SEPTEMBER 04, 2019

By Vijay Kumar

PUNJAB Finance Minister Manpreet Singh Badal wants GST 2.0 by redesigning and revisiting it in its entirety. He says,

-  GST has been a disappointment, and I think there has been some flaw in the design.

-  The expectation was that once GST was introduced, GDP would go up by two percentage points, tax collections would increase, exports would become competitive and filing would be very easy. But the experience has been that the GDP growth has not taken place to the expected level and filing is very, very difficult.

-  So, what we are talking about is GST 2.0 because in the last two-and-half years, there has been almost 4,000 statutory amendments in the law. So, if you operate a patient 4,000 times, he is not likely to get well.

-  So, I think we need to redesign our GST and if I am not mistaken, the tax collections in the last two years are actually lower than what India was collecting two years back.

-  If Indian economy is growing at 6-7 percent, the tax collection should also be growing at least by four per cent, if not six. But how come that the tax collection has dropped in the last two years?

-  So, GST has been actually a disappointment and my own feeling is that we have not been able to keep an ear to the ground.

-  Stakeholder consultation is not taking place, and there is a certain amount of arrogance in the Government of India, which is not willing to concede there are flaws in the GST.

-  It does not make a difference which political party one belongs to, but the objective should be to make India a superpower. How do we achieve that? We can only achieve that if we have a system of taxation which is fantastic, first-class. India was not the first country to introduce GST. We are the 161st nation.

-  Let's revisit it again, the whole thing.

In January 2016, Mr Badal said,

-  GST is in the national interest. It must take place. We have done an exercise and Punjab will benefit immensely from GST because we are a consuming state.

-  GST is something we should go ahead with as quickly as possible.

Two years later in January 2018, he said,

-  Due to bad implementation of GST, Punjab has lost 40 percent of the revenue. How will the states survive when there won't be any compensation after 5 years?

-  We were told that GST would boost revenue but in reality it has reduced GDP and revenues, increased inflation and complicated compliance.

-  The frequent revisions in filing dates have completely shattered the faith in the sanctity of the GST reform.

In October 2018, he said,

-  ST (Goods and Service Taxes) model currently implemented by the NDA government need to be simplified as it was full of complexity. I am not against the GST, but it was "poorly designed" and needed massive fixing.

-  Among 161 countries which has adopted GST as law, I would actually give it 2 out of 10.

-  I am part of the GST Council and ever since the rates were discussed, my own feeling is the model which India is following is actually the most complex in the world.

-  GST has actually been messed up. The centre had claimed that introduction of the GST will make the tax system simple which in return increase the tax revenue by two percentage points. However the exact opposite had happened. GST implementation was hugely complex, less taxes were being collected when compared to the pre-GST period. Similarly, growth has also not picked up.

-  if one looked at balance sheets of companies listed on the stock market-the big industries gained 10 percent, but the medium industry was down 30 percent and the small industries, down by 300 percent.

-  As a Finance Minister I want GST to succeed. I hope we can fix it.

GST needs to be overhauled before it becomes irreparable.

"A modern tax system should be fair, uncomplicated, transparent and easy to administer. It must yield revenues sufficient to cover the cost of government services and public goods. India's GST did not pass these tests convincingly." - Puja Mehra [Author - The lost Decade (2008-18): How India's Growth Story Devolved into Growth without a story]

Effect of Stay after Six Months:

In Asian Resurfacing of Road Agency Pvt Ltd & Anr v. Central Bureau of Investigation [Judgement dated 28 March 2018 in criminal appeal no. 1375-1376 of 2013] , the Supreme Court ordered, "in all pending cases where stay against proceedings of a civil or criminal trial is operating, the same will come to an end on expiry of six months from today unless in an exceptional case by a speaking order such stay is extended. In cases where stay is granted in future, the same will end on expiry of six months from the date of such order unless similar extension is granted by a speaking order."

Some smart officers in CBIC assumed that the above ruling applies to all stay orders granted by CESTAT. The Tribunal in Vijayanagar Sugars - 2019-TIOL-861-CESTAT-BANG held that the ambit of the decision of the Supreme Court is restricted to one aspect of the appeals pertaining to trial courts only, and clarified that the Tribunal is not a Trial Court. The Tribunal directed that:

- all such instructions issued by heads of Commissionerates (presumably for recovery action) be withdrawn with immediate effect; &

- a copy of the Order is to be served on the Chairman, CBIC to enable appropriate guidance to field formations.

The Board sought the opinion of the Ministry of Law on whether

- the Judgment of the Hon'ble Supreme Court dt. 28/3/2018 was applicable only to cases where trial in a civil or criminal matter had been stayed by a Superior Court, and as a corollary, whether it was applicable to stays granted on recovery proceedings by CESTAT or the High Court; and

- whether the Order of the CESTAT dt. 9/3/2019 was legally correct or not.

The Ministry advised that:

- CESTAT will not come under the purview of category of trial court, therefore, the judgment of the Hon'ble Supreme Court will not have any effect on the stay granted by the Tribunal or High Court in recovery proceedings.

- We could not find any infirmity in the order dated 7/3/2019 passed by CESTAT, Bangalore in the case of Vijaynagar Sugars Pvt Ltd & Ors and = 2019-TIOL-861-CESTAT-BANG is legally valid.

The Board has accepted this advice and in turn advised the field in F. No. 1080/2/DLA/Tech/Action Taken/2019/3514, dated 18/7/2019:

- That the Judgment of the Hon'ble Supreme Court would apply to cases pending in Trial Courts only. Where any stay has been granted on recovery of revenue by the CESTAT or the High Court, the proper approach would be to file an application for vacation of stay at the appropriate forum and obtain suitable directions of the Tribunal or High Court, as the case may be, before initiating any recovery action; and

-  Any instructions to the contrary issued by any Commissionerate to field formations under its jurisdiction on the above issue may be promptly withdrawn.

Good things done by the Board usually do not get enough publicity, as this scarcely reported instruction would prove.

Service by Police - GST?

Recently TIOL reported a CESTAT order - Superintendent of Police Vs Central Excise & Service Tax (2019-TIOL-2501-CESTAT-DEL), wherein it was held that security services provided by the Police were not taxable under Service Tax.  Please also see 2016-TIOL-3507-CESTAT-DEL.

What is the position under GST?

The FAQ on Government services clarifies:

Question 11: Will the services provided by Police or security agencies of Government to PSUs or corporate entities or sports events held by private entities be taxable?

Answer: Yes. Services provided by Police or security agencies of Government to PSU/private business entities are not exempt from GST. Such services are taxable supplies and the recipients are required to pay the tax under reverse charge mechanism on the amount of consideration paid to Government for such supply of services.

Illustration: The Karnataka Cricket Association, Bangalore requests the Commissioner of Police, Bangalore to provide security in and around the Cricket Stadium for the purpose of conducting the cricket match. The Commissioner of Police arranges the required security for a consideration. In this case, services of providing security by the police personnel are not exempt. As the services are provided by Government, Karnataka Cricket Association is liable to pay the tax on the amount of consideration paid under reverse charge mechanism.

Only Official Email Id - Please

The CBIC Chairman in his D.O. Letter dated 30 th August states, "It is imperative that all official communications should be done through official email ids in order to avoid any confusion among the trade. At present, individual departmental officer is using ICEGATE email id domain for official communication. In order to facilitate communications among offices as well as taxpayers, DG System has already generated 1412 office-generic ICEGATE email ids. A consolidated list of Generic emails issued formation-wise has been uploaded on CBIC website. The remaining field offices should send requisite information at the earliest."

Why are the government officers fond of using private email ids instead of the government ones? Maybe the government emails don't work!

Sardar Patel of Indian Economy

What Sardar Patel did for the country's polity, Arun Jaitley did for the Indian economy. He brought about economic integration in a federation as diverse and as vast as India, something which no modern federation has achieved. But for him, GST would have remained a pious intention - something everyone agreed to but had a different version of.

- Sushil Kumar Modi - Deputy Chief Minister, Bihar

Until Next Week