September 1st 2017
To,
Shri Hasmukh Adhia, Revenue Secretary,
The Government of India,
Ministry of Finance,
(Department of Revenue, Central Board of
Excise & Customs)
New Delhi
Dear Sir,
GST Implementation –
Practical Difficulties – Need for appropriate Guidance
A. Registration:
1. Section 22 of CGST Act
states “(1)Every supplier shall be liable to be registered under this Act in
the State or Union territory, other than special category States, from where he
makes a taxable supply of goods or services or both, if his aggregate turnover
in a financial year exceeds……”
There is wide spread
confusion about the phrase “from where he makes a taxable supply of goods or
services”. Different interpretations are being given by Central authorities and
State authorities. It is requested that either the terminology may kindly be
defined in the Act itself or appropriate guidance may kindly be provided in
this regard so that the Taxable Persons can comply with the requirements
accordingly.
2. Many dealers, who were already registered under the earlier laws,
have not been able to migrate due to various difficulties: one of them is
difference in PAN in the records of authorities and real PAN. They should be
permitted to migrate the registration with effect from 1st July 2017
by bringing in suitable amendments in the portal. The time limit for making
application for migration by such persons may be provided to be 30 days from
the introduction of this functionality on the portal.
3. There are certain
sectors, which have come into the GST net for the first time (they were not
liable for VAT or Service Tax earlier). Many of them have already applied for
registration, but their applications are still pending for approval, all such
applications may kindly be cleared at the earliest. And those who have not yet
been able to apply due to any kind of confusion or due to non working or slow
working of website or for any other reason, may kindly be permitted to apply
for registration w.e.f. 1st July 2017. The time limit for making
application by such persons may be stipulated to be 30th September
2017.
4. It may be noted that unless registration is granted to such
persons, they may not be able to issue Tax Invoice. Thus, will not be able to
pay tax and submit returns etc.
5. Further, in many cases
where application has been made before 30th July for new
registration, certificates have been issued granting registration w.e.f. the
date of granting registration, instead of date of liability. The online filing utility
for GSTR-3B does not allow such dealers to submit return for the month of July.
It may be necessary to issue general instruction for all such cases that their
registration should be made effective from 1st July 2017 and that
the portal should accept invoices of the earlier date.
B. Submission of Returns and
Payment of Taxes:
Present provisions under
the GST laws provide filing monthly returns by all tax payers whether small or
big. (Except those who have opted for composition scheme). And such returns
have to be filed in three parts on three different dates. Several restrictions
have been prescribed whereby if a person wishes to submit required information
earlier than the due date, he cannot do so. This is creating greatest unrest
among the small and medium enterprises. It may be imperative for the Government
to mitigate the hardship likely to be caused to all such taxable persons.
It looks like that
suggestions made by various trade associations in this regard have been
ignored. If your good selves have a look at the provisions in GST laws
worldwide, you will appreciate that all such countries who have successfully
implemented GST have ensured much easier compliance by the tax payers. However,
our country has chosen such a rigid time frame and in such a manner, which is
practically impossible to comply with on regular basis. Kindly consider the
time and energy which will be required for such kind of compliance by SMEs
every month throughout the year.
It is requested
therefore, Chapter IX of the CGST Act regarding submission of returns etc. may
kindly be revisited. (Suggestion made by various associations may kindly be
considered and/or the provisions may kindly be made on the lines of similar
provisions under the laws of various other countries who have successfully
implemented VAT such as EU VAT, Australian VAT or Singapore VAT, etc.)
It is also observed that
many functionalities on the portal are still not operational. The trade and
industry will need at least 30 days to understand the nuances of the portal
since it is the first time of operation. Therefore, it is suggested that the
due dates of filing of various returns be decided at least 30 days after the
respective functionalities are opened on the portal.
Further, the
offline/online utility should be provided in such a manner that GSTR-3 is
simultaneously generated from information contained in GSTR-1 and GSTR-2.
Form GSTR-3B requires a
taxable person to report “supplies made to composition dealer”. As the
compliance of such a requirement looks almost impossible, the Form may kindly
be amended accordingly.
The due date for payment
of tax may remain same i.e. within 20 days from the end of month.
C. Reverse Charge Mechanism:
Another major area of
concern to all the tax payers (whether big or small) is provisions contained in
section 9(4) of the CGST Act (supplies received from un-registered persons),
coupled with section 31(3)(f) and the condition that the liability under
reverse charge has to be first paid in cash and the credit thereof (if
eligible) can be claimed thereafter.
Section 9 “(4) The
central tax in respect of the supply of taxable goods or services or both, by a
supplier who is not registered, to a registered person shall be paid by such
person on reverse charge basis as the recipient and all the provisions of this
Act shall apply to such recipient as if he is the person liable for paying the
tax in relation to the supply of such goods or services or both.”
Section 31(3) “(f)a
registered person who is liable to pay tax under sub-section(3) or sub-section
(4) of section 9 shall issue an invoice in respect of goods or services or both
received by him from the supplier who is not registered on the date of receipt
of goods or services or both;”
Respected Sirs, there is
an urgent need to kindly have a look into the provision once again. How much
revenue does the Government expect from such a provision? It will be the most
cumbersome job for the tax payers calculating liability on account of all such
supplies received from ‘un-registered persons’, issuing an invoice for all such
supplies, calculation of tax for each item at respective rate, payment thereof
and thereafter again claiming credit of the same amount as ITC. It may the most
time-consuming exercise for all taxable persons throughout the country,
resulting into almost no additional revenue to the Government and undue burden
of cash outflow on the Tax Payer. It may also result into a tool of harassment
at assessment and audit proceedings. It is requested that such provisions must
be avoided.
Till necessary amendment
is done in the Act, the applicability of section 9(4) may kindly be kept in
abeyance, or, permission may kindly be granted to discharge the liability
through the Electronic Credit Ledger to the extent credit is available in
respect of such supplies received from un-registered suppliers in the same tax
period.
D. Time of Supply:
Section 12(2) of CGST
Act may need appropriate amendment to provide ease of compliance.
E. Place of Supply:
Considering
the complexities involved in the provisions, it is requested that a Guidance
Note may kindly be issued for appropriate compliance by Taxable Persons. It may
be noted that there are different views expressed by the concerned authorities
and leading consultants in respect of various kinds of transactions of supply
of goods as well as in respect of supply of services.
F. Composition Schemes:
World over composition
schemes are being encouraged for easier compliance by all those who are
generally supplying goods/services to consumers, but, the Composition Schemes
as provided under our laws contain too many conditions and restrictions whereby
all those who really want to opt for composition cannot do so. It is suggested
that:
1. The turnover limit of
Composition scheme for manufacturers and retailers may kindly be raised to
Rupees 150 lakhs (from present limit of Rs. 75/50 lakhs).
2. The Composition Scheme
for hotels (restaurants, eating houses and caterers) should be permitted to all
such establishments without any limit of turnover. It will provide a great
relief to all those people who are dependent on such eating houses for their
daily meals. As the rate of composition under this scheme is kept at 5%, which
is much higher than other composition schemes, the suggestion may kindly be
considered in the interest of people in general.
G. HSN Codes and
Rates of Tax:
1. Although the Government
has not made it clear to the people that why it is necessary to mention HSN
code in respect of each and every supply of goods and why HSN code-wise summary
of intra state and interstate supplies is required to be reported in GSTR-1 and
GSTR-2, in this connection, kindly have a look at the rates of tax prescribed
through various rate schedules, items falling under same HSN code (2 digits and
4 digits) may be liable to tax under 2 or 3 different rate schedules. The
registered tax payers are maintaining rate wise bifurcation of each outward
supply as well as inward supply. Further bifurcation thereof into HSN codes and
service accounting codes may result into a much complicated accounting and the
same may lead to various kinds of errors in reporting. It is requested that HSN
code-wise reporting may kindly be kept in abeyance for the time being (at least
during first two years of implementation).
2. The Rate Schedules may have to be thoroughly reviewed. In the
present set up it is likely to raise a large number of classification disputes,
which must be avoided for having it to be a just and fair law.
H. FAQs and Replies through
Twitter:
It should be made clear
to all those concerned that whether replies given through Twitter can be
considered as official reply of the Department and if someone has followed the
same whether he will be protected from levy of additional tax, fine and
penalties.
Thanking you
Yours sincerely,
For
Bombay Chartered Accountants’ Society,
Narayan
Pasari Deepak
R. Shah
President Chairman
– Indirect Tax Committee
