What are the Legal Issues in GST?

GST has always been in news since its inception on 1^st July 2017. The centre is doing a comprehensive study on the GST law to examine the main issues in this system. This study will examine the services given by multinational company’s back offices. In addition to this, they will address the confusion over GST applicable on discounts. It is also looking forward to cater to the legal issues in GST. The review will simply the law and reduce indirect tac conflicts.

This article talks about the legal issues in GST in India. It will throw light on the taxation system issues and the grievances of taxpayers.

Current status of GST in India

The Post-GST era was very confusing, with a number of errors in filing returns and loads of errors in the system. But in 2017 India jumped into the GST bandwagon. Now GST has completed 4 years in India. However, GST is still struggling to meet up the policy demands. There have been multiple policy up-gradation and it seems that it is still in the development phase. The government is still developing this regime. GST in India has one of the highest tax rates along with a large number of tax slabs. In addition to this, it has a lot of compliance and technical issues.

What are some of the crucial issues in GST?

Some of the most crucial issues from an industry perspective revolve around the rectification process in the GST system. The improper blocking of the input tax credit, applicability of the GST rates or the HSN codes, and rigorous compliance burden on taxpayers are few examples of the issues in India.

Many have taken up these issues with the GST council already. The GST council regularly comes up with clarifications and resolves the legal issues in GST smoothly.

Latest Update on Legal Issues in GST

• The All India Federation of Tax Practitioners made a submission pertaining to 39 GST issues on July 22^nd, 2021. The main aim latest behind the presentation was the immediate response as businesses are facing issues because of technical difficulties.
• Kerala Finance Minister KN Balagopal has recently given structural suggestions for the GST law in India. He advised that we should increase the GST compensation period. Moreover, we should change the current structure of GST.
• In early July 2021 Central government, CAIT national meeting was conducted for discussion on the common issues in GST, income tax, etc.

Review of the Legal Issues in GST

The central government is reviewing the legal issues in GST. Some of the important key factors are-

• The central government is conducting a comprehensive review of the taxation regime in India. It is also looking into GST and other rules regarding the same. This review will simplify the legal procedures and reduce the disputes.
• The review will also determine issues on contradictory judgment or ruling.
• The authorities will discuss these issues in the GST Council. Thereafter, they will frame a proposal and give a decision regarding the issues.
• Additionally, multiple issues need more clarification either through the amendment of rules or laws. These should be taken up so soon as possible to bring down the disputes.
• Finally, the government plans to reduce litigation over matters of direct and indirect taxes. There are conflicting views on the authority for advance rulings as well.

Clarifications regarding legal issues in GST

The centre review will streamline and reduce the complexity of legal issues in GST. Here are areas that need clarification by government authorities-

• Contradictory Judgements: There are numerous contradictory rulings on GST, which has led to confusion among the people. The government needs to address this issue to put an end to such litigations.
• Streamlining Litigation Process: There is a need for setting up an Appellate Tribunal for streamlining the process under CGST Act, 2017. Moreover, it is imperative that these Appellate Bodies be operative to curb the numerous litigations at an initial stage.
• Amendments under GST: There are many judgments which have held certain GST provisions and rules ultra vires. The government should amend these provisions.
• Issues in availability of input tax credit: Input tax credit might be available for expenses incurred for the furtherance of any business activity or is done in the course of business. Following are some examples of such expenses-
  • The expenses relating to employee benefits like insurance and medical.
  • Corporate social responsibility expenses. Recently in an advance ruling, it was said that ITC is available on the expenses relating to CSR. Moreover, the ITC on any inherent loss will not be reversed if it is done during the manufacturing process.

• Clarifications on refund related issues: The authorities have issued a smooth system for GST refunds. The authorities have made clarification about the inclusion of ITC in relation to input services if there is a refund because of an inverted duty structure which relates directly to the sale of the goods.
• GST Rate and the applicability of HSN: Many states have different views on the applicability of GST rates. The AARs of Gujarat and Tamil Nadu have said there is 12% GST on flavoured milk. Whereas the GST is 5% in Karnataka.
  Furthermore, in Maharashtra, the solar procurement and installation contracts have 18% GST. But in Karnataka, it is just 5%.
  Therefore it is very important for the government to clarify on these rates, as it will strengthen GST in India. It is also vital for companies to evaluate their tax positions.
• The issue in GSTR 2A, GSTR 3B, and GSTR 1: It is very difficult to fill GSTR 2A as it cannot be downloaded and has to be seen on monthly basis. This in turn creates irregularities with the books of accounts. Modification under GSTR 3B takes at least one month time. Furthermore, one cannot modify credit or debit note in GSTR 1.
• TRAN 1 form: The authorities need to clarify their position on trans 1 notice in form 603. It is sent by the department to everyone making it difficult for real taxpayers in India.

Some Other Important GST Issues

• Issues for Small Traders: GST is an additional cost for small entrepreneurs or businesses. Not every small business can afford it. And if the small businesses don’t fall under the GST regime, customers don’t have trust on them. Without the certificate of GST exemption, it is very difficult to create trust. Sometimes, these businesses are so small, that they are carried out by illiterate, and it is very difficult for them to comply with the basic GST requirements.
• Tax Evasion: Policy rollbacks and regular amendments couple with a bad GSTN network have led to large-scale tax evasion. Many a time, there are irregularities in tax returns. The GST system does not have a mechanism to check the discrepancies in the GST Returns. Most of the taxpayers can’t correct their revenue statements. We are in need of rigorous measures to tackle tax evasions.

Conclusion

The current GST system is a mixture of good and bad, but it delivers little promises to the taxpayers. There are many issues with the implementation of GST, it has both operational and technical loose ends. The government should look into the legal issues in GST. Additionally, it should focus on the grievances of the taxpayers. The framework of policies should lessen the compliance burden on individuals. People should be taught about GST and the government should enlighten them on the benefits of GST in India. It is very important to make necessary changes and address the issues to bring down the litigations.