SEPTEMBER 24, 2019

By Shailesh Sheth, Advocate 

"The nation should have a tax system that looks like someone designed it on purpose."

[William E. Simon]

IT'S raining reliefs for the taxpayers from all directions! The 37th Meeting of the GST Council held on September 20, 2019 at Goa was the first major meet of the Council post-announcement of the Union Budget, 2019, if one were to go by its loaded agenda! (The netizens are aware that the 36th Meeting of the Council held on July 27, 2019 had been primarily called to take some vital decisions on the GST rates for electric vehicles.) Naturally, there were heightened expectations of the Trade and Industry from the Council - particularly, the beleaguered Auto Sector and the worried Lottery Trade. The Council headed by its chairperson, FM Nirmala Sitharaman has apparently not disappointed the taxpayers, except may be, the Auto Sector and Lottery Trade who may have to wait!

The Council has announced a slew of measures or recommendations which are aimed at:

- easing the compliance burden for the taxpayers, particularly the small taxpayers;

- reducing the tax burden for the unorganized sectors, even while attempting the rate rationalization; and

- ironing out the creases in the interpretation and implementation of certain statutory provisions.

Earlier, the FM had already announced mega reliefs on the 'Direct Tax' front in the morning of the day, taking the 'Corporate India' by surprise! Close on the heels of these announcements, the proposals mooted by the Council and announced in the late evening were like 'icing on the cake' for the Trade & Industry and were greeted by them with cheers!

The decisions taken or the recommendations made by the Council were, after the conclusion of the Meeting, announced through 3 (three) separate Press Releases (as is now becoming a routine practice) covering:

-  Law and Procedure related changes;

-  Rate related changes for goods;

-  Rate related changes for services.

In this article, certain major decisions/recommendations of the Council are briefly discussed:

I. Recommendations on the Law and Procedure related changes :

a. Relaxation in filing of Annual Returns for F.Y. 2017-18 and F.Y. 2018-19 - Small is, after all, beautiful!

Council's recommendations :

The Council has recommended the relaxing of the requirement of filing of Annual Returns for MSMEs for F.Y. 2017-18 and F.Y. 2018-19 as under:

i. Waiver of the requirement of filing FORM GSTR-9A for Composition Taxpayers for the said tax periods; and

ii. Optional filing of FORM GSTR-9 for those taxpayers who are required to file the said return but have aggregate turnover up to Rs. 2 crores for the said tax periods.

Comments :

In what can easily be described as one of its boldest and most pragmatic decisions, the Council has recommended:

- the complete waiver of the requirement of filing of Annual Return in FORM GSTR-9A for the Composition Taxpayers for the F.Y. 2017-18 and F. Y. 2018-19; and

- making the filing of the Annual Return in FORM GSTR-9 for other taxpayers with turnover up to Rs. 2.00 crores, optional for F.Y. 2017-18 and F.Y. 2018-19.

The netizens are aware that the due date for filing the Annual Returns in FORMS GSTR-9 or GSTR-9A, as the case may be and the Reconciliation Statement in FORM GSTR-9C for the F.Y. 2017-18 already stands extended to November 30, 2019. The implications of this extension have been discussed in detail by me in my Article titled "Extension of due dates for filing GSTR-9, 9A & 9C - what lies beneath!" published by TIOL on September 4, 2019. In this Article, I had strongly favored and suggested:

- the complete waiver of the requirement of filing the Annual Return in FORM GSTR-9A for the Composition Taxpayers for F.Y. 2017-18 and F.Y. 2018-19;

- waiver of requirement of filing of Annual Returns in FORM GSTR-9 for other taxpayers with turnover not exceeding Rs. 2.00 crores for F.Y. 2017-18 and F.Y. 2018-19; and

- extension of due date for filing of the Annual Returns in FORM GSTR-9 and the Reconciliation Statement in FORM GSTR-9C for F.Y. 2018-19 from 'December 31, 2019', as it now stands, to 'March 31, 2020' !

I cannot help but feel extremely glad that my 'wishes' or 'suggestions' - whatever one may call them-regarding the waiver of filing of Annual Returns in Form GSTR-9 or 9A, as the case may be, have come true, even while the filing of Annual Returns in FORM GSTR-9 is being made optional!

While some tax professionals may feel dismayed and disappointed at this relaxation announced by the Council as it would mean 'loss of business (?) opportunities' for them, the announcement needs to be seen and weighed in the broader perspective.

On August 6, 2019, the Chairman, CBIC, in the communiqué to all the Chief Commissioners, had expressed serious concern over the 'sub-optimal' status of filing of these Returns as on August 3, 2019.

The Chairman wrote:

"The last date for filing the annual return and the reconciliation statements in FORM GSTR-9, FORM GSTR-9A and FORM GSTR-9C is 31.08.2019. However, the available data shows that till 3 rd August, 2019, only 14,85,863 GSTR-9 Returns have been filed while all non-composition taxpayers are required to file the said annual returns. The status of filing of GSTR-9A at 4,33,148 and GSTR-9C at 11,334 is also sub-optimal."

In the next 15 days, there was only a marginal improvement in the number of Returns filed (for F.Y. 2017-18) which stood as under as on August 18, 2019:

Wasn't this an alarming and dismal state of affairs? Mind you, the reasons for such poor filing of Returns are not important and it may need an independent analysis and remedial measures. What is important is the Herculean challenges confronting the tax payers, tax professionals and GSTN, so far as the Return-filing process is concerned. As for the small taxpayers, the cumbersome requirement of filing these returns would also mean compliance burden being higher in proportion to tax payable by them. It is, therefore, heartening to note that the Council, at one stroke, relieved almost 1.00 crore small taxpayers from the onerous and costly compliance burden!

No doubt, quite a few taxpayers and tax professionals might have labored hard in past few months in finalizing the Annual Returns which now stand waived. However, this fact, by itself, cannot be a factor to persist with the requirement of filing the Annual Returns for the small taxpayers.

In any event, FORM GSTR-9 for the taxpayers having turnover upto Rs.2.00 crore is being made optional and it is for the tax professional and his client to take a call on whether to opt for the filing the Return or not even though, otherwise not required.

"The best way to look at any business is from the standpoint of the Clients."

Jamie Dimon

b. Simplification of Forms - Are better days ahead...?

Council's recommendation:

The Council has proposed that a Committee of Officers be constituted to examine the simplification of Forms for Annual Returns and Reconciliation Statement.

Comments:

It does not bear repetition that the existing Forms for Annual Returns and the Reconciliation Statement are riddled with so many ambiguities, inconsistencies and complexities that the taxpayers and the tax professionals virtually face 'nightmarish situations' while attempting the filling and filing of these Forms/Statement!

Fortunately, the Council has taken due note of this dilemma facing the taxpayers and the tax professionals. The Council has, accordingly, proposed the constitution of a Committee of Officers to examine the simplification of Forms for Annual Returns and Reconciliation Statement. It is expected that the drafts of the revised and simplified Forms would be released sooner than expected for the study and comments/suggestions by all the stake holders. Needless to say, the revised Forms will be made applicable only for the F. Y. 2019-20 and beyond.

c. Extension of last date for filing appeals before the GST Appellate Tribunal

- A messy affair, indeed…!

Council's recommendation:

The Council has recommended the extension of last date for filing of appeals against orders of Appellate Authority before the GST Appellate Tribunal as the Appellate Tribunals are yet not functional.

Comments:

Sub-section (1) of S.112 provides for the filing of an appeal by any person before the Appellate Tribunal if he is aggrieved by the following types of orders viz:

i) Order passed by an Appellate Authority under S.107 of the CGST Act or the SGST Act or UTGST Act;

ii) Order passed by a Revisionary Authority under S.108 of the CGST Act or the SGST Act or UTGST Act.

The statutory time limit provided for filing the appeal is '3 (three months from the date of communication of the order to the person preferring the appeal'.

Sub-section (3) of S.112 deals with the right of the department to file an appeal before the Appellate Tribunal. The statutory time limit provided to the Department for filing the appeal is '6 (six) months from the date on which the order is passed.'

However, it is, indeed, unfortunate and extremely disturbing that even though 2 years have elapsed since the introduction of the GST regime in the country, there is hardly any progress in the matter of the setting up of the Benches of the GST Tribunal. Not even an ounce of alacrity and urgency displayed by the Government in setting up the National Anti-Profiteering Authority and the different Benches of the Authority for Advance Ruling has been visible in so far as the constitution and setting up the Benches of the GSTAT is concerned!

It was only in its 35th Meeting held on June 21, 2019 that the GST Council took up this issue and announced the setting up of the State and the Area Benches of the GSTAT. This initiative (?) probably came after the displeasure expressed by the Hon'ble Allahabad High Court over the inordinate delay in setting up of the GSTAT by the Government. [See - Jai Baba Amernath Industries vs. State of U.P. - 2018 (15) GSTL 484 (Allah.), & Oudh Bar Association vs. UOI - 2019-TIOL-1168-HC-All-GST. [The netizens may refer to my detailed analysis of this recommendation in the Article titled "GST - 35th Meeting of the GST Council and its recommendations - The transition begins….! (Part-I)" published on TIOL on 26.06.2019].

However, as was pointed out by me in my article, the Council appears to be either oblivious to or has not been apprised of the constitutional challenges to the vires of the S.109 and S. 110 of the CGST Act and the corresponding provisions of the relevant State GST Acts in the following cases, namely:

1. V. Vasanthakumar vs. UOI - 2018-TIOL-2863-HC-MAD-GST

2. Bhartiya Vitta Salahakar Samiti & Anr. Vs. UOI - 2019-TIOL-1096-HC-DEL-GST

3. Pratik Satyanarayan Gattani vs. UOI - (2018) 93 taxmann.com 115 (Gujarat)

The above Petitions are reportedly pending before the respective Hon'ble High Courts. However, while the Council might be in the midst of deliberating upon this issue during its meeting on 20.09.2019, the Hon'ble High Court of Madras was delivering its landmark judgement on the same day in the case of Revenue Bar Association vs. UOI - 2019-TIOL-2188-HC-MAD-GST. The Hon'ble High Court in this significant judgement, has held as under:

"(i) Section 110(1)(b)(iii) of the CGST Act which states that a Member of the Indian Legal Services, who has held a post not less than Additional Secretary for three years, can be appointed as a Judicial Member in GSTAT, is struck down.

(ii) Section 109(3) and 109(9) of the  CGST Act, 2017 , which prescribes that the tribunal shall consists of one Judicial Member, one Technical Member (Centre) and one Technical Member (State), is struck down.

(iii) The argument that Sections 109 & 110 of the CGST Act, 2017 and  TNGST Act, 2017  are ultra vires, in so far as exclusion of lawyers from the scope and view for consideration as members of the tribunal, is rejected. However, we recommend that the Parliament must consider to amend section for including lawyers to be eligible to be appointed as Judicial Members to the Appellate Tribunal in view of the issues which are likely to arise for adjudication under the CGST Act and in order to maintain uniformity in various statutes."

When the Hon'ble High Court has almost struck down the statutory provisions governing the constitution of the Benches of the GSTAT in its above ruling, what purpose will be served by extending the last date for filing the Appeals before the GSTAT? Or is it that the Council is biding for some breathing period to set its house in order? At the cost of repetition, let me reproduce what I said in my above Article while concluding my discussion on the recommendation of the Council at its 35th Meeting on this subject:

"There is no denial of the fact that the statutory provisions of Ss. 109 to 114 of the CGST Act governing 'Appellate Tribunal' suffer from serious flaws and arbitrariness. It is, therefore, rather surprising that the Council has thought it fit to discuss the issue of location of the Benches of the GSTAT as if it was oblivious to the Constitutional challenges to the relevant statutory provisions pending before the various High Courts! Or it may be that the Council has not been apprised of the pendency of such Constitutional challenges before the High Courts and the wider ramifications of the outcome thereof!

The urgent need of the hour is that the Council must discuss the statutory provisions contained in Chapter XVIII of the CGST Act relating to 'Appeals and Revision' [Ss.107 to S.121], identify the flaws therein thread-bare and after taking a holistic and pragmatic view, recommend suitable changes therein so as to make the provisions less susceptible to Constitutional challenges, as far as possible and also capable enough to play their vital role under the GST regime as is expected."

It is strongly felt and urged that the Council may convene, if required, a special meeting with a 1-point Agenda to discuss and resolve the above imbroglio. The changes that may be inevitable and as suggested by the Council can thereafter be introduced through Union Budget, 2020, the presentation of which is hardly 5 months away.

In the meantime, the Board must issue instructions to the Appellate Authorities functioning under S.107 of the CGST Act, 2017 to not - repeat, not - decide any appeal filed before it, whether by the taxpayer or the Revenue and to keep all appeals pending till the issues concerning the setting up of the GSTAT are resolved and the Benches of the GSTAT are set up and start functioning.

Let pragmatism prevail and let us not make this unfortunate and messy affair messier than it already is!

[…To be continued]

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