News Update

GSTN activates functionality to file quarterly GSTR-1 returns for taxpayers having less than Rs 1.5 Cr turnoverCBEC Chairperson asks for expediting work relating to division of taxpayers; verification of transitional credit claims & timely revenue analysisWidespread tax evasion compelled GST Council to advance e-Way Bill: Sushil ModiGuwahati DRI nabs three persons with gold bars worth Rs 2.4 CroreGST - If ownership of imported goods kept in bonded warehouse is transferred, such transaction to be liable to IGST, clarifies CBECAP CM to position his State as Education HubUS taxpayers not hopeful of decline in taxes next year: PollsSC orders re-examination of 349 FDC medicines such as Corex Cough syrup + Vicks Action 500e-Way Bill - GST Council decides to notify it from Feb 1, 2018 on Inter-State movement of goodsIncome tax - Figures mentioned in loose sheet cannot be automatically treated as incriminating material, for initiating reopening: ITATCX - Revenue failing to cause enquiry to ascertain truth from IT Dept. regarding seizure of document shall not debar appellant from respective claim of CENVAT credit: CESTATFM urged to hike TDS limit for bank interest and extend date of Masala Bond TDSNewsprint publications - UP tops tally; followed by MaharashtraUnion Cabinet clears bill to substitute MCI Act to regulate 40% seats even in private medical collegesExports picks up in Nov but trade deficit also swells between Apr-NovDebit Card Payment - Govt to reimburse banks MDR charges on transactions upto Rs 2KGovt has fixed ceiling prices of 849 medicines so far: MandaviyaConsumer Helpline receives over 3 lakh plaints relating to e-commerce, banking, insurance, telecom and real estate sectorsNovember exports gallops @30.5% in Dollar termsPre-Budget Meet - Bankers urge FM to hike TDS limit of bank interest from Rs 10KCabinet okays proposal to reimburse banks MDR charges for debit card payments upto Rs 2000Cabinet approves subsidy to industrial units located in N-ECabinet okays UNESCO's Training Centre for Operational Oceanography in HyderabadCabinet okays special package for employment generation in leather & footwear sectorsCabinet okays 2nd financial restructuring proposal of Konkan Railway Corporation Limited (See 'TOG News')Cabinet nod to subsidize MDR charges on digital payments (See 'TOG News')Govt substantially reduces tariff value of gold, silver and edible oilsGST - Nebulous state of affairs - Court fully justified in initiating action for contempt, however, considering sensitivity of matter, is inclined to give one more opportunity to respondent to consider representations and pass orders: HCPM to launch 60MW Tuirial Hydro Power Project tomorrow
 
GST - Consumers cry for mercy!

TIOL - COB( WEB) - 581
NOVEMBER 23, 2017

By Shailendra Kumar, Founder Editor

CHAOS or no chaos! There is evidently no stopping the Modi Government from accelerating the giant wheel of long-overdue tax reform at the structural level in the economy. And, even before the pain triggered by the GST subsides, the Union Cabinet yesterday set the ball rolling for the income tax reform process. A committee of experts has been set up with its convener, incidentally representing a 'hoary link' with the Direct Tax Code, now junked by the Modi Government. The guiding lamps for the Committee will be the best international practices and the needs of the economy. Going by the six months deadline which would come after the Union Budget 2018, even if the Govt in its present dispensation may not implement the new code, being too close to the general elections, the same may be acted upon as soon as the New Government comes into power. And, going by the present calculus of vote politics, Mr Narendra Modi's aplomb to stage a comeback may not be rated as too ambitious!

Prior to yesterday's Cabinet Meeting the Modi Cabinet also approved the constitution of the National Anti-Profiteering Authority to be headed by a Chairman and some Members. Though such a decision could have been a part of the regular Wednesday's Cabinet meeting but the Modi Govt rightly demonstrated a sense of urgency to do so. And the trigger-apparent was the GST Council's decision to reduce GST rates on 178 commodities at its Guwahati meet. Although it was an overdue rate reform but the Centre made a virtue out of it by marketing the decision as a consumer-friendly initiative. Ever since the GST roll-out the Govt has been thinking and talking about all the stakeholders except the consumers who happen to be, at least theoretically, the ultimate beneficiaries of all the reforms. Consumers have so far been taken for a rude ride! Whether it is the restaurant sector or the traders, consumers continue to shoulder their legal obligations by paying taxes as demanded by the retailers but whether such taxes collected are reaching the treasury is not very clear.

Certain inputs reaching TIOL indicate that since a large number of consumers are not familiar with the multiple tax rates, they have less propensity to question the traders and prefer to simply pay them. Whether such traders are indeed registered suppliers or composition dealers, is not clear at all. I am yet to come across one sign board declaring the retailer as a composition dealer. Secondly, there is no stopping such dealers from collecting taxes and pocketing them. What makes their fleecing 'jobwork' easier is the frequent rate change. For instance, a good number of eateries even today charge higher rates despite being a small service provider and they may not even be a part of the composition scheme as no verification drive has so far been undertaken by the GST field formations.

Going by the letters sent to large FMCG companies by the CBEC honchos and the appeal made by the Revenue Secretary to reduce prices after the tax rate cut, it is crystal clear that the consumers have to draw solace only from appeals being made to companies, their distributors and retailers. What about the enforcement machinery? This is yet another example of no preparation before implementation. The fact that the Indian consumers have historically been at the mercy of price-riggers and also low awareness about the dynamics of the changing product price, they needed to be cared a little extra. Ideally, the procedure for reporting complaints against price-riggers and a quick mechanism to grant relief should have been put in place right on the day the GST was rolled out. It would have sent a strict message to the industry and retailers. But, it did not happen and it would take some more weeks before clear-cut guidelines are made public. My fear is that a hurriedly drafted rules may trigger litigation. Hence, extra caution should be the guiding principle.

Let's move from the consumers to widespread indiscipline among GST officials in some States. Setting up additional outlets in temporary meal or bazar on certain festive occasions is a common practice among large number of traders. It is learnt that in some States, States officials have collected taxes from them against some locally-printed receipts! First, one needs to register an additional place of business with the GSTN, and secondly, none can collect GST against a manually-issued receipt as per law. But, it has happened and has also become a 'fun time' for small traders who are not keen to join the tax net. What aids such activities by both the traders as well as State officials is the fact that the jurisdictional distribution is yet to be finalised in most zones. Secondly, there is no survey or verification of taxpayers, whether one has taken registration or not.

One great disservice to GST which may be attributed to the GSTN, is the unseen behavioural reversal. When the GST was rolled out, the hype preceding the implementation had compelled traders to take registration and maintain books. A large number of fresh registrations is one such evidence to this fact. But, when they failed to file their returns - GSTR-1, 2 & 3; they have every reason to believe that the mechanism devised by the Govt to catch them has failed. And they have gone back to their hoary arrangement with their local VAT officials - only cash deals! Such evasion may temporarily be ignored when a reform process of GST-size has been implemented but what is worrying is the behavioural change in the reverse! The fear of GST to 'formalise' the informal economy is gone. Traders have begun to deal only in cash with their distributors and suppliers. And all suppliers are not above board. There are still several sectors with large medium-sized companies which continue to enrich the parallel economy. No doubt, when the verification drive would be undertaken by the GST officials in future it would be set right but the advantage which the pre-GST roll-out hype had created, is lost for the GST administration. It would now take several years to rope in major part of the informal sector businesses.

Another distortion which the non-working functionalities of GSTN is causing in the business practices is equally interesting. Since a registered person is not able to edit the name of its authorised signatory, it has decided to surrender the registration and take a fresh registration. This may be a quick solution to such a pestering problem but no tax system should force a taxpayer to do such things. Ideally, all the key functionalities should be activated within an advertised time-frame. It is appreciable that the committee set up to review the business processes is burning midnight oil but a simple solution could be a little tweaking of the GSTR-3B and a parallel filing of GSTR-1. Since the GSTR-3B has stabilised and it can be seen from the rising graph of returns in each passing month, it should find a permanent place in the GST Rules along with the GSTR-1 which would provide all the invoices raised by a supplier in a particular month. Such details would be good enough to check the ITC claimed.

For future, the Govt should also explore an alternative model for the GSTR-2 if it fails! And this can be a robust BILLING Software provided to the businesses. Such a software can work through internet once the BharatNet project is implemented across the country. Since one copy of every bill raised can be stored in the server at the command of the GST administration, the manipulation of supplies or evasion at the last-end of the transaction i.e consumer-end, can be regulated or curbed. For the large taxpayers, the Govt can even tie up with popular ERP or accounting software developers and notify them as authorised softwares to be used for maintaining supplies details and these software companies can replicate data to be stored in the Govt server for the audit purpose. Secondly, the Govt can earn royalty as non-tax revenue from such software suppliers for being stamped as approved software providers - a loud thinking, indeed! But, there is no harm in churning such idea which can be further chiselled to suit the purpose to keep an eye on abuse of ITC.

Before I wrap up this piece it is equally important for the Central Govt to quickly engage its large workforce parked at the GST field formations. Since most Central Excise Commissionerates that used to handle Customs-related works which have now been shifted to the Customs Commissionerates, the Group B and Group C personnel have become virtually jobless! In the present GST regime, the GST Sewa Kendras which they man on daily basis, their only job is to upload the queries from taxpayers to the official twitter handle or forward them to the CBEC Policy Wing. They have no other work to do. They are evidently getting demotivated. They need to be quickly engaged in some constructive GST-related work so that they become active aid to GST success!

 

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