By Vijay Kumar

Ink signing mandatory?

RECENTLY, the CBIC issued a Circular dated 10th January 2019, clarifying certain issues regarding implementation of the Scheme of Budgetary Support to eligible industrial units located in States of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North East including Sikkim. One of the doubts raised was,

Provision for appeal: There is no provision for appeal for the unit in case the unit is aggrieved with the findings of sanctioning authority/Inspection team.

And the CBIC clarified,

The support under the scheme is in the nature of grant and not refund of duty under taxation law. As such there is no requirement for any appellate forum as the decision of the sanctioning authority is final.

Can the decision of a babu be final and can there be no appellate mechanism against such decisions? Is the government officer a Supreme Court? When there is no appellate mechanism provided for in the Scheme, the decisions can be challenged in the High Courts by writ petitions. Not even GST can displace the writ jurisdiction of the High Courts. There are other areas in GST where no appellate mechanism is provided for in the Law. All those matters will eventually reach the High Courts, which will be further clogged.

Ink Signing? Another doubt answered in the same Circular was:

Insistence on ink signed copy by PAO of sanction order, creates delay in the sanction of refund. It was suggested that there should not be any requirement of ink signed copy of the sanction order to the PAO by the DC/AC especially in areas where Commissionerates are located in far flung areas.

Board clarified that in the manual mode there is a requirement for the same. However, in the automated mode after roll out of the third phase of the automation, there will not be any requirement of ink signing of the sanction order.

What is ink signing? If it is signing by ink, will a ballpoint signature be accepted? Is there any colour requirement for the ink signature? There seems to be an unwritten law that gazetted officers should sign in green ink and they alone are authorised to sign in green! Please also see THE GREEN INK CONTROVERSY

The Board communication in reference is Circular No. 1068/1/2019-CX, dated 10th January 2019 issued by the Central Board of Excise & Customs. By the Finance Act, 2018, "the Central Board of Excise and Customs" was renamed as "the Central Board of Indirect Taxes and Customs". But the Board still calls itself the Central Board of Excise & Customs! Old habits die hard.

The GST North East Scheme:

Under the Central Excise regime as its existed prior to 01.07.2017, the units located in the states of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North East including Sikkim were eligible to avail exemption from payment of Central Excise duty in terms of area based exemption notifications. While ab-initio exemption was available to the units located in the States of Uttarakhand and Himachal Pradesh, the units located in other aforesaid areas were required to pay Central Excise duty and avail exemption by way of refund of cash component of such duty paid.

Under GST regime there is no such exemption and the existing units which were availing exemption from payment of Central Excise duty prior to 01.07.2017 are required to pay CGST&SGST/IGST like a normal unit. Thus, at present, no exemption is available to these units by way of either ab-initio exemption or by way of refund.

In order to obviate the hardships faced by such units, Central Government has decided to provide budgetary support to the eligible units which were operating under erstwhile Area Based Exemption Schemes, for the residual period for which the units would have operated under the schemes, by way of refund of the Goods and Services tax, limited to its share of CGST and/or IGST retained after devolution of taxes to the states. The Department of industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry which is the administrative department for the scheme, has issued a notification dated 05.10.2017 regarding "Scheme of budgetary support under Goods and Service Tax Regime to the units located in States of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North East including Sikkim."

The new scheme is introduced as a measure of goodwill, only to the units which were eligible for availing benefits under the earlier excise duty exemption/refund schemes but has otherwise no relation to the erstwhile schemes. The scheme of budgetary support has come into operation w.e.f. 01.07.2017 for an eligible unit and shall remain in operation for residual period in respect of specified goods.

It is in relation to this scheme, that the CBIC/CBEC has given the above clarification in Circular No. 1068/1/2019-CX, dated 10th January 2019.

GST for Panchayats? Percolate the Co-operative federalism: Dr. Vijay Kelkar, chairman, National Institute of Public Finance and Policy says,

Fiscal federalism has been one of the most important pillars for the success of our enduring democracy. The fiscal federalism mainly comprises allocation of rights and duties related to taxation and expenditure responsibilities and system of transfers between the different levels of government such as centre, state and the third tier, elected local governments and Panchayats.

To provide the necessary fiscal base for the 3rd Tier, I would strongly urge to make constitutional amendment to enable both states and the centre to share an equal percentage of their  GST, i.e., of SGST and CGST with the 3rd Tier. This will provide a buoyant fiscal base to the 3rd Tier and more importantly align interests of the elected officials with their citizens as GST is essentially a consumption-based tax.

Towards this, I would propose the following rates: A single GST rate of 12% with CGST and SGST of 6% each and both Centre and state would share 1/6th of this with the 3rd Tier. This would enable providing a fiscal base of not less than 1% of GDP to the 3rd Tier in a predictable manner.

Given growing urbanization and the increasing role of the cities in maintaining the country's growth momentum, an adequate fiscal base for the cities can alone ensure the supply of required public goods such as urban mobility, solid waste management, public health, etc. Such a measure will also generate considerable amount of fiscal resources with high buoyancy.

There is, of course, need to reform the property tax system on the lines suggested by the 13th Finance Commission. Such strengthening of the fiscal base can give a major boost for improving greatly the urban infrastructure and strengthen our cities as powerful engine of growth.

Cities with better local public goods would increase automatically the tax base of the cities as better public goods will promote growth of economic activities and the resident citizens' incomes and consumption which, in turn, will provide high fiscal resources to the cities' governments. Equally, every citizen will be contributing to the fiscal base as the GST is a consumption tax. Consequently, every citizen will demand high accountability of the governance. In other words, both demand for and supply of good governance will improve quality of life on a sustained basis.

The effective "democratic decentralization" means autonomy of the third tier governments in terms of funds, functions and functionaries.

Already several Municipal Corporations and Cantonment Boards have asked for share in GST collections or they want to be permitted to levy local taxes.

GST reforms: Dr.Kelkar has also suggested several GST reforms like:

- GST should include real estate, electricity, liquor, tobacco and the petroleum products. Some of these products can be considered as "sin" goods and a single rate of GST may not be adequate to discourage the consumption of these products. Towards this, one can envisage "nonvattable" levy on these sin goods. Such a surcharge can be imposed by both centre and state equally or by centre alone or states alone. For instance, on tobacco, it can be only by the centre and on liquor, it can be only by the states and on petroleum products both centre and States. Such a flexible approach towards tax jurisdiction for "non-vattable" surcharges will meet the concerns of the state governments.

- Bringing real estate in the GST will have an additional advantage of imparting transparency in the land and real estate markets and thus substantially reduce generation of black money in our economy. This measure will yield better results on controlling black money than a measure like demonetization.

- Completely do away with the system of e-way bills.

- Recalibrate the GST administrative structure so that a tax payer is required to be audited only by a single tax authority, for a larger taxpayer by the Central authority and for smaller taxpayer by the State authority.

No e-way bill: In an earlier paper V. Bhaskar and Vijay Kelkar had suggested:

1. The e way bill be discontinued, and reliance is placed on the Goods Receipt and the invoice which are already required to accompany the vehicle.

2. Inspection on the road transport vehicles in transit can be avoided to a very large extent if two steps are taken.

a.  The invoice matching mechanism in the GSTN is activated.

b. The exemptions given to the road transport sector in the GST framework are withdrawn and this sector is treated on par with the rail, air and sea freight sectors. This will require standing up to the road transport unions (something the government was unsuccessful in doing so in 1997 and 2004). There may be merits in overruling objections of this special interest groups so that a truly national market with seamless connectivity can be put in place.

Chairman urges GST facilitation: The new Chairman of CBIC in his weekly letter dated 11 th January has exhorted his staff to spread awareness and facilitate in case of need. The Chairman states,

It has been more than eighteen months since GST was implemented and based on the experience and the data available for this period, possibilities were explored to further ease the compliance of doing business for small taxpayers. Accordingly, GST Council in its 32nd meeting held on 10th January, 2019 made decisions to further facilitate the small taxpayers. One of the major decisions was to provide an option to States to extend the threshold limit of aggregate turnover for registration under GST up to Rs. 40 lakhs. Decisions have also been taken to provide opportunities to more taxpayers to take benefit of the Composition Scheme which has been further simplified. The limit of aggregate turnover for availing extant Composition Scheme has been increased to Rs 1.5 crore for all states except special category States. They would be required to furnish only one yearly return with quarterly payment. Necessary tax compliance details would be captured in tax payment challan.

In view of all the above changes, I would urge all the officers to spread the awareness to the tax payers about these recent trade facilitating changes and facilitate them in case of any need.