RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

On economy, various economists and agencies have estimated GST growth for Q1 of current fiscal in the range of 13-23% with most predictable being in 17-18% range.

Union Government has ruled out any possibility for the present, to cut excise duty on petroleum products i.e., petrol and diesel because of the cost of burden on the oil bonds. The principal amount outstanding on the oil bonds is ₹ 1.3 trillion and Government has to repay ₹ 10000 crore in current fiscal, ₹ 31150 crore in 2023-24 followed by ₹ 52860 crore and ₹ 36,913 crore till 2025-2026.

CBIC Chairman, in one of the recent events has expressed that the last two years have been a challenging one for the economy due to the Pandemic, however government has seen in this adversity an opportunity to bring in structural change. CBIC have taken on this challenge seriously and have sought to make trade more competitive by reducing cost and time and increase profitability for trade and industry. The Indian tax system has been envisioned around voluntary tax compliance. CBIC has  tried to reduce the compliance burden and make procedures simpler. GST collections have risen during the past eight months to above Rs. one lakh crore despite lowering our average tax rates which shows signs of a resilient trade and industry bouncing back quickly. The recent United Nations Global Survey on Digital and Sustainable Trade facilitation report has seen a swing for India from a score of 78.49% in 2019 to 90.32% in 2921.

Good news on GST Compensation Cess is that the Central Government has paid all the GST Compensation dues to the States for the financial years 2020-21 and 2021-22. In one of the replies by Minister of State for Finance, he has stated in Lok Sabha that the economic impact of the pandemic has led to higher compensation requirement due to lower GST collection and at the same time lower collection of GST compensation cess. GST compensation of ₹ 91,000 crore has been released to all States/ UTs to partly meet the compensation payable for the period April’20 to March’21 as the amount in GST Compensation Fund was not adequate to meet the full compensation requirement. Depending on the amount available in the Compensation Fund, Centre has also been releasing the regular GST compensation to States to make up for GST revenue shortfall.

Recently, Ministry of Finance had issued a Press Release dated August 03, 2021, regarding the input tax credit fraud of more than ₹ 31,000 crore involving more than 7,200 cases in FY 2020-21 busted by the Central Board of Indirect Taxes and Customs. The Goods and Services Tax authorities have unearthed over ₹ 31,000 crore of tax fraud committed by misuse of input tax credit (ITC) during the financial year 2020-21 and booked more than 7,200 cases involving fake ITC.

GST Council may consider soon the ways to bring down the GST rates on certain items. The Council may take out few items from tax exempt category and correct inverted duty structure. Revenue Secretary has commented recently that it was the Government’s policy to provide a stable and predictable tax regime.

Government has announced new duty remission scheme (RODTEP) covering 8555 items which will provide relief to exporters. If aims at refunding taxes and duties on exports.

Advisory on GSTR 1 Filing – Errors & Resolution

• GSTR-1 is a monthly or quarterly return containing details of outward supply to be filed by every registered GST taxpayer.
• Currently, the taxpayers are seeing the below statuses for GSTR-1, after uploading of JSON file from the Offline Tool:

                1. Processed with Error, or

                2. In Progress

• This is due to the fact that many offline utilities used by Taxpayers are not filing the Table 12 HSN wise summary of outward supplies correctly. The HSN Code and Rate fields cannot be null.
• It is suggested to use the latest version of Offline Tool (Version 3.0.4) provided by GSTN instead of 3^rd Party GSTR 1 Offline Tool.

(Source: https://twitter.com/infosys_GSTN/status/1425489278138683392  dated 11.08.2021)

Setting up GST Appellate Tribunals: PIL

• Section 109 of CGST ACT, 2017 mandates the Central Government to constitute Appellate Tribunal for hearing appeals against the orders passed by the Appellate Authority (under section 107 of the CGST Act) or the Revisional Authority (under section 108 of the CGST Act).
• Presently, in absence of Appellate Tribunal in place, aggrieved assessees have no option but to file writ petition in high courts to seek appropriate remedy, adding to the workload of courts.
• A public interest litigation has been filed by one, Mr. Amit Sahni, Advocate, before Supreme Court of India in July, 2021.
• Let’s hope for constitution of Appellate Tribunal under GST law soon.

(Source: PIL before Supreme Court)

GST registration of company under CIRP – IBC Code

• The insolvency resolution professional can apply for GST registration of a corporate debtor with the intent of keeping the corporate debtor company as a going concern.
• On such application, GST department rejected the registration application on the ground that GST registration of corporate debtor was earlier cancelled by the Department suo moto and there is no ground to apply for grant of fresh registration.
• Corporate debtor undergoing CIRP is to be treated as a distinct person and is liable to take new registration where corporate debtor was registered earlier. Section 238 of IBC overrides the provisions of other laws.
• It was directed to the GST department to allow the IRP to register as a corporate debtor under GST.

[Source: SAPAN MOHAN GARG, RP FOR SORT INDIA ENVIRO SOLUTION LTD. VERSUS COMMERCIAL TAX OFFICER GHATAK 40 (VADODRA) , RANGE-10 2021 (5) TMI 409 - NATIONAL COMPANY LAW TRIBUNAL , AHMEDABAD BENCH]

GST on Liaison Office Activities- Advance Ruling

• Where assessee, an organization incorporated in Germany, established its liaison office in India which was an extended arm of head office in Germany, since parent company in Germany and liaison office in India  are not recognized  as separate persons but as one legal entity, liaison activity performed by liaison office of assessee for parent company is in nature of service rendered to self which would not come within purview of supply under section 7(1)(a) of  CGST Act, 2017.
• The activities of the liaison office do not amount to supply of services.
• The liaison office is not required to be registered under GST as there is not taxable supply.
• The liaison office is not liable to pay GST.

 [Source: IN RE: M/S. FRAUNHOFER-GESELLSCHAFT ZURFORDERUNG DER ANGEWANDTENFORSCHUNGE.- 2021 (2) TMI 1164 - APPELLATE AUTHORITY FOR ADVANCE, KARNATAKA]

Proactive measures by CBIC

The field of taxation is a very complex one. In any taxation system, it is traditionally thought that the taxpayers and the tax administrators are its most important elements. However, it’s the galaxy of tax pundits, facilitators like the tax practitioners, technology service providers etc. who contribute to the success of a tax system but have largely gone unnoticed. Their role needs to be recognized and awards like this go a long way in honoring their contributions.

Hon’ble Prime Minister has envisioned to make India a 5 trillion dollar economy by 2024-25. He has also given a clarion call to give a boost to the export sector and make it an engine of growth. We at CBIC have been striving to contribute our mite to help make this a reality.

The last two years have been a challenging one for the economy due to the Pandemic, however government has seen in this adversity an opportunity to bring in structural change. We at  CBIC have taken on this challenge seriously and have sought to make trade more competitive by reducing cost and time and increase profitability for trade and industry. The Indian tax system has been envisioned around voluntary tax compliance. We have tried to reduce the compliance burden and make procedures simpler. We are sure that the good practices and ease of doing business processes that we have initiated will usher in a tax friendly environment while rewarding the honest and more compliant taxpayer, in treading tax collections with increasing the rates. Having said that, we have also sent out a strong message to the non-compliant taxpayers about our endeavor to deal with them firmly.

The CBIC in recent times have taken numerous steps in this direction and more so to ease things during the Covid-19 pandemic by quickly coming out with relaxations of compliance requirements and exemptions/tax reductions on covid-19 medical equipments and drugs as well as waiver of duty, fine and penalty. On the departmental side, we quickly rolled out e-Office across the country so that there was no disruption in our services to the trade.

On the trade facilitation front, several steps have been taken by CBIC. On the GST side, Smoothening of the GST return filing processes as well as NIL filing of FORM GSTR-3B through SMS facility, Quarterly Return and Monthly Payment (QRMP) Scheme for taxpayers with turnover of less than ₹ 5 crore, Return Enhancement and Advancement Project (REAP), e-Invoicing System, Aadhar based authentication of registration processes and many measures taken to reduce the compliance burden on the taxpayers along with recent amnesty scheme to provide relief to taxpayers regarding late fee for pending returns etc. to name a few.

At the same time, several effective measures on the policy and administrative front to curb the menace of fraudulent Input Tax Credit (ITC) availment based on fake invoices which essentially is an invoice raised without actual supply of goods and/or services.

On the Customs side we have Under the flagship programme of CBIC i.e., ‘Turant Customs’ brought a sea change in the way how Indian Customs worked.

• Faceless Assessment
• Contactless Customs
• Paperless Customs
• Shift from thrust on Gateway controls to post clearance audit
• Integrating all Partner Govt Agencies (PGAs) on e-SANCHIT:
• EODB Score Card for Customs Brokers:
• Expansion of Turant Suvidha Kendras
• Measures to align Customs Tariff Act, 1975 with WCO HS Convention:
• Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020

Are some of these steps.

Other measures include, enhancement of Direct Port delivery to 90%, introduction of RMS for drawback claims, dispensing with periodic renewals of licenses/approvals and digitization of AEO applications are a few initiatives to mention that facilitated trade in a big manner.

Our GST collections have risen during the past eight months to above Rs. one lakh crore despite lowering our average tax rates which shows signs of a resilient trade and industry bouncing back quickly. The recent United Nations Global Survey on Digital and Sustainable Trade facilitation report has seen a swing for India from a score of 78.49% in 2019 to 90.32% in 2921. With such institutional changes having been set in motion, I am sure the clarion call of our Hon’ble Prime Minister will become a reality sooner than expected.

(Source: Excepts from speech of CBIC Chairman @ TIOL Awards on 21.08.2021)