GIVE IT WHOLEHEARTEDLY

[K Balasubramanian]

1. Introduction: The efforts of GST Council and the Government are applaudable in few cases. However, there are few amendments where the Government is giving apparently less which sometimes severely affect the taxpayer, wherein the High Courts are coming forward to rescue the taxpayer. Let us analyze few such cases in this article.

2. Section 50 of the CGST ACT. The efforts of the Government in bringing out the required amendment in the Finance Act 2022 on Section 50 are really applaudable. This is the classic example of giving wholeheartedly as the amendment made on 05/07/2022 was given retrospective effect from the date of introduction of GST (01/07/2017) when extending a benefit to the taxpayer. The law stood as even wrongly availed credit would attract interest during the period from 01/07/2017 till 04/07/2022. The Government showed the generosity in giving a benefit to the taxpayer, that too with retrospective effect to clarify that any wrongly availed credit would attract interest only when such wrongly availed credit is utilized. Interest is applicable only to the extent of utilization of such wrongly availed credit. The Government has understood the issue and penalizes the taxpayer only when there is a loss of GST to the Government and not in other cases.

3. Section 128A. The next best example of giving is the introduction of a new section 128A which is effective from 01/11/2024. The Government has very clearly understood that in many cases the demands raised Under Section 73 of the CGST Act during 01/07/2017 to 31/03/2020 were raised due to various mismatches in GSTR. Moreover, in many cases, the demands were raised when the system was not stabilized. The provision which makes it possible for waiver of interest as well as penalties pertaining up to 31/03/2020 subject to payment of FULL TAX by 31/03/2025 is laudable.

4. Section 16(5). The next example on giving is introduction of new sub-section 5 to Section 16 through Finance Act 2024 made effective on 27/09/2024.  This again is a highly beneficial provision for those taxpayers who were affected by 16(4) on time limit to avail the ITC. This benefit is available only up to 31/03/2021. The efforts of the Government in appreciating the practical difficulties of the taxpayer are laudable.

5. As is where is basis. In several cases, including Section 128A, the benefits pertaining to the period up to the date of enactment of that particular provision is available for those who have not paid their dues to the Government, whereas a taxpayer who promptly made the payments of TAX, Interest as well as penalties as applicable prior to such amendment are at a GREAT LOSS. Still, the efforts are acceptable as something is Better than nothing.

6. Giving Less: Notification Number 06/2023 Central Tax dated 31/03/2023: This notification is on assessment under section 62. Though the notification was issued on 31/03/2023, benefits are available on orders passed up to 28/02/2023 only. If at all the intention of the notification is to really give certain benefits to the taxpayer, what was the need to restrict the cases only up to 28/02/2023, when the notification itself is issued on 31/03/2023?. Moreover, benefits of automatic withdrawal of assessment orders available only when the applicable GSTR is filed on or before 31/08/2023. Why such restriction, when there is a late fee of Rs.100 per day of delay beyond the sixtieth day?  Section 62 is severely affecting a taxpayer who is not in a position to file the GSTR even after issuance of reminder notice. As interest as well as late fees are applicable on all the cases of delayed filing of GSTR, why there are restrictions on dates such as 28/02/2023 and 31/08/2023 etc?.  The Government may instruct the proper officers to pass orders under section 62 on a selective basis and not as a ROUTINE.

7. Notification 53/2023 CENTRAL TAX dated 02/11/2023: This is yet another example on giving less. The notification provides for certain relief on cases affected due to time limit specified under section 107. Though the notification itself was issued during November 2023, the stipulated benefits are available only for orders passed on or before 31/03/2023. The High Court of PATNA in the case of MALI TRACTORS PRIVATE LIMITED VERSUS THE UNION OF INDIA, THE STATE OF BIHAR, THE ADDITIONAL COMMISSIONER OF STATE TAX, APPELLATE AUTHORITY, DARBHANGA, THE ASSISTANT COMMISSIONER OF STATE TAX, BEGUSARAI. - 2025 (1) TMI 979 - PATNA HIGH COURT has held that an order passed on 23/06/2023 could not be rejected quoting the reason as date of order is beyond 31/03/2023. Accordingly, the said order of the appellate authority which rejected appeal was set aside with directions to consider the appeal based on merits.  The High Court has held that in all cases, where orders are passed up to three months prior to the date of the notification are to be covered under the said notification as there was no reason to fix the date as 31/03/2023.

8. Section 17(5): One more example of giving less is the Section 17(5) itself. Most of the restrictions covered under sub section 5 of Section 17 are against the principles on seamless flow of ITC. These restrictions are artificial based on some assumptions as many of the restrictions could not satisfy the test of used or intended to be used by a supplier in the course or furtherance of business and hence the Section itself is worded as notwithstanding anything contained in sub section 1 of section 16. The Government may kindly revisit the Section 17(5) in the BUDGET for the year 2026/27.

9. Conclusion: It is not the case that the Government is focusing exclusively on REVENUE as there are many notifications/circulars which are beneficial to the taxpayer. However, as the Government has the powers, sometimes the amendments are totally against the intention of the legislature and one such case is the amendment, which is still in the pipeline on Section 17(5)(d) which replaces the words plant or machinery with  plant and machinery. This amendment is proposed to be with retrospective effect from 01/07/2017 itself to nullify the decision of the Supreme Court in the case of CHIEF COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX & ORS. VERSUS M/S SAFARI RETREATS PRIVATE LTD. & ORS. - 2024 (10) TMI 286 - SUPREME COURT. Even today, it is NOT TOO LATE to REVISIT this particular amendment, as the amendment, if made with prospective effect shall benefit the taxpayer who honestly relied on  the law  as it stood  at that time  and availed ITC as the law stood as  passed by the Parliament.