GST @ 2 - Taking Stock! Reflections from Legal Stalwarts & Tax Experts!

"The experiment of a one combined GST Council is proving good and common good of Trade has chosen to isolate ideological differences.

This Pooled Sovereignty should now extend to other areas mainly water and environment.

The non optional technology network has exposed bill traders and bogus operators in a short time.

The creation of AARs and its Appellate Body in each State should be avoided. Instead it should be made regional, since the law is now unified. The State Centric Creation has already started to produce adverse consequences.

Officers assuming police powers across issues and the compulsion to remit taxes before adjudication is concerning."

“Two years of GST has been fascinating both in its evolution and implementation. The GST Council’s proactiveness has been commendable in these two years in addressing the concerns of the industry. A large segment of business has taken to GST well and are actively complying with the law and taking its benefits. In complex businesses involving tri-partite transactions, funding, etc, there are issues that were expected. The areas of concern continue to remain anti-profiteering and advance ruling authority. But at the end of two years, I am happy with GST and more importantly happy with the compliance mindset that businesses are taking towards taxes.”

"Two years of GST have meant a paradigm shift in the field of Indirect Taxation.There has been some criticism in relation to frequent amendments, compliance challenges and multiplicity of rates. Despite all the criticism, the fact that we are in a GST regime and the level of responsiveness exhibited by the authorities, is a quantum leap for the nation. There is much more to be done in the phase of GST 2.0. We should however not let that cloud the fact that after several years and several challenges we are today a GST Nation."

Second year of GST has been much more stable with revenues consistently breaching 1 lac crore mark per month, technology infrastructure working relatively better and industry beginning to explore the benefits GST has to offer. With the new government in place now, industry would now expect further simplification in laws, strengthening of dispute resolution mechanism, some guidance on anti-profiteering regulations and rate rationalization by possibly collapsing 12 & 18% categories into one. Focus on tax administration and detailed guidance for audits and scrutiny on the ground is also needed.

GST @2 is now able to stand on it's own and walk without much support but needs more strengthening of legs before it starts running fast.

"One cannot but think of the snake and ladder game when it comes to India's GST reform. Uniformity in tax rates, Cooperative federalism, lower rates are the ladder points while retrospective amendments through Rules, Plethora of notifications, AAR rulings and their aftermath and the goods vs services debate are the snake points."

"When we take stock of the situation on the second Anniversary of GST in India, we notice a number of aberrations that the law has witnessed, which clearly is a deviation from the avowed objective behind its implementation. In short, the basic GST philosophy has been tampered with in many areas. The one issue that sticks out as a sore thumb is that pertaining to repeated credit reductions, in the garb of offering reduced tax rate. While the very edifice of GST was based on free flow of credit, eligibility to claim credit for "use in the course of business or furtherance of business", but it seems surreptitiously, the policy makers have resorted to cut credits in the garb of reduced tax rates. Restaurant services & Real estate are two such examples. Although the industry continues to believe that optically, concessional tax rate on the invoice serves the cause of the consumers, but what everyone seems to forget is "higher tax rate with full credit" is always better than "lower tax rate without credit" in most cases.  Notwithstanding the math, at a larger level, we must introspect as to if multiple rates is what we had to live with, then why did we even introduce GST to begin with? The earlier law perpetuated tax cascading and the new law in some of the sectors continue to be draped in the same malady!

The second aspect that stands out as an area of concern is the wide untrammelled powers exercised by the delegate ( ie the Central /Stage Government) in tax administration and policy making.  While tax policy has always been the exclusive jurisdiction of the legislative wing under our Constitution and an essential legislative function, however, this very important aspect is being usurped by the Executive given the myriad policy changes that we have seen in the past two years. Admittedly all such decisions have the recommendation of the GST council (a constitutional body), nonetheless some ticklish questions under Constitutional law and Administrative Law does arise. Firstly, did the Constitution envisage the GST Council to be the sole authority to deal with GST policy making in a manner that the Legislature was to abdicate their powers in favour of the Executive? Article 246 A is certainly not subject to or subservient to Article 279 A.

Secondly, have the larger legislative wisdom become toothless, merely because Legislature and the Parliament have nominees sitting in the GST Council?

Thirdly in the garb of filling in the details (a corner stone of delegated legislation), are the Executive committing overreach in as much as the very basic architecture of GST in the statute book (on aspects such as credits, restrictions et al) is being diluted, tampered with and changed through the route of delegated legislation including the Henry Clause, almost every other day in a routine basis with no directional road map."

"GST completed two years in India. They are many firsts to its credit. We are the only country trying to introduce a comprehensive return filing system in the world, wherein the invoice level data would be matched in order to allow input tax credit. Fine tuning of the tax rates is work in progress even as on date. Still there are commodities, which are outside the GST. This will definitely would be the trigger for possible extension of the Anti-profiteering authorities continued existence in future also. Technical glitches have become the order of the day and industry is no more interested in making it an issue as they would wait for the notifications from the authorities intimating the extension of the due dates for filing of returns. The intimations from GST authorities in the form of mails whenever we use the portal do not bear any indication to which GST ID they are referring to, creating confusion for the assesse dealing with multiple registrations pan India. Many promises like single authority for refund or audit are yet to be implemented. Now the authorities are planning to introduce messages directly to the top management including the board of directors whenever there is a mis-match in the return filing resulting in denial of ITC. Is this really necessary that the top management needs to be bothered about such trivial issues, which are also due to technical glitches in the portal? The compliances teams will be taken to task by the sensitive top management functionaries. The authorities are stating that such messages are yielding results, but are not realizing that it would be at the cost of the compliance teams in such organizations. The SEZ and Customs laws are still not in sync with the GST laws resulting in problems at the field level. The differential import duties for violation of end use based notifications under customs result in payment on the basis of challan, but challan is still not recognized as document for availing ITC under GST. Constitution of appellate authorities should not be taking so much of time like in the case of appeals against AAAR decisions and normal appeals post Appellate Commissioner as the CESTATs are not entertaining such appeals due to lack of jurisdiction. Resorting to writ appeals in all such cases is resulting in mounting of cases in High Courts and Supreme Court. Certain key decisions like introduction of electronic invoicing etc., are taken only in consultation with select experts and the deliberations are not made available to the larger public including industry to offer their comments resulting in practical issues while in implementation. It is suggested that more transparency is maintained while dealing with such important matters and larger industry representations are also considered before formulating the policies by giving adequate time. Fine tuning of tax rates for key industries like automobile, insurance and clarity of discount policies in case of pharma, FMCG and policy stability in case of electronic commerce and aggregators community should be the top priority for GST in its third year of existence. These are issues which need attention in order to consolidate on the good work done on many fronts by all the stake holders and are suggested in the interests of the industry. Industry is aware of the fact that patience pays, but life support should be there before patient dies. Trust we see some positive outcome on these matters in the near future."

“Tax reform in the form of GST is here to stay having seen a buoyancy in and stability of revenue flows. The stage is set for the next set of changes of which the inclusion of hitherto excluded sectors of economy would require a paradigm shift in the perception of the Governments towards tax mobilization. 

While the Government would be encouraged to undertake further rate rationalization and other incremental adjustments, the real unfinished agenda is in three areas; first of which is to stabilize the filing processes that has seen umpteen delays due to lack of adequate communication between the policy makers, administrators and GSTN network. The second is to tackle the menace of tax leakages which in spite of revenue gains has not been adequately resolved. Steps towards e-invoicing being taken to address this problem should be implemented in a manner that combines feasibility with tax payer convenience and reduction in duplication of processes, such as e-way bills. The third and most important test of GST is the coordination among tax authorities administering this concurrently levied tax. This is the most ignored step in the process of implementation and the audits and assessments that are set to follow shortly will reveal the real pains of GST. Far reaching changes in business processes at the both Central and State are necessary for gaining acceptability from the tax payers in this important journey of reform.”

“GST was hailed as good and simple tax. It may not be simple but it is the coming years that its “goodness” will come through. The efforts of GST Council and the tax authorities have been timely in relation to industry concerns.  However, in certain industries such as real estate, food, etc, the response to curbing anti-profiteering by changing tax mechanism may have unintended consequences in the future.  Having said that the development of GST has been excellent and hopefully it will bring the benefits it promised in the future.”

"We believed that all the states will never come together  to introduce GST, given the multiparty governments in each states with conflicting interests. We were proved wrong.
Once the states come to a consensus to introduce GST, we  said that introduction of  GST would be an utter chaos. We were again proved wrong, given the enormity of the reforms and hiccups which were within tolerable limits!
We believed that Indian tax administration is illiterate in  technology and digitization of compliance is going to be a disaster, we were proved wrong once again!!
Having introduce GST we said, that the governments that have  introduced GST, never came back to power anywhere in the world. But here also we have re-written the history!!!.

After two years, when we look back we have reasons to rejoice. Introduction of GST is indeed a success story and exceeded our expectations. Salute to the tax administrators, taxpayers and the political leaders ship."

"Two years of GST were action packed on various fronts. On the compliance side, there were various pragmatic changes and extensions to support the industry. However, it is now expected that there will not be many frequent changes as these changes also require tweaking the systems.

On the litigation side, we have seen various amendments carried out after the writ petitions have been filed and there have been various interesting decisions of different courts surrounding the constitutional validity wherein the vires of the provision was challenged. What needs to be watched closely now are the anti-profiteering provisions after they get an extension of two more years, various significant petitions pending before the court such as taxability of intermediaries services, issues related to real estate, various matters concerning the exporters and the promised incentives of the erstwhile regime.

In terms of the expectations, the inclusion of the petroleum products within the GST should not be delayed. The quality and timelines of the orders passed by the advance ruling authorities should be monitored. The new foreign trade policy needs to capture the important aspects related to the incentives for the Indian exporters."

“The last two years of GST have been an incredible journey. Its been a roller coaster ride for the industry, GST being a new law and they getting used to digital compliances.  However, overall its been a boon for the industry, with GST being a single “one nation one tax law”; the Government pro-actively providing clarifications and addressing concerns of the industry; rate reductions for a plethora of products; largely seamless credit for purchase of goods and services (irrespective of whether the taxpayer is a trader or service provider); statutory forms ie Form C, Form F etc being done away with. The industry would now forward to expansion of GST to cover excluded oil & gas products, electricity, real estate so that it’s a seamless integration of credits in these sectors as well. The industry would also look forward to trial version of the new GST Return format and more clarity and modalities of the e-invoicing initiative of the Government”

"July 2017 marked a historic event for the country where over 40 Central, State and Municipal taxes were subsumed into one levy called GST. Introduction of GST has changed the very dynamics of doing business in India. No doubt, Indian industry needs further simplicity in compliance as well as clarity with respect to some transactions, however, if one views the broader picture, GST has achieved the dual objectives of simplicity and certainty in the tax regime in India. The success of GST in our country can also be measured by the fact that the same government has retained power contrary to experience worldwide. Industry now looks forward to GST 2.0 where a further rationalisation of rate structures, a detailed understanding of GST audit and investigations and ease of procedural compliances are expected."

“As we step into the third year of GST in India, it is time to reflect back and see what we have achieved in the past two years. It was not easy to implement a single taxation system in a country like ours and the credit must be given where it is due. Decisions have been largely unanimous in GST council meetings, which in itself has been a great achievement thus far. However, for the industry, the journey has been mostly rough. While large corporations struggled with managing compliances within timelines, primarily due to the quality and quantity of data required for compliances, the small and medium enterprises found it difficult to cope with the complex regulations riddled with frequent changes.

The Advance Ruling mechanism has not been as successful as expected. We have received contradictory Rulings from different States which has only contributed to the confusion amongst businesses. The Rulings and even department Circulars have been far from practical realities. A case in point is the cross charge of GST on employee costs and the recent circular of post-sale discounts being treated as supply of services in particular cases.  Frequent Notices from department on ITC mis-matches, complexity and ambiguity on GST Audit Reports are also a pain point and have led to a significant increase in compliance costs for the industry.

Going forward, there is sincere hope that the government works towards bringing more certainty in law, reduce the compliance burden and make the GSTN more user friendly so as to enable the businesses to focus on their core competency and not spend valuable resources on dealing with the convolutions of GST.”

"Let me first add my compliments to all stakeholders on completion of two years of implementation of Goods and Services Tax (GST), a massive, massive, indirect tax reform for the country. Businesses and the tax payers are getting used to the new tax system and so are tax administrators. I believe, we, as a country, have been fairly successful in implementation of GST, especially, the unique dual model and entire electronic administration, a most contemporary feature, with an on-going, GST Council led collaborative process of addressing challenges. It is time now to move away from patch work to a comprehensive review of the entire system to resolve issues faced by businesses and tax payers especially, loss of input tax credits, cascading of taxes and cost of compliance without losing sight of revenue considerations. We do hope that will mark the beginning of a new year for GST!"

“The last two years of GST has not been easy for the industry. While GST has clearly brought in a lot of advantages, some of the key ones being consolidation of multiple laws, multiple rates, fungibility of credits etc., what it has failed to achieve until now is simplicity. The “One Nation GST” loses its relevance at the ground level. Corporates, have to cater to the need for taking multi-State registration, do multi-State return filings, get multi-State Audits done, get notices from multiple States, have to adhere to the rulings of different State AAR’s and will have to submit themselves to multi-State audits & assessments in a situation where there is no clarity on the jurisdiction of a State.

The interpretation issues still continue to haunt the industry e.g. cross-charge – whether employee cost to be included or not, Place of supply (which to service providers is still a big dilemma) - despite the fact that a tax payer might have paid full GST, he may still be pulled up for wrong Place of Supply (both at the output side as well as the input side) leading to substantial multi-State litigation in the future. The industry is flooded with multiplicity of tax positions and are concerned on the future approach of the tax authorities at the ground level when these positions get tested . The clarifications are either not being issued, or even if issued are quite late in the day. For e.g. the recent clarification on penal interest  - positive for the GST regime, however, stops short of clarifying that the same should also be applicable to the service tax regime. Another example is discounts & schemes – issued quite late in the day as positions have already been taken and the question is what happens to previous stand taken by corporates, specifically where the tax adjustment could be tax neutral.

The extension of the term for the anti-profiteering body for two years is also highly debatable and could be viewed as an hindrance to freedom of commerce and trade. The complaints need to be looked at objectively from the industries perspective as well and the body needs to be alive to the fact that benefits can be passed on by the industries in multiple ways and it always need not be pricing. That ultimately, it is demand and supply that should determine pricing.

In the long term, there is a need for larger consolidation whereby all the States work in complete sync to monitor and collect taxes – not only at a decision making level but at the implementation level as well. Aspects such as centralized registration, single return filing with appropriate breakup, central authority for assessment of tax, centralized audit etc. can bring in much larger simplicity as opposed to merely an introduction of simplified forms. And with technology, this is clearly not difficult to achieve."

''Two years is good time for the new tax to have settled despite the size of the reform. But, all would think it still is settling.