GST is celebrating its 3rd Anniversary today. In the first three years, taxpayers were struggling with maze of amendments and clarification by way of Notifications, Circulars, Orders along with several litigations.
Thus, it is becoming difficult to understand whether GST is heading towards simplification or further complications and how to handle this 3-year child which will now move to 4th year. In this Article we discuss the same.
1st Year of GST – Full of technical surprises!
GST law was rollout on 1st July 2017 as a ‘mother of all tax reforms’ along with numerous transitional provision and everyone struggled to transit their business to GST. One of the major areas of concern faced by industries in the 1st year of GST was relating to the functioning of the online compliance portal and system glitches. The online system was expected to be smooth and steady, however, till date numerous GSTN glitches remain un-resolved. These technical glitches continuously resulted in to pending of filing of return, processing of refunds, etc.
Further, initial struggle of transition is now resulting into un-ending web of litigation on transitional credit. Recently the Hon’ble Delhi High Court in Brand Equity Treaties Ltd – TOG-361-HC-DEL-GST-2020 comprehensively dealt with this issue and held that the Cenvat Credit of Pre-GST should be available to all taxpayer as a vested right. However, Apex court has granted stay and now decision lies with the Apex court. Further, already, more than forty cases have been pronounced by Hon’ble High Court throughout India and many cases are waiting in wings. Thus, even after three years taxpayers are struggling for transition of erstwhile credit to GST.
Also, in the first year, certain provisions were either extended or amended like, extension of due dates, Reverse Charge Mechanism (‘RCM’) on un-registered procurement extended etc.
Further, GST rate for restaurant reduced to 5% with conditions created long lasting ongoing litigation about applicability of GST @18% or 5%.
2nd year of GST – Increase in compliances
In the second year, a major compliance for movement of goods within the State and outside the State was implemented a.k.a. e-way bill. Initially the e-way bill portal was launched in February 2018, however, due to glitches it was re-launched again on 1st April 2018.
Within two years of e-way implementation, more than hundred litigations have already reported. In various cases like Time To Time Logistics [2018 (11) G.S.T.L. 259 (All.)], Pragati Enterprises [2018 (12) G.S.T.L. 9 (All.), the vehicles were detained only on account of certain procedural discrepancies in the E-way bill particulars.
Thus, Circular No. 64/38/2018-GST dated 14th September 2018 was required to be issued to save genuine cases. However, even though after issuance of this circular still numerous cases are reported for procedural lapses. Although the inherent purpose of e-way bill was to ensure that there is no movement of goods without payment of GST, however, the cases where transfer without payment of GST, like stock transfer, have attracted penalty (refer Caterpillar India Pvt. Ltd. [2019 (27) G.S.T.L. 4 (Mad.)].
As the second year was coming to closure, in the month of March 2019, major changes were proposed in real estate sector and a new revised GST rate of 5% or 1% was made applicable for it from 1st April 2019 by restricting ITC. However, on account of sudden changes, many developers struggled to cope-up with these changes.
3rd year of GST – Coping with unforseen challenges
The trend of numerous changes in GST has continued even in 3rd year which increased uncertainty. There were several efforts made to implement the E-invoicing and New GST return, however, the same was fortunately postponed.
Meanwhile, as a step towards implementation of new return system the Government restricted provisional ITC (i.e. not reflected in GSTR-2A) to the extent of 20% from October 2020 and further restricted it to 10 %. This restriction of 10% was affecting working capital requirement arising out of the unmatched credits. Again, due to Corona-crisis, for the period February 2020 to August 2020, the restriction was removed for the time being (and will be applicable again on cumulative basis in
September 2020). These changes and restrictions are affecting the right to do business instead of being an aid towards business.
Few other notable amendments were change in rate of hotel accommodation where peak GST rate was reduced from 28% to 18% w.e.f 1st October 2019. Further, GST @ 5% was made applicable for outdoor catering at premises other than specified premise by any person other than specified person.
Since, February 2020, on account of COVID-19 the taxpayers are expecting a substantive relief in GST, however, the Government has announced more procedural relief like reduction and/or waiver of interest, penalty, late fees etc. Thus, lets welcome 4th year of GST with a hope that substantive relief will also be granted to taxpayers.
Source Credit – CA Vaishali Kharde
[The author is Associate Director, CA Pritam Mahure and Associates and the views expressed are strictly personal.]