Thirty GST Council meetings, 4,730 pages of Agenda Notes, 1,394 pages of minutes of the meetings, 918 decisions taken, 96% of the decisions taken implemented through 294 notifications, an almost equal number of corresponding SGST notifications issued by the states — according to a press note issued by the GST Council titled “GST Council — the journey so far”.
These may be impressive statistics for a new law that has replaced numerous laws on indirect taxes since July 2017. However, the GST taxpayer would see these statistics differently –- 30 GST Council meetings, innumerable changes in GST laws, including in tax rates, 405 notifications, 103 circulars and 16 orders (totalling 524) issued in 486 days of GST. More importantly, and despite all this, they would remember that GST laws still have many grey areas, apart from a web portal that is behaving much better lately than it used to but still has occasional phases of going into a comatose condition.
GSTR 9/9C
The months of November and December will be critical for GST taxpayers as they will need to fill in an annual return in form GSTR 9 and obtain a reconciliation statement from an auditor they have to appoint under GSTR 9C. GSTR 9 should pose no problems for a taxpayer since they would only have to mathematically add the details of their supplies from GSTR 1 and their input tax credit from GSTR 3B. To this, they would have to add their turnover from the pre-GST era.
Taxpayers will take some time and effort to get their GSTR 9C certified since the reconciliation statement requires a reconciliation with total turnover, taxable turnover and input tax credit (ITC) availed, with the audited financial statements for the year ended March 31, 2018. To reconcile their turnover, they would have to reconcile their accounting policies for revenue recognition with the GST returns. This could pose some issues since accounting policies do not go by the concept of supplies as GST laws do.
In addition, the reconciliation statement requires a reconciliation of all the items in the profit or loss account with the GST returns filed. It also has a strange requirement, asking the auditor to recommend additional tax to be paid due to non-reconciliation. It is going to be a brave auditor who would recommend this because the GST laws do not specifically prescribe any additional tax due to non-reconciliation.
Availing ITC
It is possible that there can be additional tax liabilities due to reversal of input tax credit. According to section 16(4) of the CGST Act, 2017, a registered person shall not be entitled to take ITC in respect of any invoice or debit note for supply of goods or services or both after October 20 (date of filing monthly return) or December 31 (date of filing annual return), whichever is earlier.
An untitled press release was issued to clarify a misgiving about the last date for taking ITC in relation to invoices or debit notes relating to such invoices pertaining to the period from July 2017 to March 2018. This misgiving appeared to stem from the government’s decision to extend the last date for furnishing of details of outward supplies in GSTR-1 from time to time. The press release clarified that the last date for filing GSTR 3B remains October 20 (later extended to October 25 through a notification).
There can be no two arguments on whether an extension of the sunset date to avail ITC on invoices should be extended. It is only now that GST taxpayers have some clarity on how the GST system works in respect of ITC because the concept of the portal matching invoices never took off. A new system of matching of invoices, with the onus on the supplier and the receiver, is due to be notified soon. Taxpayers should not be denied credit just because they are availing credit on the basis of a stop-gap system which was no fault of theirs.
Whether GSTR 3B is a return that has been notified as per Section 39 of the CGST Act can be questioned on the grounds that it was meant to be a temporary return, but has become semi-permanent due to lack of alternatives.
Attempts to reconcile GSTR 1 with GSTR 2A throws up some bizarre mismatches because the software seems to be capturing data in silos. The Central Board of Indirect Tax and Customs (CBIC) would do well to extend the date for availing ITC to December 31 since taxpayers had too many issues to grapple with in GST laws till date.
Assessments
With revenues from GST oscillating like the BSE Sensex, it is expected that the GST officers would go all out to collect as much as they can. Due to lack of clear-cut guidelines on assessments, it is possible that some taxpayers may be subjected to assessments from both the central tax authorities as well as state tax authorities. CBIC should come out with detailed notifications on assessment procedures and provide their staff with appropriate instructions.
It has been noted that certain taxpayers have availed huge amounts of ITC on the basis of fake invoices. CBIC has been quick to take criminal action against them. However, it should not make the mistake of bracketing all taxpayers as this will lead to tax harassment. The facility for filing responses to show-cause notices as well as appeals to higher appellate authorities should also be enabled on the portal to achieve one of the declared objectives of the GST laws — minimum physical interaction between the taxpayer and the department.
In a year’s time, if the GST Council wants to again recollect its, it should probably put out data on the efforts taken to stabilise GST laws and the beneficial provisions enacted.
(The writer is a Bengaluru-based tax expert)