RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

The Union Budget 2021-22 does not impose any new personal or corporate direct tax but at the same time had two garner resources for additional allocation to various sectors including infrastructure, health care, agricultural and so on. Though there were strong chances of more taxes, cesses or surcharge in post COVID era, Government only levied one visible Cess called Agricultural and Infrastructure Development Cess (AIDC), which will be levied on one and all. This year’s budget also breaks the taboo that rising fiscal deficit, which is presently 9.5% of GDP can be addressed only by increasing the tax revenue.

The focus is also on reducing the compliance burden which seems to be both, in direct taxes and indirect taxes. While artificial intelligence and data mining will be used more, emphasis has been on efficient tax collection, reducing paper work and compliance burden. Further, appellate procedures are being made simple and faceless. Tax payer’s trust is also being rebuild with easing out of tax reopening norms. There will be a dispute resolution mechanism for small tax payers. There is a feel to improve tax administration, voluntary compliance, tax payment and keeping tax at reasonable levels.

Budget looks into the future as reform in the backdrop of COVID hit country and economy. In the extraordinary circumstances, it is felt that this year’s budget is a reformative one providing a quantum leap into the future.

For the first time in India’s history, health care has been positioned one of the important pillars of economy with allocation to healthcare spends being raised by 135 percent. It has earmarked ₹ 35000 crores for COVID vaccine program in 2021-22 and assured of more resources on need basis.

On GST, while certain legislative changes have been proposed, it has been assured that the Government will work with GST Council to set right certain anomalies in GST laws system. Inverted duty structure in GST is an area of concern resulting in distortion in tax system and loss to revenue. GST Council is expected to address this in near future. This is more in sectors such a textile, plastic, fertilizers etc.   

The recent increase in GST collections in past 3-4 months only indicate that tax compliance can result in rise in tax revenue if tax rates are kept at reasonable levels and voluntary compliance and payments are encouraged.

The Standing Committee on Finance headed by Jayant Sinha has recommended the integration of Trade Receivables Discounting System (TReDS) platform with GSTN e-invoicing portal leading to automatic uploading of all GST invoices onto the TReDS platform to enable real time sharing of data that will allow buyers and sellers to have a single window access to invoices.

CBIC has issued guidelines procedure to be followed during search operations u/s 67 of the CGST Act, 2017. These guidelines ought to be followed while carrying search proceedings.

Also, MOF has renamed Indian Renewal Services (Customs & Central Excise) [IRS (C&CE)] as Indian Revenue Services (Customs & Indirect Taxes) [IRS (C & IT) w.e.f. 10.02.2021. Will it make any difference in services !!

CBIC  Guidelines for Search Operations

CBIC have issued guidelines procedure to be followed during search operations u/s 67 of the CGST Act, 2017. It inter alia, covers the following :

• The officer issuing authorization for search should have valid and justifiable reasons for authorizing a search, which shall be duly recorded in the file. Search should be carried out. only with a proper search authorization issued by the Competent Authority.
• The premises of a person cannot be searched on the authority of a search warrant issued for the premises of some other person. Where a search warrant, through oversight, has been issued in the name of a person w ho is already dead, the authorised officer should report to the Competent Authority and get a fresh warrant issued in the names of the legal heirs.
• In case of search of a residence, a lady officer shall necessarily be part of the search team.
• The officer authorized to search the premises must sign each page of the Panchnama and annexures. A copy of the Panchnama along with all its annexures should be given to the person in-charge of the premises being searched and acknowledgement In this regard may be taken. If the person in-charge refuses to sign the Panchnama, the same may be pasted in a conspicuous place of the premises, in presence of the witnesses. Photograph of the Panchnama pasted on the premises may be kept on record.
• These guidelines ought to be followed while carrying search proceedings.
• Specific instructions regarding search of premises/persons arc contained in the Central Excise Intelligence and Investigation Manual issued by the DGCHI, New Delhi. Subsequent instructions have also been issued from time to time as per the need of the hour, latest being DGG1 Instruction dated 14.08.2020. The instructions as elaborated in the preceding para(s) are to be followed in continuation to the  earlier instructions.
• The search shall be made in the presence of two or more independent witnesses who would preferably be respectable inhabitants of the locality, and if no such inhabitants are available or willing, the inhabitants of any other locality should be asked to be witness to the search. PSU employees, Bank employees etc, may be included as witnesses during sensitive search operations to maintain transparency and credibility, The witnesses should be informed about the purpose of the search and their duties.
• The search authorization shall be executed before the start of the search and the same shall be shown to the person in charge of the premises to be searched and his/her signature with date and time shah be obtained on the body of the search authorization. The signatures of the witnesses with date and time should also be obtained on the body of the search authorization.
• While conducting search, the officers must be sensitive towards the assessee/party. Social and religious sentiments of the person(s) under search and of all the person(s) present, shall be respected at all times. Special care/ attention should be given to elderly, women and children present in the premises under search. Children should be allowed to go to school, after examining of their bags. A woman occupying any premises, to be searched, has the right to withdraw before the search party enters, if according to the customs she does not appear in public. If a person in the premises is not well, a medical practitioner may be called.

[Source: CBIC Instruction No.  01/2020-21 (GST Investigation) , F.No. GST/INV/ DGOV Reference/20-21 dated 02.02.2021]

Suspension of Registration

CBIC has issued Standard Operating Procedure (SOP) for implementation of the provision of suspension of registrations under sub-rule (2A) of rule 21A of CGST Rules, 2017.

• Vide  notification No. 94/2020- CT, dated 22.12.2020, sub-rule (2A)  was inserted to rule 21A of the CGST Rules, 2017 which provides for immediate suspension of registration of a person, as a measure to safeguard the interest of revenue, on observance of such discrepancies /anomalies which indicate violation of the provisions of Act / Rules, and that continuation of such registration poses immediate threat to revenue.
• Till the time an independent functionality for FORM GST REG-31 is developed on the portal, in order to ensure uniformity in the implementation of the provisions of rule 21A(2A), the Board has provided guidelines for implementation of the provision of suspension of registrations.
• Till the time independent functionality for FORM GST REG-31 is fully ready, if the proper officer considers it appropriate to drop a proceeding anytime after  the issuance of FORM GST REG-31, he may advise the said person to furnish his reply on the common portal in FORM GST REG-18.
• In case the proper officer is prima-facie satisfied with the reply of the said person, he may revoke the suspension by passing an order in FORM GST REG-20.
• Post such revocation, if need be, the proper officer can continue with the detailed verification of the documents and recovery of short payment of tax, if any. Further, in such cases, after detailed verification or otherwise, if the proper officer finds that the registration of the said person is liable for cancellation, he can again initiate the proceeding of cancellation of registration by issuing notice in FORM GST REG-17.

[Source: CBIC Circular No. 145/01/2021-GST dated 11.02.2021]

IGST Refund due to mismatch in IGST liability in GSTR-3B and GSTR-1  for FY 2019-20 and FY 2020-21

• CBIC had earlier provided a procedure for refunds which were stuck in cases where the records could not be transmitted from GSTN to ICEGATE portal due to mismatch in IGST Liability between GSTR-1 and GSTR-3B vide Circular No. 12/2018-Customs dated 29.05.2018. The procedure covered the period from July 2017 to March 2019.
• However, IGST refunds are pending due to mis-match of data between GSTR-1 & GSTR-3B. The IGST refunds relatable to the Shipping Bills filed after 31.03.2019 having mismatch error between GSTR-1 and GSTR-3B could not be processed and are held up.
• In order to overcome the problems faced by the exporters, CBIC has decided that the solution provided in the Circular 12/2018-Customs read with Circular No. 25/2019-Customs would be applicable mutatis mutandis for the Shipping Bills filed during the financial year 2019-20 and 2020-21 (i.e. in respect of all Shipping Bills filed/ to be filed upto 31.03.2021).
• Now this procedure has been extended for another 2 years i.e. FY 2019-20 and 2020-21.

[Source: Circular No. 4/2021-Customs dated 16.02.2021]