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TMI Blog2021 (7) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... place in Section 10(1) of the Act itself - As the tax to be paid is to be determined under the new regime, the legislature thought it fit to fix a limit in the turn over of the preceding financial year for the purpose of extending the benefit under the composite scheme. A reading of the objects and reasons and the provisions of GST Act makes it clear that GST Act has only replaced VAT Act. All the taxes to be paid under VAT are subsumed into a single tax called GST, simplifying the tax collection process and making it easier not only to the customer, but also the State and Central authorities. The argument that the turn over in the financial year starting from 1.7.2017 has only to be taken into consideration ignoring the previous turn over in the VAT regime does not sound to reason, because when the legislature at more than one place used the word preceding financial year , it would only mean that as on 1.7.2017, the turn over of the previous year under the VAT regime has to be reckoned with for the purpose of extending benefit under GST regime, provided the self-declarations made are correct - by switching over from VAT to GST system, tax payment/collection on intra state sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have opted for paying tax under composite scheme as per the procedure contemplated under Section 10(1) of GST Act and got it registered through GST portal. The petitioner has been filing GST returns and Form GSTR-IV from the quarter ending September, 2017 and the taxes were paid as per the said scheme, which postulates payment of 1% of GST on the turn over. According to the petitioner, the Department accepted the taxes paid/returns filed, till the date of issuance of show cause notice by the 3rd respondent on 14.2.2018, wherein the action of the petitioner claiming payment of tax under the composite scheme was rejected on the ground that the turnover of petitioner for the previous year under the VAT regime was ₹ 2.09 crores. The petitioner is said to have given an explanation to the show cause notice, but the same was rejected on 26.7.2018 in Form-GSTCMP- 07. Consequently, the petitioner was issued with a show cause notice on 27.7.2018, in terms of Section 74 and Section 10(5) of the State GST Act, stating that she is liable to pay S.GST @ 14% and C.GST @ 14% from the date of initial registration i.e., from 1.7.2017. Though an explanation was given stating that she is not l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss all the options exercised and in the process accepted the tax paid. Hence, urges that this will not estop the respondents from exercising the power to cancel the option exercised by the petitioner. According to him, if really the intention of the legislature was to exclude the provisions of the VAT Act, or make the provisions of GST prospective in operation, there would have been a reference to that effect in Section 10 of GST Act itself. In the absence of the same, it cannot be inferred that the word preceding year excludes the turn over declared during the VAT regime. Apart from that, he pleads that under Sub-Section 1 of Section 10, any person, who files an intimation to pay tax in the said provision, has to file form GST CMP-03 (Rule 3(4)) intimating details of stock as on the date of exercise of option for composition levy, but in the absence of the same, the petitioner cannot claim that the turn over was less than the prescribed norm warranting applicability of Section 10 (1) of the GST Act. 4. The point that arises for consideration is whether the petitioner is entitled for payment of GST as per the composite scheme, as his turn over after the GST regime came to fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax at 28% (14% S.GST and 14 % C.GST) and also as to what the word preceding financial year appearing in Section 10(1) of Act would mean? 8. In order to appreciate the same, it will be useful to refer to Section 10(1) of the AP GST Act, which is as under : 10. Composition levy (1) Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees may opt to pay, in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate as may be prescribed, but not exceeding,- Rate of Tax of Composition levy (a) one percent of the turnover in State in case of manufacturer, (b) two and a half percent of the turnover in State in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II; and (c) half percent of the turnover in State in case of other suppliers, subject to such conditions and restrictions as may be prescribed : Provided that the Government may, by notification, increase the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities to examine the options exercised by all the taxpayers in the State cannot be brushed aside. Merely because the petitioner has exercised an option (which should be a correct one) and that it took time for the authorities to verify the genuinity or otherwise of the option exercised, cannot estop the respondents from directing the petitioner to pay tax as regulated under the provisions of the GST Act, if the option exercised was found to be incorrect. 13. Therefore, the word preceding financial year appearing in Section 10 (1) of the Act is the crux of the issue. If the word preceding financial year is restricted to the period commencing from GST regime, then all the assesses, who have submitted their returns with false declarations in the GST regime for the financial year 2017-2018, would go scot free and would not be liable to pay any tax, as there would not be any preceding financial year in the GST regime for the period 2017-2018. This could not have been the intention of the legislature at all. If the intention of the legislature was to exclude the declarations made under VAT regime, the same would have found place in Section 10(1) of the Act itself. As the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only escape payment of GST for the year 2017-2018, though the self-declaration made is incorrect or false, but also end up paying minimum GST though their turn over is on a higher side. It is to be noted here that word preceding financial year is appearing at more than one place in Section 10 itself, hence, it cannot be said that there was any error in usage of the word preceding in Section 10. The legislature was conscious enough, when the word preceding was used before the word financial year in Section 10(1) and also in the second proviso to Section 10(1)(c), while extending benefits under a scheme. The legislature in its wisdom observed that such a benefit can be extended to those whose turn over in the previous financial year does not exceed ₹ 50 lakhs. Therefore, the word preceding appearing before the word financial year cannot be ignored and if done, one would doing mockery of the words financial year does not exceed ₹ 50 lakhs . Therefore, to fix a parameter for extending the benefits under the scheme and for payment of less tax in case of manufacturers and for those engaged in making supplies, the legislature thought it fit to take into account t ..... 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