GST - Once Bitten, Twice Shy!
TIOL - COB( WEB) - 610
JUNE 07, 2018
By Shailendra Kumar, Founder Editor
ONCE Bitten, Twice Shy! That is how one may describe the slow pace of pending GST-related reforms such as e-Wallet Refund Scheme, New GSTR format, tweaking of the GSTN critical software's and even GST rates or laws. And, it may appear that the tardiness also pays! But how? It has indeed softened the painful impact of DISRUPTIONS caused by implementation of imperfect GST IT platform. The slow pace of changes approved by the GST Council has helped the economy to overcome the pangs of transformation which was eloquently acknowledged by the World Bank recently when the Q4 results were made public. Manufacturing, industrial production and capital formation have noticeably taken a leap and that is how the economy growth swirled out less than 7% quagmire to log 7.3% growth rate. It is indeed good news for India and it is expected that the policy makers would prefer going slow on all mega GST-related initiatives even if they are decided by the GST Council.
Secondly, it would be too optimistic for any GST protagonists to expect the Council to bring any of the petroleum products under the GST scanner. The Council would prefer cooling its heels for some more months and watch two mega events - a sustainable growth rate in the GST Collections and the political headwinds in the country. Given that the General Elections are now almost on the cards, no political party would like to devour tangible reform risks. Secondly, the GST collections are yet to yield a comforting trend which may provide cushion to the risk-taking behaviour of the Council. Though number-crunchers vouch that the April collection figure of Rs 94000 Crore is a healthy sign of improvement as compared to the July-December average of about 89900 Crore but the Council would prefer more data under its microscope before it breathes easy about the annual projections. Like in the previous years, the March collection was exceptionally high and the April collection was predictably down. Though it was down but certainly not out of projected range of slump!
The e-Way Bill which now stands implemented across the country, has done its tangible bit - a marginal push in the collections. In the coming months it would show more substantive results by contributing to the revenue kitty. Going by an average of 16 lakh e-Way bills being generated and this number is expected to go up to 20 lakhs per day, things would be falling in place for the worried tax administration. In the months to come, other anti-evasion measures such as TDS may come into force, sooner than one may expect, if the revenue collections do not pick up as per the expectations of the revenue monitors in the North Block.
One recent analysis which the North Block had got done by the GSTN, has prompted the Revenue Secretary to pinpoint serious slackness in the performance of the CGST Commissionerates. Though out of nicety, the CBIC honchos have probably not reacted (In fact there is a history to support their such stoic silence whenever an accusing finger is pointed at them!) but the field officials are a bit agitated. And they do have valid reasons for such reactions. The study done by the GSTN has taken into account merely four or five parameters and left out those where the CGST arms have done exceptionally well such as Policy, Refund and Anti-evasion. So far whatever stories have been reported about arrest of GST abusers, the source has been only the CGST Commissionerates. SGST administration across the country is yet to make its first case of misuse of provisions or outright attempt of tax evasion. Probably, they continue to rest on their 'glorious' laurels of turning Nelson's eye to ...!
Secondly, GST refund has so far been an unidirectional effort! Thanks to CBIC special drives, more than Rs 30,000 Crore of refunds have been sanctioned and, as per the latest data, what is pending is about Rs 14,000 Crore. However, exporters are of the opinion that if the GSTN provides the facility, more exporters would like to lengthen the queue and the total sum could be more than Rs 20,000 Crore. Whatever the figures are going to be, what is important is that the States are equal partners in the GST Collections and their efforts are not yet noticeably visible. It is true that e-Wallet scheme which was announced to be put to test by April 1, has been delayed but the general philosophy after the GSTN episodes, appears to be - Once bitten, twice shy! The security aspects of such e-wallets are yet to be finalised and the technology for the same is yet to be chosen.
Even as certain decisions may appear to be languishing for implementation, a good number of States have reported that the GST has turned out to be a true 'lottery' for them as they have mopped up as much as Rs 4000 Crore from the levy of GST on lotteries sold by NINE States. The Kerala Finance Minister is of the view that this sector has a potential to generate as much as Rs 35,000 Crore to Rs 40,000 Crore annually if this sector is nourished and allowed to grow by a favourable policy framework. On the revenue mop-up front, as many as half of the States have reported close to 48% growth rate in GST revenue collections. This means lesser fund outgo from the Compensation Cess Fund and in months to come, the GST Council may prepare a blueprint to pare down tax rates on some of the goods which number about 50 and continue to be in the 28% tax bracket.
On the GST law front, the Council had approved as many as 54 amendments but a review was also suggested. Thus, a Review Committee of CGST and SGST officials was set up and it was given the mandate to interact with the Law Committee (the original framers). Unfortunately, even after THREE meetings, nothing appears to have been finalised. And the FOURTH meeting is slated to kick off today for three days in the national capital. If an amendment bill is to be tabled during the Monsoon Session of Parliament, it has very little time to discuss it threadbare and then rewording of the key expressions overcoming the 'mischiefs'. Though the GST laws provide for State-level forum of officials to pass advance rulings but what happens when there is a case of divergent rulings passed in the case of same assessee by two different State ARAs. And it has happened in the case of Giriraj Renewables Pvt Ltd (2018-TIOL-12-AAR-GST + 2018-TIOL-43-AAR-GST) and the North Block needs to quickly settle such aberrations before they snowball into full-fledged litigation.
Since the objective of the Union of India is to minimise even the pending litigation and prevent a fresh bout of litigation, it should take a call on either creating a national body to sort out such discrepancies or legally empower the existing ARA headed by a retired Supreme Court judge. Like the Customs, this forum may be vested with the powers to deal with all such GST-related issues and it can have regional benches at least in the four metros. Some CESTAT or retiring CBIC Members may be appointed as its Members. It would be much easier than creating a whole new body with regional benches. It is more so because this forum has in the past dealt with even CST issues besides other indirect taxes. Let's hope tardiness does not really become a mantra to solve all problems irrespective of the elements of urgency!