When GST was introduced in India, it was not a complete law since it was introduced in a hurry. Over the past 27 months, the government has been trying to make the law complete but is finding it hard to do so as things change.
It is now certain that GST monthly revenues would hover around ₹93,000 crore and will touch the ₹1-lakh crore mark occasionally. The Finance Minister promises to further simplify the GST to improve the ‘ease of doing business’ rankings. There is a clear difference in perception here. The GST should be eased with an intention to make life easier for the taxpayers and not secure a spot in global rankings. If life is made easier for taxpayers, the ‘ease of doing business’ rankings would take care of itself. The government appears to have given a patient hearing to some experts who are now recommending that India adopt the Singapore model of the GST. This is an option the government had in 2017 too, but it chose the South African model, not because of the content of the law but since the country was similar to India in many aspects.
Invoices and returns were the bedrock on which the GST in India was based. While the invoices were pretty much similar to what was there in the erstwhile regime, the government missed the bus completely when it came to returns under the GST, due to which it is still trying to play catch-up.
The concept of GSTR 1/2/3 — as per which a supplier uploads a return (GSTR 1), the portal matches the invoice for the recipient (GSTR 2) and the adjustments are captured in the monthly return (GSTR 3) — never took off. To fix things, a new form GSTR 3B was introduced, which was a sort of voucher that captured supplies and input and the tax payable. Since taxes were paid on the basis of this form, it was assumed that it was a return. However, the Gujarat High Court in the AAP & Co., Chartered Accountants v. Union of India case [2019 107 taxmann.com 125/75 GST 192] ruled that GSTR 3B is not a return that replaces GSTR 3.
Smart taxpayers took the rationale of this decision a bit further and concluded that there could be no time limit imposed for availing of input tax credit, and interest and late fees could not be levied since no returns were being filed and the restriction to issue debit/credit notes before September of the ensuing financial year would also not be valid. The CBIC (Central Board of Indirect Taxes and Customs) has fixed this anomaly by issuing Notification No. 49/2019-Central Tax, whereby Rule 61(5) has been amended to clarify that if a taxpayer has filed GSTR 3B, he need not file GSTR 3. The ensuing Rule 61(6) on matching of invoices has been omitted.
It is now expected that the new system of returns would be introduced from April 2020. There is enough and more time for the CBIC and the software vendor to get it right this time around. A number of relaxations have been given over the last two years or so to composition taxpayers and those with a turnover not exceeding ₹1.5-2 crore.
These should continue in the new invoice regime too, which would mean that the new system of returns would be applicable only to a set of taxpayers who have the resources to deal with it. The government can expect revenues to touch the magic figure of ₹1 lakh crore every month once the new system of invoices comes in, since one of the major drawbacks of the present 3B — an open-ended claim for input tax credit with no checks and balances — would be plugged.
The writer is a chartered accountant