Fine-tuning GST

Mohan Lavi | Updated on May 26, 2019

The govt must make it a Good and Simple Tax

Now that the government that unleashed GST upon the nation has returned to power, it has a golden opportunity to live up to expectations — of making it a Good and Simple Tax.

The first 18 months of GST were tumultuous with ever-so-frequent changes due to which everyone including the GST Council were learning and adapting on the fly. The government has 60 months to work less chaotically and take informed decisions on the changes that the laws require.

After many changes, most GST tax rates appear to be in a sweet spot now. Without looking at revenues, the GST Council would do well to take a relook at the rates of certain industries.

For instance, keeping the GST rate for cement at 28 per cent when the real estate industry is at 12 per cent doesn’t look right. Restrictions on availing refunds on inverted duty structure would mean that the industry has to do some adjustments in pricing to off-set the negation of ITC. If the pricing is changed, anti-profiteering provisions come into play.

With no specific guidance available on how to calculate the quantum of anti-profiteering, one is left to a few decisions of the Authority for Advance Rulings (AAR) for clarity. Most AAR decisions are skewed in favour of the Department as they are passing judgement on a law that is still wet behind its ears.

During the next five years, there will be pressure on GST revenues — the government should not make the mistake of resorting to ad-hoc increases in rates on a few items. While the intention to bring as many taxpayers as possible onto the GST bandwagon is laudable, attempting to do this through reverse charge on purchases from unregistered dealers will result in exactly the opposite.

A sequential look at events after the GST’s launch makes is clear that the software developed by Infosys was only a work-in-progress on July 1, 2017. Both the Central Board of Indirect Taxes and Customs (CBIC) and Infosys have learnt a lot over the past 18 months and have been able to fix many of the bugs. The portal shows no signs of moodiness now but both CBIC and Infosys should do multiple dry runs of the new system of filing returns before launching it as the system requires both the supplier and the receiver to spend a lot of time on the portal playing the game of matching their invoices.

Simplify notifications

The government at the earliest should seek professional assistance to teach bureaucrats the art of issuing simple notifications and circulars. To an existing set of unclear GST laws, if we add a bunch of equally unclear Notifications, mayhem will prevail. CBIC should come up with a solution whereby the GST Acts, Rules and Rates are all changed automatically on the portal once a clarification is issued. The notification can still be issued and kept in a database.

As on date, most of the litigation in GST is at the doors of the AAR. It should be ensured that there are sufficient appellate tribunals to hear and adjudicate on the avalanche of appeals that are expected. History tells us that justice on tax issues happens mostly at the Tribunal level. Internal instructions should be given to officers not to conduct “Revenue-at-any-cost” assessments. CBIC is just about issuing the last set of service tax notices now. One can expect the first assessment-based GST notices sometime next year.

GST laws did not win the election for this government. The government can work towards making them count in 2024.

The writer is a chartered accountant

Published on May 26, 2019

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