Address GST blues

The interim Budget may not have major policy announcements, but it could provide insights into the government’s economic vision and tax thinking.

A long-standing demand of small and medium-size business owners has been to increase the minimum threshold for GST registration to ₹50 lakh, to afford the necessary breather to expand their business activities. Also, the industry expects that the phasing out of Foreign Inward Remittance Certificates (FIRCs) by the RBI with regard to export refund processing under GST law. Currently, for processing refund claims, FIRC details are asked on the ground from exporters, and this creates additional roadblocks in a system that can be easily streamlined by adopting RBI guidelines.

Last year, there were many GST demands and scrutiny on businesses, because the suppliers failed to file GST returns and deposit tax collected, which resulted in the credit taken by such businesses becoming prone to litigation. There is an industry proposal that for large taxpayers, the GST paid to small suppliers be paid by such businesses through reverse charge mechanism.

This would ensure that the tax is appropriately deposited to the government and is also not reliant on the compliance of the small supplier, who may be facing challenges in depositing taxes and filing returns. If the tax is deposited on reverse charge, subject to appropriate compliance, there should not be any hindrance in availing input credit. Such a proposal would be extremely beneficial for both the government and the industry and will also minimise litigation at a later date.

Online gaming

Clarity is also expected on the new valuation rules for online gaming; the Finance Minister has already made a statement of their prospective effect. These rules are due for review after six months of introduction, i.e., around April 2024. The perspective of the government, especially in view of the numerous pending litigations, would be of help to the industry.

On the customs front, there is expectation that operational requirements regarding ‘certificate of origin’ to obtain benefits under free trade agreements (FTAs) would be looked into and the process streamlined for ease of doing business. Presently, customs officials send certificates of origin for scrutiny if the importer wishes to get FTA benefits. A digital ecosystem is the need of the hour, where the certificate can be electronically verified without making the process cumbersome for the importer.

Further, litigations in customs have also seen an uptick recently due to issue of notices by jurisdictional authorities on the recommendation of intelligence agencies. There’s a need for an amnesty scheme for customs litigation, where old and dated litigation can be phased out and settled on the payment of appropriate duties and reasonable interest.

A leaf can be taken out of the DGFT, where delinquent export licences like EPCG(s) are being settled on application and payment of the shortfall with interest. Such a scheme can be introduced in customs litigation also to clear the backlog of cases that are now dated, and make the process more efficient.

To further the digitalisation process, the filing of appeals before Commissioner Appeals has already been put on an online platform. This should be extended to other filings like before appraisers, etc., on classification queries raised via ICES (Indian Customs EDI Systems), so that bulky manual documentation processes are streamlined and the efficient clearance at customs port can be carried out.

Further, the SWIFT system, already in place for customs clearances, should be further harnessed to enable fully digital clearances and verification process to reduce dwell time at customs ports. Since the infrastructure is already in place, the further strengthening of the same will make the ecosystem more transparent.

Bose is Partner, and Chakrabarti is Consultant, at Shardul Amarchand Mangaldas & Co

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