By GOVIND G. GOYAL Chartered Accountant
SUSHIL SOLANKI, IRS and DRASHTI SEJPAL Chartered Accountants
GST runs on technology platform.
Often technology and legal provisions are out of sync. Technology (GSTN)
prohibits actions that are specifically permitted by law. Often technology
seems to impede the letter and spirit of law and the tax payer is stranded.
Problems are many: Inability to claim credits if Place of Supply is different
than registered address, inability to upload an invoice where the customer is
wrongly tagged as SEZ Unit/Developer, issues of an erratic portal, mismatches
in Shipping Bill Numbers resulting in blockage of refunds to exporters, Forced
Utilization and Cross Utilization of Credit Balances before cash payment
settlement, Requirement to identify supplies to composition persons separately
in GSTR-3B…This third VIEW and COUNTERVIEW aims to inform the reader of multi
dimensional totality of an issue, and enable him to see a matter from a broad
horizon.
VIEW: Technology is
playing an Important Role in GST Implementation
Govind G. Goyal
Chartered Accountant
In today’s
world, technology is playing plausible role in every sphere of our life. With
speedy internet access, technology has made it possible to accomplish many
things almost instantly. Technological developments in last few years have
changed the way we live our lives. Today, whether it is sharing of news, views,
pictures, messages, knowledge based discussion, buying, selling, travel,
entertainment, research, development, banking, investment, management, and administration
– most of our acts and deeds are guided or assisted by technology.
People, world
over, are using technology and so do the Governments. As far as GST is
concerned, such a mega reform in the field of indirect taxation would not have
been possible to implement without the use of well researched network of
Information Technology (IT).
Introduction
of GST, in India, is certainly a paradigm shift in the field of indirect taxes
which will necessarily change the manner in which the taxes were being administered.
Earlier the Centre as well as the States and Union Territories were having
their own laws and procedures for taxing goods and services whereby there were
multiple taxes, multiple compliances and so the multiple administrations
thereof. But, in GST, all those States, Union Territories as well as the Centre
have come together. Most of the taxes, which were levied separately, were
consolidated under the vision of ‘One Nation One Tax’. Although, legally
speaking there may be separate legislation for Centre and States, the
technological network has made it possible like ‘one registration’, ‘one
challan’, ‘one return’, etc.
India’s dual
GST system also ensures each stake holder (i.e. Centre, States and UTs)
receives their share of revenue in time. At the same time GST, being
destination based tax, it ensures that the tax amount travels simultaneously
with the movement of goods and/or services, as the case may be. The registered
tax payer (recipient of goods/services) has to be ensured every eligible input
tax credit of Central GST (CGST), State GST (SGST) or Integrated GST (IGST).
And there is Cess also on some of the commodities, which has to be accounted
separately. Migration of tax payers (under the earlier laws) to GST was a
tedious job. Nevertheless, all those tax payers (more than 64 lakh in number)
spread over various States and UTs could smoothly migrate to the new system,
thanks to the robust Information technology backbone. In addition, more than 44
lakh new tax payers (spread all over India) have opted for new registration
(July 17 to April 18). Each of these tax payers has been assigned one unique
GSTIN, which is valid for all the taxes i.e. CGST, SGST/UGST and IGST. There is
no separate number needed for Centre and State GST. Presently more than 10
million tax payers are liable to submit data of outward supplies, inward
supplies, tax payable and ITC, etc., through various returns and
formats. There are a large number of commodities and services, out of which
some are nil rated, while others are liable to tax at several different rates.
Some of the transactions are zero rated, while a few are liable for a
concessional rate of taxation. There are about 20 lakh taxpayers, who have
opted for ‘composition schemes’. Such tax payers are discharging their tax
liability differently than other registered tax payers. While dealing with
about 250 to 300 crore B2B invoices per month, one has to keep track of all
such kind of transactions so as to see that correct amount of tax is being paid
by the tax payer/s and instant credit thereof is granted as soon as the payment
is cleared through respective bank.
The law
provides that GSTN (GST Network, which is presently managing IT network)
maintains three types of ledgers (or registers), for each tax payer, (1)
Liability Register – wherein tax payable on supplies made by the tax payer is
recorded (as per periodic data related to supplies uploaded by the tax payer)
(2) Credit Ledger – In which credit of ITC and utilisation thereof is recorded
and (3) Cash Register – wherein all payments made by the tax payer (through
bank challan) and utilisation thereof is recorded. All these ledgers/registers
are instantly updated and available for viewing by the tax payer. To avoid most
of the common mistakes, in preparation of challan for payment of taxes, a
system has been developed whereby a payment challan has to be created through
IT network of GST portal. The system has provided great relief to the tax
payers, bankers as well as the Government Departments.
GST IT Strategy:
The GSTN has
been assigned the role of facing taxpayers and these among other things include
filing of registration application, filing of return, creation of challan for
tax payment, settlement of IGST payment (like a clearing house), generation of
business intelligence and analytics. All statutory functions to be performed by
tax officials under GST like approval of registration, assessment, audit,
appeal, enforcement etc. remains with the respective tax departments.
Thus, GSTN has
the main responsibility of providing a robust IT infrastructure and related
services to the Central and State Governments, taxpayers and other
stakeholders, by integrating the common GST portal and connecting it to the
existing tax administration IT systems. The common GST Portal developed by GSTN
is functioning as the front-end of the overall GST IT eco-system. The back end
operations are being looked after by the IT systems of CBEC (Central Board of
Excise and Customs) and State Tax Departments.
Under GST, the
registration of taxpayers is common under Central and State GST and hence, one
place of filing application for the same i.e. the Common GST portal. The
application so received is being checked for its completeness by the GST
portal, which will also carry out validation of data like PAN from CBDT,
CIN/DIN from MCA and Aadhaar of promoters, if provided, from UIDAI. After
completion of validation, the registration application thereafter is shared
with respective central and state tax authorities. Query of tax authorities, if
any, and their final decision is communicated to GST portal which in turn
communicates the same to the taxpayer.
The Common GST
Portal, as explained in brief above, is the single interface for all taxpayers
from any part of the country. Only in case where a taxpayer is picked up for
scrutiny or audit, and such cases are expected to be small in number, he will
interface with the respective tax authority issuing the notice under the Act.
For all other cases, which is expected to be around 95%, the Common GST Portal
will be the only taxpayer interface.
As far as
filing of returns is concerned, under GST there is one common return for CGST,
SGST and IGST, eliminating the need to file separate tax returns with Central
and state GST authorities. Checking of claim of Input Tax Credit (ITC) is one
of the fundamental pillars of GST, for which data of Business to Business (B2B)
invoices have to be uploaded and matched. The Common GST Portal created and
managed by GSTN will do this matching on the basis of invoice level data filed
as part of return by all taxpayers. Similar exercise will be done for
inter-state supplies where goods or services will move from the state of origin
to the state of consumption and so will the taxes. The claim of IGST and its
utilisation will be settled based on returns filed at the Common GST portal.
Although,
there may have been initial hiccups due to various reasons, but learning from
past, adopting appropriate strategies, and constant improvement thereof is the
key to success. The fact remains that the IT network of GSTN, CBEC and that of
respective State Governments, together, are rendering plausible services to all
stake holders in the implementation of GST in our country.
(Thanks to Shri Gajanan Khanande,
Deputy Commissioner of Goods and Services Tax, Maharashtra, for necessary
inputs.)
counterview:
Technology cannot override the provisions of Law
Sushil Solanki, IRS and
Drashti Sejpal
Chartered Accountants
One of the
important features of GST structure, adopted by the policy makers, is the IT
network which is the backbone for almost all the processes like registration,
return filing, tax payment, etc. On the face of it, it promises minimal
human intervention, giving the hope of a robust transparent system which should
have been welcomed by all the stakeholders.
After passing
of more than 10 months, the said hope has belied the expectations and there
have been a lot of hue and cry across the country about helplessness of the
taxpayers in handling the situation arising out of glitches or non-functioning
of the IT network.
Under the
authority of section 146 of the CGST Act, the Central Government has notified
vide Notification no. 4/2017- Central Tax, www.gst.gov.in, as the website
managed by Goods and Service Tax Network (GSTN).
While
operating the GSTN, the taxpayers have faced many situations whereunder, they
could not upload the information in the returns or even file the returns or
applications. Some of the illustrations are the following:
1) In many
cases TRAN-1 return was not uploaded even after it was ‘submitted’. It has
resulted in either not carrying forward the ITC balance available with the
taxpayer to the GST regime or mismatch between GSTR-3B and electronic credit
ledger. It also led to inability to file returns for subsequent months.
Exporters could not get refunds because of non-filing of returns.
2) In the case
of sale of imported bonded goods, the CBIC has clarified vide Circular No.
46/2017- Customs treating the said transaction liable to payment of IGST
irrespective of location of buyer (place of supply). Whenever sale was made to
customer within the same State, the said transactions were not accepted by GSTN
for payment of IGST as the system was classifying those transactions as
intra-state transaction liable to payment of CGST & SGST. The system was
behaving against the provisions of law. In future, GST Officer may allege
payment of wrong taxes and even wrong availment of credit by the buyers.
3) On
introduction of GST, all the existing taxpayers were migrated to GST. A large
number of them had stopped the business or decided to close the business, but
the GST portal did not have facility for cancellation of registration till
November 2017. This has led to imposition of penalties for non-filing of
returns. In one of the States, the GST officers have issued
the best judgement
assessment orders u/s. 62
treating the cases of non-filers and huge demands have been raised against them
because the system was not accepting their cancellation application and there
is no provision in the law to file manual applications.
4) Section 170
of the CGST Act requires rounding off the tax payable amount. On the other
hand, online GSTR-1 facility which calculates the tax payable amount
automatically does not round off the tax payment. It led to mismatch between
GSTR-3B and GSTR-1 return resulting in non-payment of refund to exporters.
There are many
such instances where GSTN portal was not supporting what the GST law has
provided for. The question, therefore, is whether GSTN portal can override the
provisions of law, thus taxpayers be made liable to suffer financial hardship
and penal consequences. The answer is definitely a big NO. Let us analyse this
with legal reasoning.
Section 146
and the Notification issued there under provides that, an electronic portal
would be notified by the Government for “facilitating” the processes like
registration, payment of tax, return filing and for carrying out functions and
purposes under the GST law. The existence of GSTN is only for facilitating the
functions and purposes of the GST law. Therefore, GSTN or the technology, which
is subservient to the law, can never override the provisions of law.
Even though,
to our knowledge, there is no judicial precedent available on the issue as to
whether technology would prevail over law or vice versa, but the courts
have consistently held that in the absence of any machinery provision to
implement a provision of law, the substantive law itself fails because of being
incapable of implementation.
The Supreme
Court has in the case of B. C. Srinavasa Shetty [1981 AIR 972], while
examining whether there arises capital gains liability on goodwill of a new
business, held that there cannot be a levy of tax without existence of a
machinery computation provision. A similar view has also been taken by the High
Court of Orissa in the case of Larsen and Toubro Limited [2008 12 VST 31
(Orissa)], which was later affirmed by the Supreme Court, wherein while
examining whether without a specific provision allowing reduction of the value
of land from the value of service, levy of tax on sale of under construction
flats by a builder is valid, the Court has held that charging provisions as
well as the machinery for its computation has to be provided in the Statute or
the rules framed under the Statute. The Act is unworkable in the absence of
necessary rules.
The Supreme
Court in the case of Govind Saran Ganga Saran (1985) 155 ITR 144, while
examining the validity of CST levy on cotton yarn where the law omitted to
prescribe the single point at which the levy could be imposed, observed that:
“The
components which enter into the concept of a tax are well known. The first
is the character of the imposition known by its nature which prescribes the
taxable event attracting the levy, the second is a clear indication of
the person on whom the levy is imposed and who is obliged to pay the tax, the third
is the rate at which the tax is imposed, and the fourth is the measure
or value to which the rate will be applied for computing the tax liability. If
those components are not clearly and definitely ascertainable, it is difficult
to say that the levy exists in point of law. Any uncertainty or vagueness in
the legislative scheme defining any of those components of the levy will be
fatal to its validity.”(emphasis supplied)
If we adopt
the reasoning given by the courts, it is crystal clear that if the law provides
for certain responsibility to be fulfilled by a taxpayer through a mechanism to
be put in place by Government or any other authority, the failure to provide
such mechanism will absolve the taxpayer from his responsibility and the
consequence thereof. The reason for such views taken by the courts is that in
the absence of any mechanism or facility which was to be provided by law, the
taxpayer cannot be made to suffer. In the case of GST, the non-availability of
certain facilities in the GST portal or inability of GSTN to permit entering of
certain details or filing of return cannot make the taxpayer to suffer its
consequences. The judicial pronouncements discussed above would definitely
support this view.
Because of
various glitches in the GSTN portal, a number of taxpayers have approached High
Courts. The courts, including Allahabad High Court (Continental Pvt. Ltd. and
others) and Bombay High Court (Abicore and Binjel Techno Weld Pvt. Ltd. and
others), have provided relief by allowing them to file manual TRAN-1 return or
to extend the deadline for filing of return/s.
The fact that
technology cannot override the provisions of law has also been admitted by the
Government vide CBIC (Central Board of Indirect Taxes and Customs) Circular
No. 39/13/2018-GST, wherein an IT-Grievance Redressal Mechanism has been
put in place to redress the grievances raised by taxpayers with regards to the
failure to filing a return or form within the time limit prescribed in the law
due to IT related glitches. Para 5.2 of the said Circular clearly states that
the application for redressal has to be made for those glitches due to which
the due process as envisaged in the law could not be completed on the Common
Portal. The circular has also empowered the said committee to provide relief
for past cases.
It is,
therefore, quite clear that GSTN is merely an infrastructural tool which would
assist and facilitate the compliances to be done by a taxpayer and it cannot
override the provisions of the law.
I do realise
that there are possibilities of IT related glitches when a tax reform of this
magnitude for a vast country like India is introduced. It has happened in the
past while implementation of VAT in many States who also adopted technology
based systems.
But, what is
disheartening is that Government has taken considerable period of time to come
out with redressal mechanism. Moreover, the mechanism is very restrictive and
many of genuine grievances presented before the committee may be rejected on
the grounds that a problem relates to individual taxpayer and not large section
of taxpayer or it does not pertain to non-filing of return.
The Government
should have allowed all types of cases to be presented before the said
committee with an assurance that a time-bound solution would be provided. Alternatively,
taxpayer may be allowed to file manual returns or documents in order to help
him in claiming refund or allowing the credit to the buyer.
In fact,
making an omnibus provision in the GST law that no penal action including
interest liability would arise against any taxpayer or his customer due to
non-filing or wrong filing of returns etc. on account of IT glitches,
Government should keep in mind that handholding of taxpayers at the initial
stage of GST reform is one of their prime responsibilities.
