DECEMBER 18, 2017

By Dr G Gokul Kishore

AS the temperature dips in Delhi aided by icy winds, the compulsion to stay indoors is more on weekends. Of course, the best antidote for long wintry evenings is GST. It was quite a surprise that the 24th GST Council Meeting has been organised through video conferencing on 16th December and it appears the only agenda discussed was implementation of e-way bill provisions and system. As the same is being set for nationwide roll-out from 1 st February next year for inter-State movement of goods notwithstanding the plea for deferring such system to 2019, we shall turn our attention to certain other issues which need the attention of authorities on priority.

Cross-charge versus ISD

GST law casts multiple-registration obligation on the taxpayers if they operate in different States. To take care of intra-company transactions across States, the concept of distinct person has been introduced with attendant provisions. Input Service Distributor or ISD mechanism has been retained in GST regime but the State-wise compartmentalization of taxpayers has logically or unintentionally led to the situation of provision of services by head office or corporate office in a particular State to plants or depots or branch offices in other States where the taxpayer is present. It will be discriminatory if this issue is termed as one where great deal of confusion exists as plenty of other issues are no less confusing.

Discussions by officialdom and trade bodies tend to obfuscate such transactions and treatment of the same under GST law and one ends up concluding cross-charging is same as ISD. Worse, in certain geographies, there is an enlightened call not to cross-charge expenses from head office on the plants in other States. Existential dilemma of such issue apart, inclusions for cross-charging presents a picture similar to excise valuation of nineties. Salary and interest, whether should form part or not is a question which tax administration considers not worthy of an answer at this moment when it has just embarked on division of taxpayers between Centre and States and high-sea sale, in-bond sale, etc., are sought to be comprehended from GST perspective.

Vesting of rights through judicial action

As per media reports, Delhi High Court has allowed interim relief on transitional credit in respect of stock beyond one-year time limit as provided in the relevant provisions [Section 140(3) of CGST Act]. On manual filing of advance ruling application and refund applications, both High Court directions and State circulars have provided some succor to otherwise bruised members of trade and industry. It is settled law that law of limitation apart, vested right of duly earned credits cannot be denied or taken away arbitrarily without any reason. It is salutary in terms of equity and fairness that credits accrued under the earlier laws have been statutorily recognized and bestowed with GST colours by treating them as credit under GST law as well. But the time-limit for claiming such ‘largesse', categorization of claimants, quantum of such entitlements and documentary requirements coupled with official instructions and circulars threatening of rigorous scrutiny of such transitional credit claims and precipitative action hardly inspire any trust in the so-called trust based tax system that is being sought to be ushered.

Judicial action to claim vested or accrued rights is not new but as a new tax system, GST, at least, during the initial period was expected to be less insulting and more liberal. Extension of time-limit for filing TRAN-1 form to one year, permitting claims for pre-GST stock without any restriction as to period and allowing multiple revisions till filing of returns utilizing proportionate transitional credit or scrutiny of claim are just some of the measures the government should consider to incentivize compliance with the new law.

Non-compliance versus not able to comply

GST administration is system driven. Every step is conceived as IT-enabled. Despite claims, the IT infrastructure was not and is not prepared to provide all the facilities contemplated online or bear the load of millions of assessees. The stories of people working on graveyard shifts only to file a return at 2 am or 3 am as can be seen on the Official Twitter handle are painful and distressing. It seems beta version of GST portal is being administered live. Normal refund application is not available online, exporters have to wait for several circulars to know how to claim refund, registration facility for those seeking Unique Identity Number (UIN) is not available, ISD return (GSTR-6) being not available (though clarified as available by Pune GST Commissionerate through social media) – the list is endless. Till last week, no taxpayer was having any idea of jurisdictional officers to be contacted.

If systems are designed to make compliance impossible, then there is every justification for suitable amendments to make inability to comply due to such reasons fit for waiver of penal action. Provision like Section 80 of Finance Act, 1994 which provided for waiver of penalty in certain cases under service tax regime should be incorporated in GST law as well.

Anti-profiteering – Price increase is sin

Compared to media campaign on GST rate reduction, the publicity on anti-profiteering is more glaring and sometimes nauseating . In particular, after the November rate reduction bringing several goods from 28% bracket to 18% slab, fear is being spread among the trade that any price increase is sin, any price decrease is ordained duty and anybody who dares to contemplate upward revision of price for hundreds of commercial reasons like increase in raw material cost, market demand, etc., will be exposing himself to the long arm of law.

Affixing new MRP sticker on old stock and in particular, those spread at various levels in the distribution chain, complying with Legal Metrology Rules and arriving at the methodology to compute the numbers to comply with anti-profiteering provision have all contributed to reinforcement of the traditional belief that nothing has changed – surveillance, enforcement and punitive action are put to use disproportionately with much less discretion. As the New Year dawns, businesses wait for routine yearly price revision but the highly inflammatory provision of anti-profiteering threatens. It is time appropriate rules are framed providing for objective methodology to determine what is the red line and how not to cross the same.

(The author is a Joint Partner, Lakshmikumaran & Sridharan, New Delhi. The views expressed are strictly personal.)