On 1st July 2021, our beloved and most controversial Goods and Service tax Act will be celebrating its 4th Birthday! The 3 Major Motive for introducing GST was One nation One Tax, Ease of compliances and Seamless Flow of credit to eliminate the cascading effect of the Taxes. But if we analyze, we can question that whether the later 2 motives are achieved in these 4 years? Well, we all know the answer.
In these 4 years, GST has suffered more than 900 amendments through Notifications, Circulars and Press Release. There has been Chronic Tinkering and twisting of the provisions and as a result of that, the provisions which are currently in force are completely different from the one which were introduced in the beginning.
If we talk about the seamless flow of the credit, it has been made more complicated by introduction of 36(4), 86B and stringent interpretation of 16(4). Introduction of 36(4) and stringent interpretation of 16(4), is clearly the case of not allowing the credit without even being given the opportunity of being heard. The Government should provide the opportunity to dealer to claim the credit by introducing GSTR -2 or similar facility in the portal, otherwise the motive of seamless flow of credit will be completely destroyed.
If we talk about section 50 of GST Act, i.e. interest on late payment of taxes, the primary clause contains that interest has to be paid on the gross liability i.e. before the input tax credit. It was the clause that was completely absurd and needed the immediate attention and amendment. But it took 3 years for government to realize that this is absurd clause, causing real hardship to taxpayer and needed the retrospective amendment. Now, recently they brought up the retrospective amendment to section 50 for levying interest on the net cash liability. However, there are still some technical glitches and blunders in the section which are yet to be addressed by the government.
TO QUOTE NANI PALKHIWALA : WE LEGISLATE FIRST AND THINK AFTERWARDS
This is the current situation of GST in India. We can quote that GST was IMPOSED on us and NOT IMPLEMENTED by government. As all the test run to this new tax law was conducted on the common Indian Public.
Nani Palkhiwala was a Legal Mastermind. He has authored the most famous book on income tax named: Kanga and Palkhiwala's The Law and Practice of income tax. The eighth edition came in 1990 by which time the income tax act was almost 30 years old. In this 30 years journey the act was mutilated by more than 3,300 amendments. In the preface, Palkhiwala lamented that 'we legislate first, and think afterwards; complexity is heaped upon, complexity and the confusion becomes worse confounded.' The avalanche of amendments only resulted in more litigation.
We all know that in GST there will be the lot of litigations coming in near future, and we all know the reason. In these 4 years, GST has become more prone to litigation. Even for simple revocation of cancellation of registration, after the prescribed days, the taxpayer has to file the appeal. So, we can presume the litigations that are going to happen in nest future.
The same was observed by Nani Palkhiwala. In preface to his 8th edition (1990) mentioned above he observed: 'In the United Kingdom there are 29 million income tax payers but the number of references filed in the High Court is only around thirty in a year. In India there are only 7 million income tax payers but the number of references filed in our High Court is over 6000 a year, in addition to 1000 writ petitions. These figures reflect the tremendous public dissatisfaction with the quality of the law and fiscal administration.'
We can relate the same with the GST. In the past 4 years, N number of writs are filed before the High courts and in most of the cases after the decision is ruled in the favor of the taxpayer, the act is amended retrospectively to nullify the judgement.
If we talk about the collection of GST, the late fees collection of last 2 years alone is above 100 crore, and its important to note that in that period 2 amnesty schemes were introduced. So we can imagine that how much late fees would have been collected by the department in initial 2 years. It took 4 years to the government to realize that they have been charging exorbitant amount of late fees to MSME and small scale dealers.
After analyzing the above facts and situation, one can conclude with the last passage of the last preface written by Palkhiwala:
'Every Government has right to levy taxes, but no government has the right, in the process of extracting taxes, to cause misery and harassment to the taxpayer and the gnawing feeling that he is made the victim of palpable injustice'