IS IT FAIR TO PUNISH TAXPAYERS FOR A FAULTY GSTN?

BACKGROUND

When the GST (Goods and Services
Tax) law was introduced in India in 2017, sufficient time was not given to
taxpayers, professionals, technical teams and the country as a whole to
understand it. Adapting to something new takes its own time to understand and
implement at the ground level; GST has been no exception to this thumb rule.
Every new reform will require an initial learning experience and will also face
some resistance; clearly, the government could have managed its implementation
better had it given sufficient time to build the GSTN portal.

Earlier, taxpayers were so
disappointed with VAT compliances and multiple State taxes that they adopted a
welcoming approach to GST and were willing to embrace it wholeheartedly. The
government had spoken so much about it and boosted it so much that there was a
hope in the taxpayers that the new law would be easy to understand and
implement and that the return-filing process would be smooth. However, the
frequent changes in the GST law has led to delays in technical implementation
at the GSTN portal which has made it cumbersome to comply with and resulted in
the wasting of thousands of person-hours of both taxpayers and professionals.

In this article, we have
highlighted some of the technical problems faced by taxpayers in compliance due
to bugs and errors in the GSTN portal; although it has been about 31 months
since its introduction, the GSTN portal has not been functioning very well.

ISSUES
AT HAND

Taxpayers cannot be expected to
have enough technical knowledge of the GSTN portal and the concept behind it.
Still, since it has now become a law, or kanoon, both taxpayers and professionals
are making valiant attempts to carry on business and adhere to the compliances
in accordance with the law.

Registering on the GSTN portal is
a lengthy and time-consuming process. It is a very stringent procedure and
requires too many details and specific formats for uploading documents; so is
the case with various other forms and returns. The businessman is being forced
to spend more hours fulfilling compliances, accumulating various data points,
most of which could have been avoided, rather than focusing on his business and
growth prospects. This is followed by a continuous process of filing
back-to-back returns either monthly or quarterly, as applicable, instead of a
single return having all the details. Moreover, there are no revision / amendment
facilities for the returns filed.

Limitless updates and
notifications have now become the norm 
and there is no clarity; instead, things are becoming more complicated
and cumbersome, thanks to the Advance Ruling Authority. The constant updates,
notifications, etc. have become a nightmare and any single unintentional missed
update of notification results in penalty and interest. Frequent changes and
revisions in the GST rates have led to uncertainty for both businessmen and
government. Further, the new Input Tax Credit (ITC) rule limiting ITC from 20%
to 10%, and managing all the calculations has become difficult for SMEs and
also for large corporates. Besides, there is a severe lack of natural
justice as the burden to prove the purchase details is placed on the
purchasers instead of punishing the defaulting sellers. The increase of
government tax revenue by curbing the working capital has thereby created
unfair business practices and pressure of paying tax on honest taxpayers; and this
might have even led to an increase in the black economy because many small
businesses have started to do business in cash, not to avoid GST but to avoid
compliance because of the torturous procedures of GST.

The GSTN portal is faulty and
weak and no repair has been done thanks to which both taxpayers and
professionals are facing problems. There is a lack of clarity and knowledge
with the technical support team. The helpline numbers have turned out to be
helpless. There is so much pressure on the GSTN portal that it is always down
or under maintenance. In spite of the faulty system, it is the taxpayer who has
to bear the burden of paying late fees even if payment is done within
the due date but there were system issues while filing the returns. The faulty
and delayed release of forms and utilities without proper testing has added
further to the existing problems. There are many bugs and tech issues in
various forms and returns, creating hurdles in filing the returns within the
due date. Extensions given by the government can be a temporary solution;
however, it will not help unless the system is upgraded to optimum capacity to
handle taxpayers’ logins. Despite all these facts, government continues to
levy penalty and interest for late filing of returns, in spite of knowing
that very often the GSTN portal is out of service.

Separate due dates for filing of
returns and payment of tax should be taken into consideration. Further, extreme
importance is given to set-off of tax instead of considering the date of
deposit of tax as the date of payment. Very few resources are available to deal
with the plethora of problems. Solutions to problems are offered quite late and
are not effective enough to deal with those problems. Moreover, the opinions
of ground-level experts are neglected and more trust is placed on the
bureaucracy.

THE QUESTION IS – IS IT FAIR?

Is it fair for the taxpayers to
shift their focus from business to adhering to innumerable compliances? The new
ITC rule which has added to the unfairness and its working has worsened things
even further. Is it right for purchasers to be burdened and punished for
defaulting sellers? Let’s understand this with an illustration.

Mr. A has a business selling
goods and pays GST on the same. He purchases goods from Mr. B and these goods
are eligible for claiming of ITC. But Mr. B defaults in making GST payments to
the government and filing his returns, which results in non-reflection of the
transaction on Mr. A’s  GSTR2A. Mr. A has
honestly paid his share of tax to the government but is unable to claim his
rightful share due to the default by Mr. B. Is this fair to Mr. A?

Similarly, with the new ITC rule
it has become practically impossible to do the workings and track the entries
of those that are reflecting in GSTR2A on a month-on-month basis. If a dealer
is filing monthly returns of GSTR3B and quarterly returns of GTSR1, the entire
working capital is curbed and the taxpayer is at times paying taxes from his
savings instead of his business because entries are not reflecting in GSTR2A.

Is it fair for professionals to
have so many continuous updates and notifications with so much ambiguity?

PROBLEMS (AND SOLUTIONS) WITH THE GSTN
PORTAL

(i) Rectification and revision of all GST returns to be made available,
say once a quarter;

(ii) Increasing the capacity of the portal from the existing 1.5 lakh
to 50 lakhs (in line with the Income Tax Portal) to handle the login for one
crore taxpayers;

(iii) Ensure effective functioning of the helpdesk and helpline numbers
and also provide training to the assigned staff, thus providing immediate and
effective solutions to grievances;

(iv) Immediate solutions of glitches and drawbacks on the GSTN portal
within ten days;

(v) Waiver of late fees, especially when the fees are levied due to
the faults and failures of the GSTN system;

(vi) Refund of late fees paid earlier by those whose deadlines and due
dates were later extended;

(vii) Simple procedures and format of filing GST returns; 50% of data
sought in various tables of annual returns forms are unnecessary and can be
avoided for smoother filing;

(viii) Separate due dates for payment of tax and filing of returns so that
downloading system reports like GSTR2A and reconciliation become easier;

(ix) Scrap the GSTR3B form and take the summary of sales and purchase
from both purchasers’ and sellers’ quarterly returns instead of bill-wise
summary;

(x) Provide a solution to the illogical sections of 16(4) and 36(4)
of the IGST;

(xi) Date of tax deposit to be considered as the payment date;

(xii) System testing and checking prior to the release of any new form
or process;

(xiii) Waive late fees until the GST portal turns smooth and efficient;

(xiv) Single return to be introduced consisting of all the details of receipts
and supply;

(xv) Amendments and notifications without ambiguity;

(xvi) ITC rules to be amended in an effective manner, thus making it fair
to practice business for taxpayers and shifting the burden on to defaulting
sellers;

(xvii) Furnish and publish telephone and email ids that are working and
reachable of officers concerned on the website;

(xviii) Self-adjustments of balances in cash ledger and electronic credit
ledger across multiple GSTNs of a single legal entity;

(xix) GSTR3B filing for earlier period without late fees;

(xx) E-Act – there are so many changes, there should be a mandatory
updated legal position, Act, Rules, Notifications all incorporated at one
place. We do have such daily updated laws under the Companies Act, 2013;

(xxi) Bringing out amendments only once a month (with reasonable
exceptions) like a master circular rather than uncontrolled rolling out of
changes.

CONCLUSION

Even today, GSTN portal is not
glitch-free; it would still be a bumpy ride for taxpayers and professionals who
are dealing with it; Infosys Chairman Nandan Nilekani has promised to solve all
technical issues by July, 2020. However, by that time the new forms are
expected to be live (by October, 2020) with new challenges.

The demand
from taxpayers and professionals is very simple and can be met if there is
willingness on the part of the government to act fast rather than acting only
when the problems are highlighted by professionals and taxpayers.

The
government would do well to work upon making the frameworks and the GSTN portal
more user-friendly; the present situation and scope of GST leads to varied
interpretations, thereby resulting in possible litigations in the GST regime in
the near future. With the new forms deadline deferred by the government, we
hope the forms are made live with proper testing and feedback from all
stakeholders.

IS IT FAIR?