Mohan Lavi

Three years on, GST is still a real head-scratcher

Mohan R Lavi | Updated on June 30, 2020

It is a matter of concern that the authorities are spending too much time on routine matters of specifying due dates and waiving interest and late fees, rather than focussing on real matters of significance

One would expect that three years would be more than enough time for even the most complex law to stabilise even in most complex countries. Sadly, this cannot be said for the GST in India as it completes three years this week.

If the first year of the GST was marked with technical glitches, the second year was riddled with a plethora of forms and extension of the due dates while the third year was full of eerie decisions of the Authority for Advance Rulings (AAR).

Dates, dates and dates

The complexity of the law today is such that if we ask a supposedly simple question like, what is the due date for filing monthly GST returns, we will not get a direct answer but more questions. Is your turnover greater than or less than ₹5 crores? Which State are you located in? Have you opted for the composition scheme? After the advent of Covid, the due dates for filing returns were extended. One would have expected that since Covid impacts everyone, all relaxations would apply to all taxpayers. But the makers of GST notifications can think of the most complex formulae. They notified that a window of 15 days would be given for those whose turnover was in excess of ₹5 crore. Interest would be levied if the return was filed after the fortnight window was over. Those with turnover with less than ₹5 crore were spared the levy of interest.

For relaxations of late fee for filing returns, the CBIC issued Notification No 52/2020, which comes close to a work of art. Specific days have been chosen, after which the late fee would kick in. Just as the taxpayer absorbed these details, a foot note to the Notification offers some more waivers if the returns are filed before specific dates. The taxpayer cannot be blamed if he is left wondering if he should file the return at all. Since Covid is not going to go away soon, CBIC would do well to waive interest and late fees at least till December for all types of taxpayers.

AAR rulings

The decisions of the AAR continue to surprise. While deciding whether the GST is to be charged on directors’ remuneration (on reverse charge basis), the Rajasthan AAR said yes, but the Karnataka AAR said no. The GST Policy wing decided to issue Circular No 140/10/2020-GST to clarify its stance. It concluded that if the directors’ remuneration is debited under the head ‘Salaries and TDS’, deducted under Section 192 of the Income Tax Act, the GST would not apply. Else, it would. Payments to independent directors would attract GST as they are not employees. The AAR in Gujarat ruled that interest income would need to be included in calculating the turnover for GST registration.

It is a matter of concern that the CBIC is spending too much time on routine matters of specifying due dates and waiving interest and late fees. Larger and more important tasks are not being discussed — the new system of filing of returns and the e-invoicing facility are cases in point. The GST collections are certainly going to be way below expectations — the State governments would be expecting a discussion on how the numbers are going to work out for them. The GST Appellate Tribunal ( GSTAT)— a forum where taxpayers expect to get some justice — is yet to make its mark.

A post-mortem assessment would reveal that the government, the software vendors and the taxpayers did not expect implementation of the GST to be so complex. It is still not too late for the government to immediately set up a GST Task Force that would look into the chinks in the armour and come out with solutions that need to be implemented in a time-bound manner. Any delay could lead to the GST law developing a Covid buzzword- co-morbidity.

The writer is a chartered accountant

Published on June 30, 2020

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