JUNE 14, 2019

By R Sridhar, Consulting Editor, TIOL

EVERY week, the GST space throws up new challenges and problems. While Taxes are the price we pay for civilization, all stakeholders must take the approach to settle the major reform smoothly and quickly. In this week we will take up three issues adverted below.

Appellate Authority for Advance rulings

In a recent ruling, the West Bengal Appellate authority consisting of two members had divergent views - 2019-TIOL-46-AAAR-GST on the appeal before it and consequently in view of s.101(3) of the Act it is deemed that no advance ruling can be issued in respect of the question under the appeal. This anomaly in law was raised many times in the run up to and after GST. The ideal resolution would be to appoint Third Member who can be a Retired Judge and provide a balance to this much vexed issue.

It is not that Third Members have not been appointed in Tax disputes before Appellate Tribunals when there is tie in the views and the tie breaker is the judgment of the Third Member.

E way Bill Changes 21 June 2019

Consequent to the amendment of Rule 138 E to be effective from 21 June 2019, it is correct that persons who do not file returns for a consecutive period of two months and in case of persons filing returns under section 10 those who have not filed returns for two consecutive tax periods, should not be allowed to raise E way Bills. The Industry and Trade supports the initiative to bar unscrupulous traders from dealing with goods but there is one doubt that has emerged whether if the recipient has not filed GST Returns for 2 Tax periods or months how the supplier can control such deviations. While all registered persons can encourage their stakeholders to obey the law, in letter and spirit, it will be beyond the locus standi of a supplier assesse to ask whether the recipient has filed the GST returns.

The solution therefore is the person raising the e-way bill should be compliant and the registered person raising the e-waybill should not be burdened with the compliance standard of recipient.

Input Tax Credit

The GST Council and the GOI with States must introspect on what is the policy objective of ITC. In the last 4 weeks High Courts have addressed issues on credit eligibility of immovable property when the same is let out on rent, validity of 16 (2)(c), 16(2)(d) etc. It is settled law that credit is not a vested right and the same is subject to contours of policy and legislation. This coupled with certain decisions of AAR on what is the correct interpretation of 17(5)(a) have raised many doubts on the issue of ITC. Time again in many forums the want of machinery provisions for 17(5)(h) have been discussed and assessees have been adopting different yardsticks on the same to reverse credit.

The spate of cases on ITC makes a student of Tax law wonder whether tax credit restriction is policy driven or is credit used as a tool to increase the cash content of duty payment.

It will be therefore imperative for a Circular on ITC to be issued or amendments to law where required be taken up so that wanted stability is achieved on the vexed subject of credits.

Services rendered by Staff of one unit to another unit of the same organization

While in the case of Columbia Hospitals - 2018-TIOL-31-AAAR-GST the Hon'ble High Court of Karnataka has issued Notice recently on the vexed issued of Section 7(2) of CGST Act read with Schedule III versus section 7(1) of CGST Act read with Schedule I, the entire issue appears to have been raised due to certain vacuum in the law.

It is relevant that Rule 32(7) of CGST Rules empowers the Government to notify on the recommendations of the Council certain services between distinct persons as nil. Considering this power it would be, fulfilling the objective of reduction of litigation if inter-office services of all registered persons by employees of one to another unit of the same enterprise/entity be notified as nil.

Considering that the larger objective of the GOI and the Council is progressive industry, and trade with healthy tax collection, it would be optimal if a middle path is found on all the above issues. It is indeed the call of every citizen that we must not burden the High Courts with too much of tax litigation, but we may not be able to achieve the goal of reducing litigation unless we attend to these burning issues.

(The views expressed are strictly personal.)