GST NOT SO TAX FRIENDLY – COURT VERDICT

[Dr. Sanjiv Agarwal]

Goods and Services Tax, though a major tax reform launched in India w.e.f. 1^st July, 2017 with a big bang has not been free from roadblocks with around 100 writs filed in various courts in country. Taxpayers are facing interpretation and implementation issues in compliance with GST law provisions. In a few cases, courts have been even observed non-seriousness on the part of tax administration and even passed strictures. The problem with GST implementation has been of a sort of administrative and technical failure to cope up with the huge volume as well as putting the country on a technology platform (i.e., GST network or GSTN network) which is neither complete non subjected to adequate testing with data. It should have been ensured that the automated and electronic system of accepting tax returns based on self assessment functions smoothly. Another areas of concern are too frequent changes in rates, exemptions, forms, dates and what not, so much so that the taxpayers and professionals have been facing tough time in meeting the deadlines.

In Abicor and Binzel Technoweld Pvt. Ltd. v. Union of India [ 2018 (2) TMI 766 - BOMBAY HIGH COURT ], Bombay high court has made remarkable observations vide its Order dated 6^th February, 2018 on manner of implementation of GST in India and hardships being faced by the tax payers.

The petitioner approached the high court with the grievance that despite being granted the provisional GST registration, it was not able to access its online profile on the GST network and that it is not even able to generate e-way bills which had paralyzed its business activities. Even today, e-way Bill system is not put to use due to technical glitches and tax administration's inability to put it in place. This has already been deferred twice and new date is not known. It may be noted that e-way bills cannot be generated through system without online access and that being so, tax payer is not allowed to move the goods anywhere leading to halt of business activities.

It was also not able to file the tax returns or pay tax or complete other compliances. That being so, payment of GST is delayed and tax payers are exposed to interest and penalty burden. This also results in possibility of non-availment of input tax credit by the taxpayer's clients/ customers which could have been avoided, had the proper systems been in place.

The court thus observed:

"A tax like Goods and Services Tax was highly publicised and termed as popular. We had yet not seen a celebration of New Tax regime, but that has followed with great hue and cry. These celebrations mean nothing. The special sessions of Parliament or special or extraordinary meetings of Council would mean nothing to the assessees unless they obtain easy access to the website and portals. The regime is not tax friendly. We hope and trust that those in charge of implementation and administration of this law will at least now wake up and put in place the requisite mechanism. This is necessary to preserve the image, prestige and reputation of this country, particularly when we are inviting and welcoming foreign investment in the State and the country. We hope and trust that such petitions are rarity and the Court will not be called upon to administer the implementation of the law, leave alone monitoring and supervising the working of the individual officials, howsoever high ranking he may be."

Court observed that it was for the tax authorities to work out necessary mechanism in place. Not only this, it should also setup and establish a grievance redressal mechanism.

Bombay High Court made a specific comment that GST regime is not tax friendly and hoped that those in charge of implementation and administration of GST law will at least now wake up and put in place the requisite mechanism. The focus ought to be on sorting out problems in a tax reform that had been heralded with so much fanfare and that the present state of affairs was not satisfactory.

The court also observed / held as under:

• The digital systems do not work properly and that still Government insists on payment of late fee for delay in filing returns.
• Celebrations around GST and special sessions of Parliament or extraordinary meetings of GST Council mean nothing to assesses when the tax regime itself is not assessee-friendly. Image of the nation suffers due to the way GST Network is functioning.
• Commissioners cannot say that issues can be solved only by GST Council and that they cannot do anything.
• Court cannot be expected to administer the implementation of law. It is the executives duty to do so. A proper grievance redressal mechanism should be in place to ensure people do not have to come to court for such issues.
• It will be constrained to pass orders on the line of those passed by Allahabad High Court in Writ (Tax) No. 67 of 2018 dated 24.01.2018. Such directions will be passed for benefit of all taxpayers and not restricted to Petitioner alone.

Mumbai high court also referred to Allahabad high court order dated 24.01.2018 in Continental  India Pvt. Ltd. v. Union of India ( 2018 (1) TMI 1245 - ALLAHABAD HIGH COURT ) which directed the tax authorities to reopen the portal and if that was not done, to entertain the petitioner's application manually and pass order after verification of India Pvt. Ltd. v. Union of India (WP No. 67 of 2018) which directed the tax authorities to reopen the portal and if that was not done, to entertain the petitioner's application manually and pass order after verification of credits claimed by the taxpayer. In this case, the petitioner had alleged in the petition that despite making several efforts on the last date for filing of the application, the electronic system of the respondent did not respond, as a result of which the petitioner is likely to suffer loss of the credit that it is entitled to by passage of time. The respondents were directed to reopen the portal within two weeks. In the event they do not do so, they will entertain the application of the petitioner manually and pass orders on it after due verification of the credits as claimed by the petitioner. They will also ensure that the petitioner is allowed to pay its taxes on the regular electronic system also which is being maintained for use of the credit likely to be considered for the petitioner.

The high court thus expressed its anguish and directed the responsible officers of GST to resolve glitches in GSTN functioning. The court emphasised that the focus need to be on sorting out problem in such big tax reform. Tax administration must wake up and put requisite mechanisms in place to preserve, prestige and reputation of country.

This calls for an introspection by GST Council, the high powered committee to take decisions on GST, Ministry of Finance and GSTN and understand that this is just a reflection of state of affairs. What assessees cannot express has been aptly done by courts.