OCTOBER 02, 2019

By Vijay Kumar

SEPTEMBER was certainly not a month of celebration for the Government as the inflows into the Government kitty recorded its lowest ever levels. While Revenue is falling with boring regularity, our law manufacturing establishment is ever busy churning out rules, notifications, circulars, orders and clarifications, all with the lofty intention of making life a little less miserable for the taxpayers, but all unintentionally ending up in unimaginable complex maze of confusion. It is really difficult to dish out all those complicated laws, but the bright babus, with exceptional brilliance, are never tired of producing mountains of legal fiction. With so many notifications, clarifications and Press Notes, people have lost track of what is happening where. In this maze, I am, like Alice in Wonderland, looking for some more laws which are yet to come into force.

The huge burden of Interest : By section 100 of the Finance (No. 2) Act, 2019, a new proviso was inserted in sub-section (1) of section 50 of the Central Goods and Services Tax Act, 2017 as:

"Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger."

This was supposed to provide a great relief against a comic mistake that had crept into the GST Act, where a taxpayer had to pay interest on the credit amount also if he delayed payment of cash. Everyone knew that it was ridiculous, but it remained a statutory blunder for two years, which was corrected by the Finance Act, 2019. There is a still small thorn. This is to be effective from a date to be notified by the Government [Section 1(2)(b) of the Finance (No.2) Act, 2019 refers] and even after two months of the Finance Bill having been enacted, there is no notification coming from the Government. Why? Perhaps the Central Government is waiting for State Governments to pass identical legislation in their Assemblies and the State Governments appear to be in no hurry to pass the amendments. So, what is the position of Law now? Status quo ante . Even this is a widely misinterpreted concept.

Post Sale Discount : In the recently held GST Council meeting it was decided to rescind Circular No. 105/24/2019-GST dated 28.06.2019, ab-initio, which was issued in respect of post-sales discount. Now, this was a monstrous Circular which caused havoc. It contained a clarification that if the additional discount given by the supplier of goods to the dealer is the post-sale incentive requiring the dealer to do some act like undertaking special sales drive, advertisement campaign, exhibition etc., then such transaction would be a separate transaction and the additional discount will be the consideration for undertaking such activity and therefore would be in relation to supply of service by dealer to the supplier of goods. The dealer, being supplier of services, would be required to charge applicable GST on the value of such additional discount and the supplier of goods, being recipient of services, will be eligible to claim input tax credit (hereinafter referred to as the "ITC") of the GST so charged by the dealer.

The Government and GST Council mercifully realised that this clarification was wrong and magnanimously agreed to press the undo button, but in their anxiety, they pressed the delete button. Now the whole circular is to be rescinded ab initio. The Circular had some other important clarifications, which are also now to be rescinded. Remember the story of the baby being thrown away along with the bath water?

But this rescinding of the Circular has not happened yet. What is the problem. Can't they just issue a one line circular that the previous circular is rescinded?

Time to appeal to the Non-existing Tribunal : The GST Council had decided to extend the last date for filing of appeals against orders of Appellate Authority before the GST Appellate Tribunal as the Appellate Tribunals are not yet functional. Now that the Tribunal has been held to be unconstitutional, it is not likely to become functional in the near future. Where do harried taxpayers go to, when they are aggrieved (which will be 99 percent of the cases) with the orders of the Appellate Authorities? Well, the High Courts are open as of now, though the GST stream is likely to cause a damaging flood of litigation.

Din In CBDT, why not in CBIC?

In a recent Circular, the CBDT noted,

With the launch of various e-governance initiatives, Income-tax Department is moving toward total computerization of its work. This has led to a significant improvement in delivery of services and has also brought greater transparency in the functioning of the tax administration. Presently, almost all notices and orders are being generated electronically on the Income Tax Business Application (ITBA) platform. However, it has been brought to the notice of the Central Board of Direct Taxes that there have been some instances in which the notice, order, summons, letter and any correspondence (hereinafter referred to as "communication") were found to have been issued manually, without maintaining a proper audit trail of such communication .

In order to prevent such instances and to maintain proper audit trail of all communication, the Board has decided that no communication shall be issued by any incometax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any other person, on or after the 1st day of October, 2019 unless a computer-generated Document Identification Number (DIN) has been allotted and is duly quoted in the body of' such communication.

And they have started this DIN yesterday. Why can't we have a similar system for GST? Here, we have even junior officers sending all kinds of unofficial letters and emails to the taxpayers.

Gandhian Style Taxation (GST)

Until next week