JANUARY 25, 2018

By Ramesh Chandra Jena

1) MINIMISATION of Multiple Returns under GST:

There are multiple of returns (GSTR-1 to GSTR-11) has been prescribed for compliance under GST. Even certain returns namely GSTR -2 & GSTR-3 kept abeyance temporarily and GSTR 3B has been prescribed up to 31st March 2018 due to insufficient infrastructure of GSTN Common portal. In spite of that taxpayers are facing a lot of problems while filing their returns namely GSTR-1, GSTR-3B, TRAN-1, TRAN-2, ITC-02 etc., so on and wasting their administrative time due to poor infrastructure of GSTN Common portal. Since GST is totally technology based it will take some more time for the taxpayers as well as GSTN personnel to sort out the problems arising in the Common portal and, therefore, till that time filing of various returns should be given relaxation. The imposition of penalty/ collection of late fees for delay filing of returns to be waived till the stabilisation of Common portal. Moreover, the multiple returns under GST should be minimised and single return should be developed for all types of business.

2) Make Provision of rectification and correction of returns submitted:

The provision of revision or rectification of mistake in returns was available under Service Tax, Central Excise;even now for Income Tax also, if any error at the time of submitting returns, same is permitted for rectification. But no such provision has been provided under GST. Consequently, this will create litigation between taxpayers and department with wrong returns. It is suggested to introduce provision for rectification of mistake in returns submitted in the Common portal. This will help for smooth tax administration in the coming days.

3) Levy of GST on Job work processing charges needs to be removed:

Under Service Tax regime "job work charges" was exempted from payment of tax to give relief to the manufacturer or principal from payment of double tax on finished goods. But in the GST regime the basis of taxability & levy of tax has been changed from "manufacture" to "supply". In terms of clause (3) of Schedule II read with sub-section (1) (c) of Section 7 of the CGST Act, 2017, "Any treatment or process which is applied to another person's goods is a supply of services.",thereby, if the Service Charges of processor or job worker exceeds the threshold limit (registration) of Rs.20 lakhs the processor or job worker is liable to pay GST on processing charges. Consequently, the job worker's transaction cost and administrative cost for GST compliance will be enhanced. Job worker will be forced to close his business on account of lesser profit margins on job working. This provision under GST needs to be reviewed and should be withdrawn for the benefit of the job worker across the country.

4) Minimisation of Multiple rates for Hotel Services :

Hotel service is falling under chapter heading 9963 in respect of accommodation, food and beverage services and rates slab has been prescribed 5%, 12%, 18% and 28% according to the various situations and depending upon Tariff charges for accommodation service. Due to multiple rates for the same type of services,Hotel industries are facing untold difficulties to raise invoices / bills with correct rates while supplying combination of food, beverages and accommodation services, wherein the common inputs are being used by them for the supply of combination of services. It is very difficult to maintain separate accounts for each service and avail ITC. Therefore, it is suggested that only two rates slab should be prescribed i.e. rate with availing ITC and rate without availing ITC for Hotel services in place of multiple rates.

5) Advance Rulings for un-registered person :

Under GST law, It has been prescribed that un-registered person can file application to obtain advance rulings but practically it is not feasible even though recently the provision of filing of manual application to the Advance Ruling Authority has been provided; but fees have to be deposited through online in the Common portal, for which an un-registered person cannot file his application as he has no access to the common portal to deposit fees, so the provision of advance ruling is meant for registered person only. Further, Advance Ruling Authority order is meant to reduce litigation of the registered person applying for the same and not for another registered person of the same jurisdiction. So Advance Ruling Authority order has narrow applicability and is no use for un-registered person. The lacuna in the provision is standing as obstacle for un-registered person to obtain Advance Rulings under GST law and needs to be amended.

6) Refund mechanism for accumulated ITC under Works Contract :

The Government as per decision of GST Council meeting held on 10thNovember, 2017has reduced rates on more than 175 items, thereby taking them out of the 28% GST slab to 18% GST slab.With this changes of rates slab in case of works contract service providers specifically those who are carrying out EPC have been affected with huge amount of accumulation of ITC against inventory of Capital goods & inputs held with them to be used, which have been procured with rate slab of 28% before 10th November, 2017. Since their output service slab rate is 18%, it would be impossible to adjust huge amount of ITC lying in their ledger. Now the said works contract service providers are facing problem to get refund claim of accumulated ITC in the absence of any statutory provision. Even though refund claim is permitted for unutilised ITC in case of inverted duty structure means since the present accumulation of ITC is not due to inverted duty structure but due to reduction of rate slab, refund is not available. It is suggested that suitable clarification or refund claim mechanism be provided so that work contract service providers get refund claim of accumulated ITC lying in their account.

7) Electronic Way Bill system needs Relaxation :

It is a welcome step taken by the Government by incorporating e-way bill system under GST law. The very objective of the Government to control of evasion of tax on supply of goods without proper documents. But the provision of e-way bill system needs relaxation as it may not be possible on part of all registered persons, recipients, transporters and small conveyance owners to be ready with electronic devices (RFID) in his vehicle and generate e-way bill on the Common portal. In the initial stage of implementation some more time be given and it should be made mandatory from 1st April, 2018. Further, it is suggested the value limit of GST paid goods of Rs.50,000/ should be enhanced to Rs.1 lakhs for e-way bill requirement so that small motorised vehicle owner can run their business in the GST regime without registration under GST and without necessary compliances.

8) Simplification of OIDAR Services :

The taxability of OIDAR services was considered by the Government in the Service Tax regime and the same provision has been incorporated in GST. But further clarification is needed for simplification of Tax provision of OIDAR Services. For example, registration under GST is PAN based identification but in case of Overseas OIDAR Service providers GST law does not specify the basis of registration for identification. It would be impractical to ask individual in India to register and undertake the necessary compliances under GST and pay tax only for a one off purchase on the internet. There is every chance of tax evasion by the OIDAR Service providers as no direct control mechanism of the Government or department officers to verify the each transaction and catch hold of the evader of tax.

9) Refund of ITC for Merchant Exporter needs to be reviewed :

Only after 23rd October, 2017,the Government has notified the procedure in respect of merchant exporters to procure goods for export with reduced rate of GST @0.1% vide Notification No. 40/2017-Central Tax ( Rate) dated 23.10.2017.

Thereafter, Merchant exporter has approached the department for refund claim of ITC on goods so procured on payment of GST during the period 1.7.2017 to 22.10.2017. The department has sanctioned refund claim of ITC in accordance with the provision of Section 54 of the CGST Act, 2017 and refund of input tax credit has been granted as per the formula as under:

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) * Net ITC / Adjusted Total Turnover.

Merchant exporter's Adjusted Total Turnover comprises multiple commodities and multiple rate of GST paid goods procured for export. The merchant exporters are suffering loss of huge amount of ITC due to wrong formula that has been adopted.

It is requested that as a special case separate clarification / formula / refund claim mechanism be introduced for sanction of refund of unutilised / accumulated ITC for the period from 1.7.2017 to 22.10.2017 so that large number of merchant exporters across the country are benefited.

(The author is Senior Tax Associate at Taxpayers Advisory Forum, Bhubaneswar.)