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GST: Many Loose Ends To Be Tied

Business Standard |
Smita Roy, Partner & Leader (North)
Indirect Tax

27 February 2017

Legal and tax experts share some concernds about the revised model GST lAW

Anti profiteering clause:The intention of the antiprofiteering clause is to pass on the benefits accuring on the benefits account to However, both industry divided.

model GST central an authority the benefits while transitioning such as rate reduction passed penalty been passed Experts parameters service. operational will have says Smita Sujit Advaita provision Experts complain that there is ambiguity around what constitutes “commensurate reduction in the price”.

There is also lack of clarity on whether the provisions will be applied on application from the affected parties or through suo motu investigation by the relevant authority.

“The government needs to be careful while framing the rules to bring objectivity in deciding whether the benefit has been passed on to the customers or not,” says Bipin Sapra, tax partner, EY India.

Advaita´s Ghosh feels the antiprofiteering provisions are susceptible toaconstitutional challenge.

“Fromatechnicallegal perspective, the provision appears to suffer from the vice of excessive delegation,” he says.

Apportionment of shared services costs/ services between branches of the same company:

Any such stock transfer of service will attract the integrated GST (IGST) rates. However, the valuation and identification of such services are likely to pose significant challenges, say tax experts.

“Imposingatax on stock transfer of goods is justified.

However,asimilar treatment is uncalled for in the case of services,” saysLBadri Narayanan, partner, Laksmikumaran &Sridharan. This provision will lead to unnecessary complications and backdoor taking of salary costs, which otherwise is outside the GST net, he adds.

Ghosh is in favour of specific guidance for determination of place of supply for such institutionally.

This provides some level of predictability and certainty to outcomes.

Under the dualcontrol model the same assessee can be assessed by the central government one year and by the state government another year.

Experts feel the government should clarify that once an assessee has been allotted to an authority, central or state, they should continue to be assessed by the same authority.

“It is everybody´s case that under dualGST the taxpayer should interface with only one tax authority, either the Centre or the state concerned.

That is how the concept of crossempowerment was brought in, but it has to be in accordance with constitutional provisions,” says Sumit Dutt Majumder, GST expert and former chairman, Central Board of Excise and Customs.

Compliancerelated issues arising from state registration: Legal experts expectalot of disputes to arise while determining the place from where supply is provided.


“The concepts of fixed establishment, permanent establishment and place of business will be tested to determine whetherabusiness ought to obtain registration inastate,” says Badri Narayanan.

For ecommerce players the model law is not clear on whether they are required to obtain registration in all states where they operate or can they discharge their TDS liability through registration inasingle state where their headquarters is located.

Enrolment figures show interstate disparity

As India moves closer to the goods and services tax (GST) regime, the statistics on advance registrations issued by the government paint an interesting picture on each state´s performance since the start of the advance enrolment programme in November 2016.

Implemented inaphased manner to avoid overload, the states began the process of advance enrolments to ensureasmooth transition of more than 8 million taxpayers to the new indirect tax framework, expected to come into effect from July 1.

However, if government figures are anything to go by, the various states in the country are showing distinctive trends in adopting the GST regime, with disparities emerging even at this nascent stage.

As there is no law mandating these registrations, some states are takingamore handson approach to these advance enrolments, which are of two kinds: Shifting already registered entities (under VAT, excise and service tax registrations) and registering fresh applications.

Other states, though, seem to be takingamore wait and watch approach.

“Some regions have been more proactive in seeking GST enrolments as compared to others.

As the data suggest, manufacturing states have done better as compared to seller (consumer) states,” says Bipin Sapra, indirect tax partner, EY.

Despitealate start, southern states have fared the best in terms of advance registrations, with Karnataka already achievinga92.79 per cent enrolment.

Only Kerala has lagged witha60.06 per cent rate.

Western and central states have also fared well, except Goa, which is at 51.77 per cent.

Rates of enrolment in the northern, eastern and northeastern regions of the country are considerably lower.

The northern state of Jammu and Kashmir has fared the worst in the lot withapaltry 0.55 per cent registration rate. Even the National Capital Territory of Delhi has put up an average performance of just 55.27 per cent.

Among the eastern and northeastern states, West Bengal has fared the best witha67.13 per cent rate of enrolment, but the region has performed much worse.

“GST awareness isacritical factor resulting in disparities between enrolments in the various states.

Historically, compliance in eastern and northeastern states has been lower, while western and southern states, with higher levels of computer literacy, have done better,” says Sachin Menon, head, indirect tax, KPMG India.

As the laws relating to the GST framework are still being debated, experts say that many taxpayers are not feeling the urgency to make the necessary registrations.

Other complexities such as service tax registrations, which are mostly central in nature, also need to be taken care of by states.

This process is cumbersome and timeconsuming and resulting inalag in the enrolment uptake.

According to Sapra, as the date for converting to the GST framework is finalised and there is greater clarity in the process and law, these enrolments should increase significantly.

The publication of these statistics, if nothing else, can be gauged as beingagood marker of GST readiness and will surely incentivise states with lower rates of enrolments to takeagreater initiative at reaching higher levels before the deadline arrives.