asks builders to improve living conditions of construction workersJoblessness marginally decreases in Q2 in OECD areasChandigarh Airport Customs seizes gold biscuits worth Rs 39 lakhApplications invited for post of Member at SAFEMA TribunalIndian billionaire Lakshmi Mittal contributes aid of USD 25 mn to Harvard Univ to enhance engagement with South Asian countriesPM urges corporate to use CSR funds to strengthen AyurvedaGST Council's decisions for small businessmen (See 'TOG Insight' in Tax on goods imported from abroad - explained furtherGST regime - continuation of area based incentiveST - Limitation prescribed u/s 11B of CEA, 1944 is not applicable to refund claim in respect of service tax paid under a mistake of law: HCI-T - Just because RBI treats 'provision for NPA' as losses/expenses, it will not override Income tax Act while deciding justification of such 'provision' u/s 36(1)(vii): HCCX - Promotional pack of Maggi Noodles supplied free of cost either by the appellant or by Tata Tea Ltd - Valuation u/s 4 of CEA, 1944 is proper: CESTATOver 69 lakh subscribers join Pension Yojana with contribution of Rs. 2690 CrAyurveda's market size to surpass USD 8 bn by 2022: MinisterIndian women scientists praised; Govt policy for all support: Minister
GST - Ground-level problems crying for solutions!

TIOL - COB( WEB) - 572
SEPTEMBER 21, 2017

By Shailendra Kumar, Founder Editor

YESTERDAY was the last date for filing GSTR-3B and one person who sounded genuinely worried but alert was the Union Finance Minister, Mr Arun Jaitely. The Finance Minister made an appeal to the taxpayers not to file their returns only at the eleventh hour! He had live fear that the GSTN server may not support either the traffic or the data overload. Notwithstanding the tall claims being made by the GSTN CEO at various fora, Mr Jaitley sounded more grounded and realistic in assessing the GSTN robustness in coping up with lakhs of taxpayers or their consultants who are habitually in love with the last-minute rush and lots of fuss! To persuade them to change their return-filing behaviour would be a gigantic task for any tax administration. Secondly, it is beyond the control of any elected or selected government. So, it is always wiser to work on the other side of system - And that is the GSTN. In fact even the GSTN would need time to codify any programme to match the complex business processes which are unfortunately being tinkered with too often. And such tinkering is the need of the hour to overcome the taxpayers' woes. So, the problem has become more complicated and sticky. Though the Sushil Modi-headed Ministerial Panel has identified only about two dozens technical glitches but the speed at which these glitches are spawning many new types of glitches, the solutions being stitched together to overcome them are falling behind in the race.

In this scenario, it would be ideal for the GST Council to take a realistic view of the ground-level issues not only at the end of taxpayers but also the tax administration and the States which are desperate to monitor their own revenue collections on real time basis. It would be faster and more intelligent to tweak the Business Processes which have been tailored with multiple goals in mind. One is revenue protection. Two is to plug the revenue leakage through misuse of input tax credit facility and that is why the GSTR-2 was prescribed for matching the purchase invoices with the sales invoices. Three is excessive data collections, perhaps for data analytics. Four is strict monitoring and enforcement. And, the fifth is an easy swim for the audit commissionerates later. All these goals are desirable but it was certainly not advisable to achieve all of them together. The need of the hour was to opt for an incremental 'noose-tightening' approach rather than getting everything on a platter without making adequate IT preparations.

One large corporate told me recently that some of the compliance burden which has been put on the taxpayers could have implemented in a phased manner - giving enough time to the taxpayers to gather some implementational experience and also to the GSTN to come up with the best solutions to capture the data required. For instance, if supplementary invoices are raised after three months which is a common practice for sourcing inputs, matching each supplementary invoice with the original invoice and then uploading all such data with the correct HSN Code is a humongous exercise which could have been reserved to be unleashed in the second phase of the GST implementation after it would have stabilised.

A little extra care should have been taken with respect to small taxpayers who have been managing their businesses, for decades, with conventional wisdom. Since they prefer operating in traditional paradigm, their inherent strength to embrace change or transformation is meagre. For a good number of millions of them, the GST which requires a transformational change in their business model, is nothing less than a calamity! Heavy compliance burden is the secondary source of worry for them. The primary source is the need of enough working capital to pay the taxes much in advance before they get their payments from the purchasers of their supplies. Getting sucked into the GST-whirlwind and changing the manner in which their business was being run, has taken a serious toll on the mental health of a good number of them. Though there is no formal study done on this issue but stray information being reported by the vernacular press in many parts of the country indicates that psychiatrists and counsellors are also doing good business. I am sure the custodians of small taxpayers, the State Finance Minister, must not have factored in such deleterious consequences of GST system.

In this background, it would be more advisable for the GST Council to quickly react and come up with an easy-to-comply-with procedures rather than making a common set of procedures mandatory for all taxpayers. Small deserves to be treated differently and by no logic, be clubbed with the big. Hence they should be exempted from the trio of GSTR-1, 2 & 3 and the trio can be retained only for the large taxpayers who generally have more ITC to be utilised and therefore, invoices to be matched. As regards the ITC on invoices raised by small taxpayers who may be supplying goods or services to large taxpayers, their credit may be allowed on self-certification basis. After all, a fiscal system operates and thrives on trust in taxpayers, and that is why self-removal of goods and self-assessment replaced the Inspector-raj system in the past. The crux of my suggestion is that the Council should explore different solutions to lessen the burden on small taxpayers who can be asked to file only GSTR-3B and the large taxpayers can comply with all the pangs of the Business Processes designed to protect revenue.

It is pertinent here to note that based on the July month data, the CBEC has asked field formations to verify over Rs 65000 Crore ITC taken by the taxpayers. Since verification is one of the natural activities of any tax administration it should not send wrong signals among the taxpayers that the Government has no trust in them or is excessively worried about the quantum of ITC. Since a good number of taxpayers had huge opening credit in their books, Rs 65000 Crore ITC is not a big figure, given the fact that a large number of assessees are yet to file their TRANS-01. Since the Government has permitted revision of TRANS-01 once, such a claim may be moderated if wrongly fed into the system or there is a likelihood that the GSTN may have allowed more than the claims made.

Another critical area which warrants quick attention of the GST Council and the GSTN is the exports. It is a well known fact in the corridors of power that after long and concerted efforts India's exports has picked up double-digit growth, and no stone should be left unturned to sustain this growth rate. But, unfortunately, exports is one sector which seems to have got minimum or no attention of our policy makers. Apart from the delay in refund which the law promises within seven days, and hence the working capital getting locked and LCs are on the verge of being cancelled for lack of funds at many exporters-end, one funny situation has arisen in the case of SEZ. We all know that SEZs account for a large swathe of our exports but they seem to be getting step-motherly treatment by the GSTN. But, how?

The story goes like this - On April 1, 2017 Government through introduction of proviso to rule 8 (1) to CGST Rules, 2017 provided that a person having a unit(s) in a Special Economic Zone or being a Special Economic Zone developer shall make a separate application for registration as a business vertical distinct from its other units located outside the Special Economic Zone and accordingly added point 12 & 13 in the revised GST registration application form. The GST software was also designed in such a way that it recognises SEZ unit from its GST registration number itself. Hence any party claiming zero rated supply to SEZ will have to put GST registration number of unit registered in GST network as SEZ unit. So far so good!

Now the catch is - the GSTN has become oblivious about those who had already migrated to GSTN in November 2016 and were having just one unit located in SEZ only and were not asked to take fresh registration. Hence such units having old registration and located in SEZ were designated as non-SEZ in the GST system and benefits of SEZ would not be available to them or their suppliers in GST network. Therefore such businesses, having a SINGLE unit located in SEZ and having registration under old regime wherein separate recognition for SEZ was not provided, are required to amend their migrated registration and get themselves recognised as SEZ unit or developer. However, strangely, till date no amendment option to convert those earlier “GST Registration number” into “GST registration as SEZ” has been provided by the GSTN. As per my input, there are about 15 such units in DAHEZ SEZ itself who had migrated to GSTN prior to April and do not have any other business place other than in SEZ in the state. All of them are stuck and cooling their heels with no-solution-scenario staring in their face!

Now, the much bigger issue is - without correction in the Registration, neither such SEZ units can file their GSTR-1 nor their supplier can do the same. Since supply made by the supplier to such SEZ units will not be accepted by GSTN as supply to SEZ, the GST portal would calculate CGST+SGST on such supply instead of Zero rated supply. Again if such SEZ units file the GSTR-1, the GSTN software will calculate SGST+CGST instead of IGST on their outward supply to DTA units. Such wrong GST calculation would be violation of GST law and prevent GSTR-1 filing. Is it not a case of being caught between the devil and the deep sea?

Let's hope the Ministerial Panel takes note of all such ground-level problems being faced by the industry and trade and does something quickly before a long-term damage is done to the economy. Only two days back, the World Bank's India Head made a statement that the GST represents a 'tectonic shift' for India which should score over 8% growth rate. There is no element of excessive optimism in his statement but India needs to guard the growth trajectory from being damaged by such foreseeable ground-level problems hampering the businesses from doing business. Undoubtedly, these are unintended consequences but that is where the efficiency of a modern governance model comes to be tested against time. Let's hope all the bold statements of the Prime Minister do not go hollow and a real-time solution-providing machinery is put in place. It is high time the key decision-makers rise above the peripheral job of spending too much time on selection of video ads and print ads and attend to real problems!


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