News Update

Violence in Delhi - HM asks all parties to rise above party linesEESL completes a decade of helping India become energy efficientCBIC hikes tariff value for Gold5 SC judges catch H1N1 flu; Govt scrambles to take preventive stepsGST - Anti-Profiteering - Sanitary Napkins - Order of NAA stayed: HCCX - assessee is eligible to avail Cenvat Credit on group medical insurance policy taken for employees: CESTATCus - Where limitation period for converting drawback shipping bills into DFIA bills is not provided in Customs Act, same cannot be fixed through a Circular - time limit fixed by Circular is only procedural & lacks authority of statutory provision: CESTATST - Consideration is essential pre-requisite for rendering any service - no tax leviable if such element is missing & if business is conducted on principal-to-principal basis: CESTATCharges of concealment of particulars of income or furnishing inaccurate particulars thereof, are not sustainable, if additional income declared by assessee in returns is accepted by AO: ITATDisallowance made u/s 14A r/w Rule 8D is not tenable if quantum of interest-free funds exceed that of investments made: ITATNo enduring benefit arises from raising finances to fund a specialised job - cost incurred thereto is not capital expenditure: ITATACC issues appointment order of 17 Joint Secretaries, including an IRS officerCBDT lists 20 most contended issues - Govt to move SC to club all pending cases and dispose them, says Revenue SecretaryComputing profits from life insurance business, when computed u/s 44 r/w I-T Rules, do not entail an embargo on conducting scrutiny assessment: HCST - RTO charges and extra charges related thereto does not fall under BSS: CESTATChange in accounting method, resulting in disallowance of indirect expenses incurred, is not tantamount to concealing particulars of income - no penalty imposable: HCCX - Statutory return not designed to capture the particular grade/specification of material required for manufacture - For manufacture of automobile axle, 6 mm size of H.R. coil required, however, credit taken on other than 6mm and is rightly denied: CESTATUn-utilised amount received as grant from Government, cannot ipso facto be treated as income of the recipient of such amount: HCCX - Data retrieved from computer hard drive cannot be relied upon as evidence where computer was used by multiple persons & if no certificate u/s 36B of CEA is furnished in its support: CESTATRe-opening of assessment is invalidated if based on material already on record during original assessment proceedings & is tantamount to change of opinion: ITATST - Circular dated 18.05.2017 clarifies that turnover/transaction charges are to be included in gross value when computing service tax liability - penalties imposed are upheld if assessee collects an amount representing service tax, but does not deposit same: CESTATOyo, MakeMyTrip invite CCI eyeballs; Probe orderedFATF puts Mauritius on Grey List, triggers panic among FDI carriersPradhan invites investments, Technology Transfer into Indian Steel SectorShooters can now keep more firearms and ammunitionGST - Anti-Profiteering - Petitions challenging constitutional validity of s.171 of the CGST Act r/w rule 126 of CGST Rules and pending before Bombay HC, P&H HC transferred to Delhi HC (where 20 petitions are pending on subject matter) in the interest of uniform and consistent view on law: SCVseV Scheme - CBDT fixes 100% of disputed tax demand cases as target for officersACC appoints Rohit Yadav, JS, Ministry of Steel, as new JS in PMOTrump praises people of India for upholding democratic values; 1.25 lakh people welcome him at Ahmedabad stadiumCoronaVirus - Death toll soars to about 2600 in China; No of infected cases goes up to 77KGST - An agenda for reforms - Part - 74 -Anti-profiteering - Complaint sans statutory basis
North Block watches as GSTN plays havoc with PM's historic tax reform!

TIOL - COB( WEB) - 698
FEBRUARY 13, 2020

By Shailendra Kumar, Founder Editor

THE Goods & Services Tax (GST) - When it was launched from the Central Hall of the Parliament at the stroke of midnight of 30th June in 2017, it did swell the chest of the Prime Minister, Mr Narendra Modi, with pride and a sense of achievement! Today, the PM is at pains and it is largely driven by the GSTN coupled with pachydermic approach of its supervisory authorities! A Good & Simple Tax has been metamorphosed into a chaotic tax which is turning out to be simply impossible to comply with! If we leave aside the contentious aspects of the laws, the tax technology-captive compliance mechanism has largely collapsed! Those who are accountable for providing either due dates or the IT platform, appear to be scurrying around for cover! The esoteric group of technocrats and bureaucrats have simply run out of ideas to make any meaningful headway! They seemingly appear to be caught in quicksand!

The two notable consequences of the grandiose failure of the GSTN and also its supervisory authorities in the North Block are - 1) A sharp rise in the trust deficit between the Govt and the taxpayers, and 2) A large number of court cases on procedural inconvenience grounds. Let me elaborate the growing trust gaps where a large swathe of the GST tax base has come to believe that the Government lacks in ideas to fix the repeated technical glitches of the GSTN and also streamline the procedures. Even some of the State VAT Commissioners also do share the same opinion being aired in the CFO and tax heads groups on whatsapp. Have these top honchos in the corporate world and State Governments' top officials really erred in firming up such an opinion? Or, is the Ministry of Finance making concerted endeavours to fix the problems as fast as a private entity would have done in any tax jurisdiction on the global map?

Going by the present hierarchy of the supervisory authorities for the activities of the GSTN, the Union Finance Minister indeed needs to repair the hugely-impaired public perception. The Revenue Secretary represents the Union of India and by holding additional charge of the GSTN's Chairman post, here emerges a potential case of conflict of interests in the administrative domain. Undoubtedly, the Revenue Secretary is an able technocrat with a heightened sense for selection of right mix of technological tools (he has proven his skills in the case of Aadhaar) but here, he has been putting on two 'hats' - one 'hat' is clearly subservient and accountable to the other. Thus, what is needed is to unburden him so that he would act as more effective monitor of the GSTN for the Centre as well as the States.

Secondly, the GSTN CEO is a perfect gentleman with many human qualities! But when the horse he is riding, has failed the Government, he should himself pave the way for a more worthy successor who could ferry the GSTN out of the muddy waters! A common sense prescription to deal with the present GSTN-related issues is - How the BCCI dealt with India's one of the most successful cricket captains when he repeatedly failed to live up to the nation's expectations! I need not further elaborate how should the Finance Minister deal with the present crisis in the GSTN which has repeatedly been letting down the Government.

The most common question being asked by not only the taxpayers but also taxmen in the field formations is that when the Centre and the States can collect over Rs 12 lakh crores from GST and such collections are totally dependent on the IT Platform, why can't the GST Council spend Rs 25000 Crore to build one of the best tax technology platforms in the world? It would be one-time investment for the Exchequers and the best of the IT organisations in the world would like to deliver it within a given time-frame. India is known for its prowess to export high-quality IT tools to large corporations worldwide but when it comes to such a large domestic project like GSTN why should the GST Council or the Centre act 'penny wise and Pound foolish'. If allocating funds is a serious constraint, the GST Council may take a call to charge Rs 100 or Rs 200 as USER FEE (in lieu of raising tax rates) like a passenger pays for airport services or a driver pays toll on National Highways. For providing high-quality tax technology services, the Sovereign is within its rights to levy user fee! Poor technology selection coupled with poorer management has brought GST to the brink of utter failure. And such an inference can be drawn from multiple writ petitions filed in several High Courts across the country.

Before I take up some recent court decisions and observations to make some comments, let me first share some basic data for better understanding of the readers. The latest legal spat is about the last date for filing GSTR-9 & GSTR-9C for the FY 2017-18. For the nine months period, the total tax base was 92.6 lakhs. Out of the total, about 64 lakhs assessees managed to file GSTR-1 and GSTR-3B and thus, became eligible for GSTR-9 filing. A large chunk of the remaining 28 lakhs assessees were granted late fee waiver to file all GSTR-1 and 3B returns so that they become eligible for the annual return. The due date was extended from November to January 2020.

Let's now take a look at the tax base eligible to file audited return i.e GSTR-9C. Till the last date i.e. January 31, 2020 only about 20% assessees have uploaded their GSTR-9C out of 12.5 lakh. The default percentage is about 80%. And the main reasons are the technical glitches of GSTN. It is true that 20% of assessees did manage to upload but the credit for the same goes to the industrious efforts of the filers and not the random efficiency of the GSTN. When 80% assessees above Rs two crore turnover threshold have failed, what should be the ideal approach of the GST mandarins? Ideally, a positive response would be to enable them to file returns when the IT Platform is not allowing them to discharge their statutory compliance. But, it seems that arrogance or non-empirical attitude has taken the GST bosses in its grip and the same can be inferred from some recent decisions. In one such case, the Union of India strangely decided to file SLP against the Rajasthan High Court decision (2020-TIOL-283-HC-RAJ-GST), extending the due date to February 12, without late fee and penalty. Union of India rushing to the Apex Court and bothering the Hon'ble judges on such a trivial procedural issue gives impressions about muddled thinking in the corridors of powers! This also reinforces the common perception that the GST bosses have little respect for the High Court orders and prefer involving the Supreme Court of India in every small issue rather than substantive legal and constitutional issues.

Let me now talk about another similar decision from the Guwahati High Court (2020-TIOL-265-HC-GUW-GST) which recommended consideration of assessees' representations and extension of the due date for 30 days for several North-East States. But, strangely and for no plausible reasons, the GST bosses preferred not to club the same case in the SLP filed before the Apex Court. This basically means that the North Block has no issue complying with the Guwahati HC decision but when the Rajasthan HC ordered 12 days extension it called for stiff opposition? Though the due dates were later extended up to February 5 for Rajasthan but one more week extra i.e Feb 12 was presented before the Apex Court (2020-TIOL-48-SC-GST) as if it would create havoc with the compliance software! Strange is the way the compliance issues are being handled by the North Block! The hand-holding approach has clearly disappeared in to thin air. I am no way suggesting that willful defaulters should not be dealt with iron hand but those who are keen to meet compliance deadlines but are being ditched by the IT platform, do deserve supportive gestures rather than dragging them to courts!

A hardened approach towards compliant taxpayers would go against the basic philosophy of earning greater acceptance for the new tax system in the society at large. This is more so when the ball of default is in the GSTN court and the GSTN seems to be buying time whenever the Union Finance Minister generates heat on it. For instance, the staggering solution for due dates for filing GSTR-3B is just to ward off the rising temperature in the North Block. Rather than overcoming the inadequacies in the software and utilities on the GSTN portal, suggesting such a measure for three months as the decision to switch over to a new Return format from April is already in place, is clearly a short-term solution to ward off pressure or displeasure from the supreme bosses! Going by the poor preparations of the GSTN it seems even e-invoicing is unlikely to take off from April 1. As per the GST Council's decision it was supposed to be optional from January but what the GSTN has offered is a TRIAL version from January 6! Where did the expression TRIAL come from when the Council has not suggested so? As a result, there are less than 250 takers for e-invoicing option so far as against 7500 (Rs 500 Cr & above turnover) and over two lakhs (Over Rs 100 Crore turnover) assessees.

I am personally of the view that it is high time that the Prime Minister intervenes to save GST from the clutches of adhocism and proven inefficiency before it is too late! And the first step which needs to be taken, is to overhaul the top management of the GSTN and put there somebody from the inner GST team who knows GST laws, business processes and also the mercurial technology. Secondly, sufficient resources are to be made available to undertake a parallel project to build a world class IT platform and the same should be built in less than 365 days. Once the new platform is ready, new GST Return or other changes should be introduced to save the assessees from unwarranted hassles and pain! I hope that the PM or the FM spare time to dive into the ailing issues and employ visionary tactics to find a long-lasting solution to the festering technical glitches of the GSTN!


Thanks for your timely article on failure of GSTN System. The current havac and revenue leakage are result of poor implementation system. Some of the exampes are as under:-
Matching system was the crux of the GSt returns. Non payment of GST and issuance of Invoices years is the basic failure system. The field staff of GST is not in position to analyse data even available in portal due to lack of infrastructure. If R-1 and related credit matching has been enabled earlier no such instances held.
2. Recently automated refund system introduced, that is good step but the problem is incompetency in the part of field formation who reject refund claim even all the documents uploaded in portal by applicants, and poor applicant again file the same.
3. How the Officers analyse the data of assesses, which do not contain details of quantity in R-1, how price comparison can be done and correct valuation be ascertained due to lack of complete data in GST Portal. The HSN summary contain quantity which can not be a basis of analysis of Invoices.
Above are some of the example and list is long. The poor implementation of the system is the root cause of failure of GSTN, although it has many defects.
The poor assesses suffer from all this and this one increased the trust deficit and no one is willing to do anything new due to this poor stage of GST implementation.
As suggested by you, the PM should himself resolve the matter.