DECEMBER 28, 2018

By Shailesh Sheth, Advocate

II. RECOMMENDATIONS relating to the procedural matters (Policy initiatives):

Council's Recommendation:

On the procedural/policy front, the Council has made quite a few significant recommendations, the broad details of which are contained in the Press Release. Here, we shall briefly discuss only a few of such recommendations.

a. Due dates for filing of Returns and New Return Filing System - Reality check

Council's recommendations:

The Council has made the following policy recommendations with regard to the furnishing of various Returns by the taxpayers.

i. A new return filing system shall be introduced on a trial basis from 01.04.2019 and on mandatory basis from 01.07.2019.

ii. The due dates for furnishing GSTR-8 by e-commerce operators for the months of October, November and December, 2018 shall be extended till 31.03.2019.

iii. The due date for furnishing GST ITC-04 (Job work) for the period July, 2017 to December, 2018 shall be extended till 31.03.2019.

iv. One more window for completion of migration is being allowed. The due date for the taxpayers who did not file the complete Form GST REG-26 but received only a Provisional ID (PID) till 31.12.2017 for furnishing the requisite details to the jurisdictional nodal officer shall be extended till 31.03.2019. Also, the due date for furnishing FORM GSTR-3B and FORM GSTR-1 for the period July, 2017 to February, 2019 / quarters July, 2017 to September, 2018 by such taxpayers shall be extended till 31.03.2019 .

v. Late fee shall be completely waived for all taxpayers in case FORM GSTR-1, FORM GSTR-3B & FORM GSTR-4 for the months/quarters July, 2017 to September, 2018 are furnished after 22.12.2018 but on or before 31.03.2019 .

vi. Taxpayers who have not filed the returns for two consecutive tax periods shall be restricted from generating e-way bills . This provision shall be made effective once GSTN/NIC make available the requisite functionality.

vii. The due dates for furnishing annual returns in FORM GSTR-9, FORM GSTR-9A and reconciliation statement in FORM GSTR-9C for the financial year 2017-18 shall be further extended till 31.06.2019 .

viii. Certain clarificatory changes, inter alia, relating to HSN Codes for inward supplies, additional payments of tax only in cash, non-GST supply, restriction on availment of ITC through FORM GSTR-9 and FORM GSTR-9C, shall be carried out in the formats/instructions according to which the annual returns/reconciliation statement are to be submitted by the taxpayers.

Comments:

Extension of due dates for furnishing returns – The duty to defer

The ill-preparedness of the GSTN Portal to handle an avalanche of GST Returns from the swelling number of taxpayers under GST regime is now starkly obvious! Things have come to such a pass that frequent extensions of due dates for furnishing various returns have become 'a norm' rather than 'an exception' in a short span of just 18 months since the introduction of GST on July 1, 2017! The latest round of extension of due dates announced by the Council for filing specified returns should not, therefore, come as a surprise at all! Such frequent extensions granted generally in an ad hoc manner reflect a systemic failure rather than the sympathetic attitude towards the taxpayers.

It is also announced that a new Return filing system shall be introduced on a trial basis from 01.04.2019 and on mandatory basis from 01.07.2019. Going by the past experiences, one can only fervently hope that the introduction of the proposed system will be planned properly, and it will be ensured that the taxpayers and the tax professionals will have a smooth switchover!

Extension of due dates for filing Annual Return/Reconciliation Statement - A height of indifference...!

What is, however, of utmost significance is the further extension of due date for filing Annual Returns in FORM GSTR-9 and FORM GSTR-9A and Reconciliation Statement in FORM GSTR-9C till 30.06.2019 for F. Y. 2017-18 recommended by the Council. Netizens would be aware that the due date of 31.12.2018 prescribed under Section 44 of the CGST Act, 2017 for filing these Annual returns/reconciliation statement already stood extended till 31.03.2019. This was initially announced through a Press Release dated 07.12.2018 and was later followed by an Order No. 1/2018-Central Tax dated 11.12.2018 issued by the Central Government under S.172 of the CGST Act, 2017. By the said Order, on the recommendation of the Council , an Explanation was inserted after sub-section (2) of S. 44 of the Act whereby the 'due date' for filing Annual Return for F. Y. 2017-18 was prescribed as '31.03.2019' . The Council has now recommended the further extension of the due date from 31.03.2019 to 30.06.2019.

While the extension was inevitable, the manner in which it is granted raises many serious and disturbing questions.

The statutory requirement of filing annual return and reconciliation statement vide S. 44 has been part of the CGST Act, 2017 from its inception. Inspite of that, for nearly 15 months, the taxpayers and tax professionals were forced to face an agonizing wait for the requisite Forms. It was only in September, 2018 that Forms GSTR-9, GSTR-9A and GSTR-9C were released. However, there has been no guidance nor clarifications on the intricacies of the Forms and the responsibility and the risks they may carry from the perspective of the taxpayers and the tax professionals. On the other hand, the tax professionals, the tax payers, the professional bodies like ICAI, CTC, to name a few and the Trade & Industry Chambers across the country have been spending countless hours in deciphering the Forms and in understanding their nuances as also identifying the risk areas.

Amidst this chaos, confusion and consternation (since the due date was fast approaching), there came an announcement early this month though the Press Release that the 'due date' is being extended to '31.03.2019' and that the utilities would be made available on the portal shortly! The almost nonchalant and carefree manner in which this announcement was made is really shocking! Was the Board or the Fitment Committee oblivious of the unpreparedness of the Portal? Aren't the countless hours spent by the taxpayers and the tax professionals across the country a colossal waste of time and a national loss? Who shall be responsible for this state of affairs? Moreover, when and in which meeting did the Council recommend the extension of due date for filing Annual Return to 31.03.2019? Last, but not the least, can the provisions of Section 172 of the CGST Act, 2017 be resorted to for such purpose?

And as if this was not enough, just in a span of 15 days, the Council has recommended the further extension of due date to '30.06.2019'. Whatever may be the inevitability and desirability of such extension, why actin such an ad hoc manner? What happened in short span of 15 days that called for further extension? Couldn't this be visualized in the first instance itself when the extension upto 31.03.2019 was granted? The revamping of the Return/Statement was already on cards and therefore, where was the justification for granting extension in such piecemeal manner?Isn't this a height of indifference?

GST Audit for F. Y. 2017-18 – "Please scrap it and save the taxpayers…!"

Amidst this chaotic scenario, it is sincerely felt that ideally, the Council shall scrap the requirement of filing the Annual Return and the Reconciliation Statement for F. Y. 2017-18 altogether! The taxpayers, particularly those in MSME Sector, are already reeling under huge compliance burden and attendant costs under GST. The mandate of the so-called 'GST Audit' too will be an additional compliance and financial burden for them. The Council can certainly save the taxpayers from this plight considering the fact that '2017-18' was the first year for the new GST regime. One should also not forget that the taxpayers are also required to comply with the requirement of VAT Audit for the first quarter of F. Y. 2017-18 as prescribed under the erstwhile State VAT laws. Under these circumstances, the Council will do well by recommending the Departmental Audit on the lines of 'EA-2000' for F. Y. 2017-18. While revenue considerations may dominate such Audit (One can't help it, can one?'), the Audit officers may be trained to become 'guides' and 'facilitators' for the taxpayers in the matter of understanding and complying with GST laws in this initial period. Contrary to the claims, the days of 'hand holding' of the taxpayers are not over. In fact, the days have never really begun in the right earnest and the Council must step in to ensure that the taxpayers, particularly in MSME Sector, are being suitably educated by the trained departmental officers.

If, however, the idea of scrapping the audit for the first year does not soundtoo appealing, the requirement can, at least, be restricted to the taxpayers having an 'aggregate turnover' of more than Rs. 10 crores during the financial year. This will bring huge relief to the large number of small and medium size taxpayers, ease the pressure on the tax professionals and in the end, make the entire exercise productive for the Revenue.

Let us hope that wiser counsel will prevail and the Council will take a very pragmatic and practical view in the matter.

" Nothing is more destructive of respect for the government and the law of the land than passing laws which cannot be enforced."

[Albert Einstein]

b. Waiver of late fee – Better late than earlier…!

Council's recommendation:

The Council has recommended that latefee shall be completely waived for all taxpayers in case Form GSTR-1, Form GSTR-3B and Form GSTR-4 for the months/quarters July 2017 to September 2018 are furnished after 22.12.2018 but on or before 31.03.2019.

Comments:

The flipflop, as is visible in case of the extension of due dates for furnishing the Returns, is also clearly visible in the matter of levy and waiver of late fees for the delayed furnishing of the Returns. During 2018, total 7 (seven) Notifications Nos. 4/18-CT to 7/18(CT) all dated 23.01.2018, 22/18-CT dated 14.05.2018 and 41/2018-CT dated 04.09.2018 have been issued providing for either reduction in or waiver of late fees for the delayed furnishing of the specified Returns by the specified class of taxpayers. Now, a complete waiver of late fees is being recommended for all taxpayers in case of the aforesaid three types of Returns for the specified period if filed after 22.12.2018 but on or before 31.03.2019.

It is obvious that the taxpayers who have already shelled out the late fees in the past for the delayed furnishing of Returns will feel unhappy! Since the waiver of late fees is necessitated due to inevitable extension of due dates for furnishing the Returns, why can't the provision relating to late fee be kept under suspension at least for two years? Simultaneously, why can't the steps be taken to encourage voluntary compliance on part of the taxpayers?

c. Extension of due date for ITC for F. Y. 2017-18 – Debatable but no one complains…!

Council's recommendations:

Granting a huge relief to the taxpayers, the Council has recommended that the ITC in relation to invoices issued by the supplier during F.Y. 2017-18 may be availed by the recipient till the due date for furnishing of Form GSTR-3B for the month of March 2019 subject to specified conditions.

Comments:

Thus, the taxpayers shall now be able to avail the credit on the invoices pertaining to F. Y. 2017-18 till 20.04.2019 that is, the due date for filing Form GSTR-3B for the month of March 2019. The recommendation has certainly come as a 'shot in the arm' for the taxpayers, many of them have apparently missed the bus in adhering to the perceived due date for availing ITC for the period F. Y. 2017-18.

While no one is complaining about this benevolent gesture of the Council, the very issue of ascertainment of actual 'last date' for availing ITC pertaining to the invoices of F. Y. 2017-18 is debatable one and mired in controversy. The Board and the field formations have been linking such last date for availing ITC for the F. Y. 2017-18 to the due date for filing the Return in Form GSTR-3B that would now stand extended till 31.03.2019 as per the recommendation of the Council in its 31 st Meeting. The Press Release (supra) also emphatically clarifies this position. However, suchdetermining and linking of last date for availing ITC for the F. Y. 2017-18 to the due date for filing Return in GSTR-3B is apparently lacking the sanctity in law. From the conjoint and careful reading of the provisions of Section 16(4), Section 39(1) and Section 44 of the CGST Act,2017 and Rule 61(1) of the CGST Rules, 2017, the due date for filing the Return in Form GSTR-3B cannot be considered to be relevant at all for determining the last date for availing ITC for the F. Y. 2017-18.It appears from the legal position, as is stands today, that neither '31.03.2019' i.e. the proposed due date for filing Return in Form GSTR-3B nor '30.06.2019' i.e. the proposed due date for filing Annual Return can be taken as the 'last date' for availing ITC on the invoices pertaining to F. Y. 2017-18.

Lastly, the extension recommended by the Council shall be subject to specified conditions. It will, therefore, be interesting to await the conditions which are prescribed for availing such benefit of extension in the matter of taking ITC for the F. Y. 2017-18.

The controversy is really unfortunate and ought not to have been allowed to arise in the first place. It has arisen due to strait-jacketed, ill-conceived and poorly drafted statutory provisions andthe compulsion to address the issue of practical difficulties in furnishing the Returns solely due to inadequacy of the GSTN Portal! The Council may have to do some 'soul searching' on this issue as it has all the ingredients of getting converted into a boiling litigation pot!

" There is no worse torture than the torture of laws."
[Francis Bacon in "Of Judicature", Essays, 1597]

d. Restrictions on the generation of e-way Bills by the defaulters – Tightening the noose….!

Council's recommendation :

The Council has recommended that the taxpayers who have not filed the Returns for two consecutive tax periods shall be restricted from generating e-way Bills. This provision shall be made effective once GSTN/NIC make available the required functionality.

Comments:

Apparently, alarmed with the rising number of non-filers of Returns under GST and also the cases of tax frauds/evasion surfacing with alarming frequency, the Council has decided to tighten the noose around the neck of the registered persons. The proposed restriction on the generation of e-way Bills in case of the taxpayers who have not filed the Returns for two consecutive periods would effectively mean that such defaulters will not be able to undertake any supply of the goods. One may also here take note of the provisions of Section 29 (2) of the CGST Act, 2017 vesting the discretionary powers in the proper officer to cancel the registration of a person in certain circumstances including the failure to furnish the Returns for the specified period.

While one may not really object to such punitive measure, it may result into an unintended discrimination between the supplier of goods and supplier of services in as much as no such action can lie in case of a defaulting supplier of service.

"Good men need no laws, and bad men are not made better by them."
[Ascribed to Demonax of Cyprus,

Cynic Philosopher, 70-170]

e. Changes in GST Laws vide the Amendment Acts of 2018 to be operationalized from 01.02.2019 – End of a long wait…!

Council's recommendation:

The Council has declared that the changes made by CGST (Amendment) Act, 2018, IGST (Amendment) Act, 2018, UTGST (Amendment) Act, 2018 and GST (Compensation to States) Amendment Act, 2018 and the corresponding changes in SGST Acts would be notified with effect from 01.02.2019.

Comments:

Netizens may recall that significant amendments have been made in the GST laws, particularly, in the CGST Act, 2017 and the IGST Act, 2017by the aforesaid 4 (four) Amendment Acts in August 2018. However, the same have not been operationalized till date. It is now proposed to put the amendments into effect from 01.02.2019. This would mean that the Council is confident of the incorporation of the corresponding changes in the SGST Acts by all the States during the intervening period.

The taxpayers may take note of this development as a few of these amendments are quite significant and have long term ramifications.

"Even when laws have been written down,
they ought not always to remain unaltered."

[Aristotle]

(To be concluded….)

(The author is founder M/s SPS Legal and the views expressed are strictly personal.)

See Part I