Still an enigma

Recent meetings of the GST Council are following a predictable pattern — some rates of tax are decided, some rules are finalised and matters to be decided in the next meeting are announced. Press conferences held after the Council meetings reiterate that July 1 is the appointed date for introduction of GST in India. There is no doubting the fact that the earlier GST is introduced, the better it is since both the taxpaying and the tax collecting community can commence the long process of getting used to the new tax.

But introducing GST in its present form and shape on July 1 is going to add to the already-existing confusion on many aspects of the law. There are many reasons to push the implementation date to September 1.

Many State governments are yet to pass their SGST laws. This may be only a formality since the State laws invariably repeat all the 174 section of the CGST law but still the administrative act of passing the Act has to be done. In transitioning to GST, the transition return is a very important document since taxpayers can claim credit on the indirect taxes paid on their closing stock before the appointed day. This form has not yet been finalised and issued.

Even it if is notified on June 11 when the GST Council meets next, the time frame to file the form is too short. The law gives a time limit of two months from the date of introduction of GST to file the form, taxpayers would be keen to strategise the amount of stocks they would need to maintain on the date of introduction of GST.

They would certainly rue a situation wherein they have strategised for inventory as on June-end but have to revise it to August-end. While most existing taxpayers have obtained a provisional GST registration, they do not have the final GST registration certificate. In addition, registration of new taxpayers has not even commenced.

As a law, GST has been structured on the fundamental principle of matching of invoices. The GST portal will do the matching and intimate both the parties with mismatch reports. One of the harshest provisions in the GST law is the one which states that if the mismatch that has not intimated is not rectified in the return for the next month, it will be added to the output tax liability. It is too early to slap the taxpayer with a tax liability within a month for the mistake of his counter party.

The GST Council would do well to retain the provisions for matching of invoices but defer the provision to add the mismatch to the tax liability of the supplier in the next month. This becomes clear if one looks at the format for mismatch of invoices that has been finalised by the Council. Though this form will be auto populated from the returns of the supplier and his counter party, it will take time for anyone to understand.

Here’s a sample: “Details of Invoices, Debit and Credit Notes of the month of September where reversal was reclaimed in violation of Section 42/43 and that will become payable in the return of October return to be filed by 20th November”.

It would most appropriate for the Government to announce a firm date (September being the ideal choice) for implementation of GST on June 11.

The writer is a chartered accountant

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