FEBRUARY 03, 2021

By Vijay Kumar

PARA 174 of the Budget speech:

174. Before I come to my Indirect Tax proposals, I would like to appraise the House on GST. The GST is now four years old, and we have taken several measures to further simplify it.

So, what we now have is a simplified version of GST! Enjoy. In her efforts to further simplify it, the Hon'ble Finance Minister has proposed certain changes in the much misunderstood GST Act. While every comma in the Budget has been microscopically analysed by the larger number of tax experts, I would highlight a couple of amendments brought in for the apparent purpose of promoting the cause of 'ease of doing business'. Don't get confused that 'ease of doing business' is for the businessmen. After all, when the laws are written by the bureaucrats, they should ensure some element of 'ease of doing business' for themselves. With too much simplification, facilitation, transparency, grievance redress, appeals, judiciary, pampering democracy etc., it has become very difficult for the babus to administer the tax system and they badly need some measures for 'ease of doing business', their business - collection of taxes.

Section 151 of the CGST Act reads as:

151. Power to collect statistics.

(1) The Commissioner may, if he considers that it is necessary so to do, by notification, direct that statistics may be collected relating to any matter dealt with by or in connection with this Act.

(2) Upon such notification being issued, the Commissioner, or any person authorised by him in this behalf, may call upon the concerned persons to furnish such information or returns, in such form and manner as may be prescribed, relating to any matter in respect of which statistics is to be collected.

Under this section,

1. The Commissioner should consider it necessary,

2. Commissioner has to issue notification,

3. He can direct that statistics may be collected relating to any matter dealt with by or in connection with GST.

4. Once the notification is issued, Commissioner, or any person authorised by him, may call upon the concerned persons to furnish such information or returns, in such form and manner as may be prescribed.

Now, to simplify this Section, it is proposed in the Finance Bill to substitute this section with a new section which would read as:

"151. The Commissioner or an officer authorised by him may, by an order, direct any person to furnish information relating to any matter dealt with in connection with this Act, within such time, in such form, and in such manner, as may be specified therein.".

Thus, the Commissioner or any officer authorised by him can:

1. Direct any person to furnish information relating to any matter in connection with this Act,

2. He can also specify the time, form and manner,

3. There is no need of any notification or prescription of any form. Each officer can devise his own forms and manners (pun).

What will happen if you don't furnish the information as required under section 151? The law amply takes care of that. Section 124 reads as:

124. Fine for failure to furnish statistics.- If any person required to furnish any information or return under section 151,-

(a) without reasonable cause fails to furnish such information or return as may be required under that section, or

(b) wilfully furnishes or causes to furnish any information or return which he knows to be false,

he shall be punishable with a fine which may extend to ten thousand rupees and in case of a continuing offence to a further fine which may extend to one hundred rupees for each day after the first day during which the offence continues subject to a maximum limit of twenty- five thousand rupees.

Bank Attachment - liberalised

Section 83(1) of the GST Act reads as:

83. Provisional attachment to protect revenue in certain cases.- (1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed.

Just a look at those provisions

62. Assessment of non-filers of returns.

63. Assessment of unregistered persons.

64. Summary assessment in certain special cases.

67. Power of inspection, search and seizure.

73. Determination of tax not paid or short paid or erroneously refunded…..

74. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud…..

This Section 83(1) is to be amended to read as:

"(1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed.".

Now, the whole of chapters XII, XIV and XV are included. This means that once the proceedings under any of the following headings are initiated, the taxable person's property including bank accounts are no more safe - they may be attacked, no, attached.

Chapter XII

59. Self-assessment.

60. Provisional assessment.

61. Scrutiny of returns.

62. Assessment of non-filers of returns.

63. Assessment of unregistered persons.

64. Summary assessment in certain special cases.

Chapter XIV

67. Power of inspection, search and seizure.

68. Inspection of goods in movement.

69. Power to arrest.

70. Power to summon persons to give evidence and produce documents

71. Access to business premises.

Chapter XV

73. Determination of tax not paid or short paid

74. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud…..

75. General provisions relating to determination of tax

76. Tax collected but not paid to Government

77. Tax wrongfully collected and paid to Central Government or State Government

78. Initiation of recovery proceedings

79. Recovery of tax

80. Payment of tax and other amount in instalments

81. Transfer of property to be void in certain cases

82. Tax to be first charge on property

83. Provisional attachment to protect revenue in certain cases

84. Continuation and validation of certain recovery proceedings

Not the taxpayer's bank account alone

In these proceedings, the Commissioner can attach not only the tax payer's bank account but also those of the following persons:

1. supplier of any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

2. who issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder;

3. who takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;

4. who takes or distributes input tax credit in contravention of section 20, or the rules made thereunder;

Remember this is provisional attachment and all that is required is initiation of proceedings, a Commissioner's opinion and a property including bank account.

You find somebody guilty and hang him - perfect, but do you throttle him just because you have a feeling that he is a criminal? Are you not killing the goose because you cannot wait till morning when it may lay an egg, that too a golden one?

The Gujarat High Court in Valerius Industries Vs Union of India - 2019-TIOL-2094-HC-AHM-GST observed,

1. The power conferred upon the authority under Section 83 of the Act for provisional attachment could be termed as a very drastic and far-reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons.

2. The power of provisional attachment under Section 83 of the Act should be exercised by the authority only if there is a reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment. It should, therefore, be exercised with extreme care and caution.

3. The power under Section 83 of the Act for provisional attachment should be exercised only if there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of wholly or any part of his / her property with a view to thwarting the ultimate collection of demand and in order to achieve the said objective, the attachment should be of the properties and to that extent, it is required to achieve this objective.

4. The power under Section 83 of the Act should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee.

5. The attachment of bank account and trading assets should be resorted to only as a last resort or measure. The provisional attachment under Section 83 of the Act should not be equated with the attachment in the course of the recovery proceedings.

And this was when Section 83 was not so draconian and had limited authority. What will happen now?

Further Simplification needed

The Law needs further simplification for 'ease of doing business' for the taxman. Maybe we should simplify the law that:

1. The Commissioner is empowered to take any decision in relation to GST for reasons not to be recorded. (they could be suspicion, suppositions, premises, or doubts.)

2. Appeal against Commissioner's orders should be before an Assistant Commissioner directly working under that Commissioner (so that there are no adverse orders against revenue).

Pakistan Dues

I am never tired of repeating this.

There is one item consistent and uniform in all Union Budgets from 1950. If you look at the STATEMENT OF LIABILITIES OF THE CENTRAL GOVERNMENT in the Receipts Budget of India, 2021-22, you will find certain interesting figures.

India's debt by the end of March 2022 would be around rupees 135,87,275 Crores (135.87 lakh crores).

As per the Statement of the Liabilities of the central Government, the Total Liabilities are Rs. 135,87,275 Crores. From this, an amount of Rs. 300 crore is deducted and the net liability is shown as Rs. 135,86,975 Crores.

What is this amount of Rs. 300 Crores? This is supposed to be "Amount due from Pakistan on account of share of Pre-partition debt (Approx)".

This same amount had been shown consistently in all our budgets since 1950, including this year's.

In 1950-51, when our total liability was Rs. 2865 Crores, this 300 Crores was deducted to arrive at Rs. 2565 Crores. Thus, the dues from Pakistan constituted slightly more than 10 percent of our liabilities. Ten percent of the present liabilities would amount to about 13.5 Lakh Crores, about 40% of this year's revenue receipts.

Why should we keep showing it in the budget year after year?

Interestingly, Pakistan also claims certain dues from India. The State Bank of Pakistan shows an amount of Rs. 1198,36,58,000 for the year 2020 as Provision for other doubtful assets - Provision against assets held with / receivable from the Government of India and the Reserve Bank of India.

Until next week