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GST: From anti-profiteering to fixing GSTN glitches, issues that need immediate attention
As the country’s biggest tax reform, Goods and Services Tax (GST), is inching closer to its second anniversary on June 30, 2019, it is evident that the toddler’s steps have finally started exhibiting its early maturity phase, in terms of revenue collection for the Government as well as in its approach towards taxpayers.
However, existence of grey areas and anomalies have not been completely ruled out. In fact, they exist in rather important spheres. Providing resolution in respect such anomalies deserve the immediate attention of Government, in order to promote better compliance of law and in turn, to promote the ease of doing business in country.
Key issues that deserve immediate attention of the Government are as follows –
1. GST Anti-profiteering
Issue – In case the businesses have made profit under GST due to change in tax rate or increased input tax credits, such benefit is required to be passed on by way of reduced pricing. Currently numerous investigations are being conducted by the National Anti-Profiteering Authority across sectors. Many such investigations have resulted in orders where the businesses have been found guilty of not passing benefits to consumers. The key sectors have been FMCG, real estate, pharma and restaurants. The challenge however is the lack of clarity on the methodology to be adopted for computing the benefit, if any
Recommendation – The Government should consider issuing a detailed, comprehensive methodology and procedure for determining the benefits so reaped by businesses.
2. Contradictory advance rulings
Issue – In order to obtain certainty on the tax treatment of a transaction, GST law provides that businesses can approach the government for obtaining an advance ruling on the said transaction. An authority of advance rulings (AAR) functions at the State level. It has been noticed that contrary views have been expressed by different State AARs in certain matters, like taxability of solar power projects. Such divergent views create uncertainty among the taxpayers.
Recommendation – It is urged that a mechanism be evolved whereby such divergent views can be resolved. As per the recent news, GST Council is considering the proposal to establish a national bench of the AAAR to look into the contradictory orders passed by different State AARs on the same issue.
Additionally, it would be good if the national bench is comprised of judicial members also. This will bring in a more legal view on a particular transaction.
3. Applicability of cross-charge under GST
Issue – Under GST, head office (HO) and branch office (BO) of a single legal entity are considered as “distinct” entities”, if they are located in different states. There is a concept of deemed supply of services from the HO to various BO when support is provided by the HO. In such a scenario, GST is required to be charged by HO to BO, even in absence of any consideration. Though GST paid may be eligible as input credit. In certain exempt sectors, say education and healthcare sector, input credit is not eligible, thus resulting in, indirectly taxing the exempt businesses.
Recommendation – Since exempting a particular sector from GST was the objective of the government, cross charging by HO to BO in an exempt sector is an un- intended consequence. The government should bring in provisions whereby the cross charge requirement for exempt sectors is done away with.
4. Interest liability on delayed payment of GST
Issue – Currently, liability to pay interest in case of delayed payment of GST is being computed on total tax liability for the month. GST Council, in its meeting held in month of December, 2018, had recommended computation of interest only on the component of tax payable in cash, as against computation of interest on total tax liability (including tax payable via input tax credit). However, the said recommendation has still not been made effective, causing working capital loss for the taxpayers. Further, certain adverse rulings have been passed by the tax authorities denying such benefit.
Recommendation –The component of GST liability which is to be paid through utilization of input credit, if discharged late, does not prima-facie cause revenue loss to the Government. However, applying interest on such late adjustment causes the loss of valuable working capital for businesses. In order to prevent it, the Government should consider issuing necessary notification for implementing GST Council’s recommendation.
5. GSTN Portal glitches
Issue - GSTN web portal is an indispensable asset of the Government for implementing GST, which facilitates tax filings of the entire nation. However, certain provisions that have been given effect in law have not been incorporated into the GSTN, which makes the actual implementation of legal provisions difficult. In certain cases, this may result in drawing the unnecessary wrath of tax authorities. Such issues, inter-alia, includes issue of single credit note against multiple invoices and reporting of negative balances in GSTR 3B return for outward supplies. Further, at times, GST portal has shown its incapability of handling too much load of taxpayers, making it inaccessible on crucial date of timelines.
Recommendation – The Government should consider taking appropriate measures to further strengthen the GST portal, to facilitate compliance with GST law amendments and to ensure GST portal’s easy access to the taxpayers.
While there are other handful of issues too that require action on behalf of the government, starting with the major issues listed above would be a good idea.
Anita Rastogi is Partner, GST and Indirect Tax , PwC India. Prashant Gupta, Associate Director and Rohit Gupta, Associate: Indirect Tax and GST, PwC India also contributed to this article.
Source: indiatimes
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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