GST has undoubtedly transformed the taxation landscape. However, there are certain areas that need to be addressed in order to ensure its continued success and effectiveness. While celebrating ‘6 Years of GST’, let’s take a moment to discuss some important issues that need to address.
1. The Recent Surge in GST Litigation
In the past two years, the world of litigation has witnessed a significant surge. We have observed the issuance of certain notices that are, quite surprisingly, deemed invalid. For instance, Best Judgement Assessment orders issued under section 62 of the CGST Act are invalid. Also, some Show Cause Notices issued without any rational.
Adding to this, the Gujarat High Court[1] recently raised a crucial question regarding the power of the Directorate General of GST Intelligence (DGGI) to issue Show Cause Notices outside its territorial jurisdiction. This development holds immense importance as it directly impacts the jurisdictional authority of the DGGI and the scope of its operations.
Thus, while some disputes are due to genuine differences in interpretation, others may be a result of inadequate understanding or compliance gaps. To guarantee proper compliance, it is essential for businesses to stay updated on the latest GST regulations which may help to mitigate the risk of litigation to some extent.
2. Notices with respect to ITC
Recently, many instances are reported wherein notices are for the discrepancy in claim of input Tax Credit (ITC) as per GSTR-2A /2B and as per GSTR-3B. During the scrutiny of these notices, it is observed that the substantial amount of variation in ITC claim is on account of ITC availed on, inter-alia, import of goods while GSTR 2A reflects only the ITC on inward supplies received from the registered person.
Therefore, the reason for differences is that the GST system is not taking into consideration the amount of import of goods (these details are already available with Customs Authorities) and thus, GST system are inadvertently showing that GST payer has claimed higher credit (whereas GST payer has claimed eligible credit of IGST paid on import of goods).
Furthermore, several notices are issued without taking into account GSTR-9 filed. As a result, businesses are filing appeals even for error, resulting in a blockage of operational funds due to the 10% pre-deposit requirement.
Thus, businesses must take the necessary steps to correct any differences in GST returns filed in order to reduce the risk of litigation due to disclosure error.
3. Numerous changes in GST Act and Rules thereunder
The trend of numerous changes in GST Act and Rules thereunder has continued even in 6th year which increased uncertainty. Implementing these changes at different times throughout the year is challenging for businesses. It requires adaptability, agility, and a keen eye for detail to ensure compliance and smooth operations.
4. Withdrawal of the exemption and/or increase in the GST rate during the fiscal year
After implementation of GST, it has suggested numerous significant amendments to GST rates in addition to GST laws and procedures. Significant changes to GST rates were announced on July 18, 2022, including the elimination of exemptions on several consumable commodities and services, a rise in GST rate, and so on.
Implementing these amendments throughout the fiscal year is difficult since ‘time of supply’ provisions need to be followed on the date of such changes in order to determine the applicable GST rate. If these changes are introduced at the beginning of the fiscal year, implementation may be eased.
5. E-invoicing implementation could be difficult for small enterprises.
The GST Council has announced that the next phase of e-invoicing for enterprises with an annual turnover of more than Rs.5 crore would begin on August 1, 2023[2]. By the end of the fiscal year, it may be extended to enterprises having a revenue of more than Rs.1 crore.
The objective of this move is to simplify and digitise the invoicing process, making it more efficient and transparent. While this is a positive step towards simplifying tax compliance, it is important to note that establishing real-time e-invoicing for small enterprises with limited compliance infrastructure may be challenging.
6. Duplication of disclosure of same details
GST payer is required to furnish details with respect to export supplies at the time of filing shipping bills and once again in GSTR-1 (Table 6A) and further at GSTR-3B [Table 3(b)]. Furthermore, details about imports supplied at the time of submitting the Bill of Entry (BoE) are required to be furnished again at GSTR-3B [Table 4 A (1)]. Similarly, details are uploaded for e-way bill and/or E-Invoice (for supplies above prescribed threshold for intra-State and inter-State movement) are again confirmed at the time of GSTR-1.
The aforesaid requirement to disclose same details two or three times, inherently creates a situation of reconciliation. Currently, GST payer is required to prepare the numerous reconciliation of GSTR 1 vis-a-vis GSTR 3B, GSTR 2A or 2B vis-a-vis GSTR 3B, GSTR 3B vis-à-vis E-Invoice, E-Invoice vis-à-vis E-way bill, GSTR 3B vis-a-vis financials, financials vis-a-vis annual return etc.
GST Council should look on reducing compliances to reduce reconciliations.
Thus, let’s work together as stakeholders to fix these issues and make GST genuinely a gift for consumers as well as businesses on its ‘6th’ anniversary. Let’s endeavour to make the GST system more effective, transparent, and taxpayer-friendly.
[1] Plea from Flair Writing Industries
[2] Not. No 10/2023 – CT
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