Goods and Services Tax has been completed its six years of journey as on 1’st July’ 2023 but still needs simplifications in GST procedures and synchronization of IT (GSTN) with GST Laws. The Government has brought several amendments in the GST Acts & GST Rules for the simplification of GST system as per the recommendations of GST Council from time to time.
The GST Council so far held 49 meetings to date, and its decisions have had a significant impact on the GST implementation in India. The Goods and Services Tax (GST) regime has been developed with the major changes and so many obstacles have already been addressed. Over last six years, despite certain issues are to be addressed to become free from troubles, the GST Council decisions in the last 49 meetings have brought a sea of changes to gear the wheels of business in the Indian economy. The GST council has played a pivotal role to strengthen GST regime in the country. It is admitted to mention that in certain matters Groups of Ministers (GoMs) have been formed to consider specific issues with wider discussion.
The major decisions of GST Council for simplifications are summarised:
1. New e-way bill mechanism: For encouraging the self-reporting businesses, the GST Council in its 24 th Meeting held on 16th December, 2017 introduced a nationwide e-way bill system w.e.f. 1’st January, 2018. Consequently, there is abolition of Check post authority from the inter- State border for hassle free movement of goods throughout the country.
2. Implementation of E- invoicing system: The GST Council in its 35th Meeting held on 21st June, 2019 approved the roll out of e-invoicing system in GST, a digital mechanism for generating and reporting invoices in a standardized format under the GST regime in India and its 37’th meeting held on 20th September, 2019 has approved introduction of e-invoicing and the same has been implemented successfully in the GST regime. The e-invoicing threshold has been reduced several times, recently further reduced and it is made mandatory for small firms with annual turnover of 5 crore or more to issue e-invoices for business-to-business supplies from August 1, 2023.
3. Introduction of special scheme for real estate Sector: The GST Council in its 33rd Meeting held on 21st February, 2019 and 34th Meeting held on 19th March, 2019 taken decisions to introduce special scheme for real estate sector. The Council reduced the effective rate from 12% to 5% on non-affordable and from 8% to 1% on affordable housing scheme applicable under construction properties.
4. Reduction in GST rate on electric vehicle: For promoting green energy initiatives, the GST Council in its 36th Meeting held on 27th July, 2019, steps taken to reduce the GST rates on all electric vehicles from 12% to 5% and Electric buses having occupancy capacity of more than 12 people exempted from GST.
5. Quarterly return Monthly Payment Scheme: As a trade facilitation measure, the GST Council in its 42nd Meeting held on 5th and 12th October, 2020 approved the enhancement in the features of Return filing process and QRMP scheme was rolled out for small business and registered person having aggregate turnover up to five (5) crore rupees may be allowed to furnish return on quarterly basis along with monthly payment of tax, with effect from 01.01.2021.
6. Rationalization of duty on certain goods: As a relief measure during COVID -19 pandemic, the Council in its 43rd and 44th Meeting held on 28th May, 2021 & 12th June, 2021 respectively approved the rationalization of duty on specified COVID related goods.
7. Remove mandatory requirement Audit by CA/CMA: The GST Council in its 43rd meeting recommended to omit sub-section 5 of Section 35 of the CGST Act, to remove the mandatory requirement of GST audit by CA / CMA and submission of GSTR-9C as certified by the CA/CMA was removed. So that there was no requirement of CA /CMA certifications in Annual return for FY 2020-21 itself. The GST Council recommended that GSTR-9C may be still submitted as self certified by taxpayers with annual aggregate turnover of equal to or more than Rs.5 crore.
8. Time limit in respect of Debit Note for availing ITC: The GST Council in its 45th Meeting held on 17th September, 2021 recommended that time limit for availing ITC in respect of a debit note as per Section 16(4) of the CGST Act, 2017 and w.e.f. 01.01.2021 in case of Debit notes, the date of issuance of Debit note (and not the date of underlying invoice) shall determine the relevant financial year for the purpose of Section 16(4) of the CGST Act, 2017.
9. Clarified Interest on ineligible ITC: The GST Council in its 45th meeting recommended retrospective amendment with effect from 1st July, 2017 to provide that interest is required to be paid on the wrongly availed ITC only when the same has been availed as well as utilised. Accordingly, CGST Rules, 2017 have also been amended vide Notification No.14/2022-CT., dated 05.07.2022 to provide for the manner of calculation of interest under Section 50 of the CGST Act, In addition to this, rate of interest on wrongly availed and utilized ITC has also been reduced to 18% from 24% with retrospective effect from 1st July, 2017.
10. New Formula for Refund on account of inverted duty structure: The GST Council in its 47th Meeting held on 28th & 29th June, 2022 recommended for amendment of formula for refund in case of inverted duty structure. Accordingly, amendment has been made in formula prescribed in sub-rule 89 of CGST Rules, 2017 for calculation of refund of unutilized Input Tax Credit on account
of inverted rated structure vide Notification No.14/2022-CT., dated 05.07.2022. The amendment formula takes into account utilization of ITC on account of inputs and input services for payment of output tax on inverted rated supplies in the same ratio in which ITC has been availed on inputs and input services for payment of output tax on inverted rated supplies in the same ratio in which ITC has been availed on inputs and input services during the said tax period.
11. Clarification on utilisation of amounts available in the electronic credit ledger and cash ledger: The GST Council in its 47th meeting recommended that amounts available in electronic credit ledger can be used for making payment of output tax only. It cannot be used for paying any tax under Reverse Charge Mechanism (RCM) or any interest, penalty, fees or any other amount payable under the said Acts. However, the amount available in electronic cash ledger may be used for making payment towards tax, interest, penalty, fees or other amount payable under the GST law.
12. Creation of Appellate Tribunal: The GST Council in its 49th meeting held on 18th February, 2023 has approved the creation of National Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) in principle. The National Bench of the Appellate Tribunal shall be situated at New Delhi. GSTAT shall be presided over by its President and shall consist of one Technical Member (Centre) and one Technical Member (State).
13. Anti-profiteering complaints assigned to the Competition Commission of India: All GST anti-profiteering complaints are now dealt by the Competition Commission of India (CCI) from December 1, 2022. It is pertinent to mention that prior, the National Anti-profiteering Authority (NAA) was set up in November,2017 to check unfair profiteering activities by registered suppliers and ensure that commensurate benefits of reduction in GST rates on goods and services and of the input tax credit are passed on to consumers by way of reduction in prices. Initially, it was set up for two years till 2019, but was later extended further.
Apart from the cited simplifications under GST, there are significant developments are taken place in the GST regime such as auto-population of GST returns, making compliance easier for taxpayers, integration einvoices with the e-way bill system and GST returns, promoting ease of doing business, introduction of the dynamic QR code on invoices to facilitate digital payment, introduction of Amnesty scheme for revocation cancellation of registration, for non-filers of GSTR-4 / GSTR-9 with minimum late fees and Rate Rationalization about 226 items under 28% GST slab reduced to 37 items till now. Thus, the GST regime most of the bottle necks have already been addressed, in these years. It is felt that still improvement is required to overcome new hurdles are being encountered in the practical filed of day to day business of the taxpayers.
The major practical issues in the GST regime are summarised as under:
1. Litigations on pre-GST works contract: Since past six years works contract service providers are knocking at the door of High Courts / Civil Courts to get remedy from additional tax burden due to introduction GST. The works contracts were construed as deemed service and the works contracts service provider was made liable to pay GST @ 18% from July 1, 2017, to August 21, 2017 and thereafter @ 12%. This additional amount of tax as a result of the transition to the GST regime. The State Government concerned department to pay the differential tax amount arising out of the transition to GST for the contractors whose work was completed prior to GST but whose payment has been made in GST period. It is to say that works contract were executed in pre-GST period and completed in pre-GST period but bills were processed in GST period attract additional tax burden. This has to be compensated by the respective State Government departments by enhancing value of agreements or executing revised / supplementary agreements to compensate additional GST burden. Hope, this grievances of the works contract service providers should compensated by reimburse of GST, as the case may be, the differential tax amount, to the contractors.
2. Non-compliance of Service of notice: Section 169 of the Act, prescribes any decision, order, summons, notice or other communication under this Act or the rules made thereunder shall be served by any of the methods enumerated in sub-section (a) to (f) of sub-section (1) of Section 169 of the Act. It is observed that the field formations are invariably choosing by making it available
on the common portal (by preferring sub-section (d) but the same provision accordingly has not been mapped with the GSTN. Consequently, taxpayers are not receiving Alert messages registered mobile, e-mail/SMS notifications in the event of issue of notice or demand by the tax authorities in the GST system for which taxpayers are unable to make compliance in time. Thereby, the tax
authorities are initiating recovery proceeding by way of bank attachment even without knowledge of the taxpayers and harassing to the taxpayers. There is need of mapping of GST law with GSTN in case of Service of Notice u/s 169 of the Act.
3. Appeal provision not synchronize with GSTN: The portal has not been synchronized with the provision of Section 107(4) of the GST Act as it prescribes that if the appeal is not presented within a period of 3 months or 6 months as the case may be, then the Appellate Authority has to be satisfied that the appellant was prevented by sufficient cause in not presenting the appeal within the aforesaid period of 3 months or 6 months as the case may be and then he can allow it to be presented within a further period of one month. Therefore if the appeal is not filed within the specified time of three months, then the assessee has to make an application to the Appellate Authority indicating therein as what was the sufficient cause for which he was prevented from filing the appeal. Thereafter, the Appellate Authority has to be satisfied with the cause shown, and then he will allow the assessee to file the appeal within a further period of one month from the date of receipt of the aforesaid order of allowing filing the appeal. Hence, the portal has to be synchronized with the aforesaid provisions and procedure contained in section 107(4) of the Act and rule made thereunder.
4. Litigation on availment of ITC in the GST regime: Firstly, the concept of mismatch and dispute with regard to ITC figures reflected in GSTR-2A v. GSTR-3B is likely comes to an end. In Pursuant to 48th GST Council’s meeting and their recommendations to remove ambiguity and disputes for availment of Input Tax Credit availed in FORM GSTR-3B returns vis-a-vis FORM GSTR2A returns relating to the financial year 2017-2018 and 2018-2019, CBI&C has issued clarificatory Circular No. 183/15/2022-GST., dated 27.12.2022 [2023 (68) G.S.T.L. C3] to deal with difference between Input Tax Credit availed in FORM GSTR-3B returns as compared to that detailed in FORM GSTR-2A returns for the said periods. The said circular should be extended to the financial year 2019-2020 to dealt with difference in figures reflected in GSTR-2A v. GSTR-3B returns to avail ITC with due compliance of the Circular.
Secondly, the dispute with regard to time limits for availment ITC under section 16(4) of the CGST Act, 2017 by 30th September/ 30th November for the previous financial year is also matter of litigation and has been challenged before the various High Courts including recently one in Kolkata High Court.
Further, the dispute with regard to section 16(2)(c) of the CGST Act,2017 prescribes that the tax charged in respect of supply has been actually paid to the Government by the supplier, in case non-payment of tax by supplier then purchaser or recipient is not eligible to avail ITC on the said supply . Hence, the show causes notices are being issued to the recipients / purchaser for the reason of non-payment of tax by the supplier. For which provision of section 16(2)( c ) of the Act has been challenged before the various High Courts including in Bombay High Court. ITC is the core subject and heart of GST system, if any dispute with regard to ITC, it should be addressed by the Government on priority for the benefits of the taxpayers to avail seamless credit in the GST regime.
5. To control flow of writ petitions before the High Courts in absence of GST Tribunal: The taxpayers are facing difficulties to file Appeal in absence of GST tribunal and alternatively filing writ petition before the Hon’ble High Courts as against recovery proceedings were being initiated by the GST authorities to protect revenue. In this regard kind attention invited to the (Ninth Removal of Difficulties) Order, 2019 dated 03.12.2019 and Circular No. 132/2/2020-GST dated 18th March, 2020 [2020 (34) G.S.T.L. C3] issued by the CBIC, New Delhi. In line of the said circular the Commissioner of Maharashtra State Tax, has issued Trade Circular No.9T of 2020 dated 26th May, 2020 [2020 (37) G.S.T.L. C3], wherein clarified that the taxpayers have to file declaration in Annexure-I before the jurisdictional tax officer stating that he is proposing to file Appeal before Tribunal against order of Appellate Authority u/s 112(1) within the time prescribed by law from the date of the constitution of Appellate Tribunal. In view of the same the recovery proceeding would not be initiated. Hence, there is need further clarification to control flow of writ petitions before the High Courts.
6. Non-compliance of Application for Rectification of Mistake: The very purpose of the provision u/s 161 of the Act to give one more opportunity to the taxpayers to rectify tax authority order on account of errors apparent on the face of record. It is observed that field formations in both CGST / SGST authority are rejecting Application u/s 161 on the ground of that, it is meant for clerical error or arithmetical error and refusing to verify the records / books of accounts of the taxpayers. It is suggested that the field formations of both CGST/SGST authority should be instructed to consider the Application u/s 161 and rectify the order on account of errors apparent on the face of records/books of Accounts of the affected parties/taxpayers.
7. Non-issuance of FORM GST DRC-04: It is observed that whenever the taxpayers’ are voluntarily paying tax liability under FORM GST DRC-03 but the proper officer fails to issue an acknowledgement of such payment in FORM GST DRC-04. It is suggested that the filed formations / the proper officers of CGST /SGST should be instructed to follow Rule 142(2) of the CGST/OGST Rules, 2017. Alternatively, GSTN should be mapped with GST Rules so that whenever there is voluntary payment made by taxpayers through FORM GST DRC-03, the system should generate FORM GST DRC-04 as an acknowledgement on the portal itself for the payment made by the taxpayers.
8. Attachment of Bank Account u/s 83 of the Act: It is observed that invariably bank account of the taxpayers were being attached by the CGST/ SGST authority u/s 83 of the Act, for recovery of tax without prior intimation to the taxpayers and even before Appeal filing limitation period is not over or in the absence of GST Appellate Tribunal. Since CBIC vide its Circular No. 132/2/2020-GST
dated 18th March, 2020 has clarified that the appeal to GST tribunal can be made within three months from the date of order or date which the President or State president enters office. No hardship is caused to the taxpayers due to non-formation of GSTAT as period of limitation for filing appeal to the Tribunal is extended vide CGST (Ninth Removal of Difficulties) Order ,2019 dated 03.12.2019 , so that the appeal can be filed within three months after constitution of Tribunal. Hence, the filed formations should be instructed that no coercive action such as bank attachment shall be taken for non-filing of Appeal against Order pass by the First Appellate Authority.
There are certain challenges before the Government in the GST regime:
1. Control of fake registration/ fake invoices: Consequent to the National Co-ordination Meeting of the State and Central officers held at New Delhi on 24th April,2023, the Department of Revenue, launching a Special All-India Drive from 16th May,2023 to 15th July,2023 to detect suspicious / fake billers from the GST eco-system and to safeguard Government revenue. Successful implementation of the Special Drive would require close coordination amongst the State Tax administration, and between State and Central Tax administrations. For which the CBIC has issued detailed Guidelines vide its Instruction 01/2023-GST dated 4th May, 2023 [2023 (73) G.S.T.L. C7]. It is big challenge in the hands of the revenue department to detect fake registration and control fraudulently pass on input tax credit to unscrupulous recipients by using invoices without any underlying supply of goods or services or both. Let us hope this initiative certainly control fake ITC invoices and protect the Government revenue in the GST regime.
2. Scrutiny of returns: Section 61 of the CGST Act, 2017 read with rule 99 of CGST Rules, 2017 provides for scrutiny of returns furnished by the registered person. CBIC has issued standard operating procedure (SOP) vide its instruction No.02/2022-GST dated 22 nd March,2022 [2022 (58) G.S.T.L. C29] for scrutiny of returns for FY 2017-18 and 2018-19 till launch of Automated Return Scrutiny Module. Recently, CBIC has rolled out the Automated Return Scrutiny Module for GST returns in the ACES-GST backend application for Central Tax officers. This said Module has commenced with the scrutiny of GST returns for FY 2019-2020, and the requisite data for the purpose has already been made available on the officer’s dashboard. CBIC has issued detailed procedures vide its instruction No.02/2023-GST dated 26th May, 2023 [2023 (73) G.S.T.L. C3]. This mode of scrutiny of returns made available on the ACES-GST application. This is also one of the challenges in the hands of the revenue officers to detect evasion of tax in order to protect the Government revenue in the coming days.
3. Mapping of GST Law with GSTN: The GST is fully based on IT infrastructure but there are certain procedures are not matching with GSTN. The law is saying certain things but GSTN is not accepting of filing application through GSTN. For example the registered person is required to file application on the common portal in case of rectification of order u/s 161 of the CGST Act, 2017 but the GSTN has not been developed to file Application of rectification of order through online. Hence, the registered persons are forced to file Application manually to rectify orders. It is requested to review the GST laws with procedures available with GSTN and streamline the IT infrastructure to discourage manual working in the GST regime.
4. Minimization of Notifications / Circulars/Instructions: There are frequent Notifications/ circulars/instructions are being issued by the Central Government by which creating confusion amongst the taxpayers in the similar issues. The Government should avoid issuing repeated Notifications in the similar matter from time to time and rescinded the unused /old Notifications. It is worthy to mention that the States Commissioners should issue their trade notices / circulars in the similar subject of GST, so that SGST officers should comply the procedures without fail for smooth tax administration in the GST regime.
5. Revenue Neutrality Rate: Revenue Neutrality Rate (RNR) is one of the biggest hurdle or challenge under GST. RNR is the rate at which tax revenue of the Central Government and State Government will remain the same. The GST rate structure comprises of four slabs i.e. 5, 12, 18 and 28%. There is need of minimum GST rates so that it will be beneficial for the taxpayers as well as the Government. The major sources of revenues are going to Centre and States are losing revenues. Hence, the Government has enhanced Compensation Cess payment to the States till 31-03-2026.
Conclusion: It is worthy to mention that several simplifications in procedures of GST have been undertaken, Acts/Rules have been amended by the Government in the last six years in the several occasions. The GST regime brought a sea of changes in business is done in India. Still there are certain grey areas needs to be addressed by the Government for the smooth and successful of GST system in the country. There is also need of coordination between Central and State Tax administration across the country to achieve Special All India drive against fake registration and bogus invoices for passing of fake ITC, these are big challenges before the Government to address for smooth functioning of the GST system in the country.
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