Some Thoughts Over New GST Acts Passed - Series 1

GST Act was passed in Lok Sabha on 22.3.17 and subsequently in Rajya Sabha and  got President’s assent.  Apart from this, the SGST has to pass through the series of steps for its passing by the majority of State Governments for it become Law and all the formalities shall have to be completed before 30^th June 2017 to enter the new GST era. In the meantime, the Council has to decide on the threshold limits, exemptions etc.

          This is the third time an Bill is doing the rounds in the field, ( 1^st one in May 2016, Second one Nov.2016 and now the one  passed  in Parliament in  March 17 ) sending the learned and the layman, pandit and pedestrian  into a maze, in all its avatars.  Every time it takes a new Avatar, it brings with it new changes in the form of knives wrapped in cotton gloves. Herein, I make some attempt to identify and highlight some of the knives, which would require a departure from the beaten Excise and Service Tax rules mandated and followed so far.

SOPS OFFERED WITH NEAR IMPOSSIBLE CONDITIONS TO FULFIL  

Though, it is stated that there is threshold exemption to small scale sector in goods and services, Government has devised a strategy or mechanism so as to make the small time tax payers to clearly opt out of the exemption carrot offered in the Statute book.

 Section 9(4) of the present Act says when the goods and services are received from unregistered players by the Registered persons, the Registered persons are liable to pay the GST on Reverse Charge basis.  Thus by this way, the Govt wants to ensure all the goods and services both supplied and received by the registered persons are GST suffered, thus bringing the GST cycle complete.  But what is lost sight is that it will serve as a disincentive for an unregistered person to supply the goods or services or both to the registered person.  Which Registered person will be ready to chase the unregistered supplier only to take the responsibility of paying the taxes on his behalf?

Think of a big industry purchasing provisions for canteen needs and stationery from small shops to meet its sundry needs.  Surely, they are likely miss out something, for which the Audit people will come with big lens to catch only to slap Tax and interest and penalty liability at a later date. We will surely live to witness such dramas in future.  Aache Dins aane walah hai!

Thus it is the other way of bringing all the people to fall in line. It is another game by the Government to show on book that there are threshold exemptions but in reality hurdles are put in place to frustrate the enjoyment of the same  it by the exemption aspirants. So the unregistered persons are to limit their transaction within the unregistered persons’circle.  However, the registered persons are to suffer in case they go in for purchase from unregistered sector.

WOES OF UNREGISTERED PERSONS CONTINUE

If you think only the Registered persons are the only one to bear the cross on behalf of the unregistered persons, you are wrong.  We won’t spare unregistered persons easily either.  An unregistered person has to be very watchful to ensure that his supplies are always within the same state.  In case he makes any single supply to a person whether registered or not in another state, he is liable for paying IGST on forward basis.  Even for making for one supply you have to take out GST registration, file multiple returns, pay the taxes on due dates.  Consequences of failure to notice any such inter state supply will be a subject of different tragic story!  So small time players – beware you may continue to enjoy the exemption benefits with the Swords of Damocles hanging permanently over your heads.  

EDUCATION THROUGH PRIVATE CHANNELS – BOUND TO BE A COSTLIER AFFAIR

Under the GST era all Kalvi thanthais ( Fathers of Education -  an euphemism for Education hawkers )are  to come under tax net. As on date all education services other than ones of commercial nature are exempt.  In GST regime, the exemption is restricted only to education services by Government or local authority.  Govt authority means Board or any authority with 90% equity by Government.  This step, if I presume correct, is the right one to bring the illegal money into legal circulation.  Thus the unwritten/undeclared capitals received from the innocent persons will be subject to GST.  A great step, but with more pain to the education seekers.  But have heart, it will stop the accumulation of ill-gotten wealth which are the root causes for all the illegal activities we notice in the country. 

For the time being I take leave for this week.  Rest of them in subsequent posts.

 

My Journey Into GST

Dear friends,

" Yenna kodumai ithu Saravanan".

  You may be aware of this famous punch dialogue of blockbuster Chandramukhi of yester years.  When I read that a new Draft GST Law is put in circulation by the Government in the month of May 2016, i.e in the month of my retirement, the aforesaid dialogue started lingering in my ears.  The reasons are not far to seek.

Ever since I joined the Central Excise Department, i.e.,  on 1^st January 1981, my superiors and the learned pundits of Regional Training Institute ( my reverential respects to Shri W.S. Krishnan, the then Collector of Central Excise,  Chennai ) who taught me the abc of Central Excise,   started drilling into my head that the most important concept for the  levy of Excise duty is ‘ manufacture ’.  Thus started my journey in Central Excise and there was no looking back until my retirement. This concept also played an important role in later years when new (baby ) levy – Service Tax was born into the indirect tax family.  During this period of nearly 36 years, I have read hundreds of hairsplitting interpretational judgments delivered by Hon’ble Tribunals, High Courts and Supreme Court from time to time dissecting the concept of ‘manufacture’ threadbare.

Now imagine my plight. I am almost touching the winning post – i.e. point of my retirement. When I was about to finish my innings in the Department successfully,  all my learned gurus of the Department and the learned judges of the various Courts turned back and said in unison ‘ All your learned so far about the indirect tax levy in India is wrong; the basic concept of ‘manufacture’ is gone! ; no longer it is valid;  high time you  started unlearning  that concept  and you catch up with new concept of ‘ supply of goods and/or services ‘ for the levy of indirect Taxes.  Now, whom should appeal crying ‘ this is unfair! Very unfair!  You cannot do this to this child who was reared and nourished all these years  with the nutritious diet of ‘manufacture concept ‘.

Nevertheless, I turn to my Lord Krishna who has never failed, nor will do in future, for an answer.  He, with his enigmatic smile, tells me “Listen . There are three things unavoidable in this world.  They are 1. Death; 2 Taxes and 3 changes”.  Nothing is permanent in this world.  I have given the wisdom to know this fundamental truth.  Then why wail and cry foul.  There is nothing that you cannot learn.  Try the new law also.

Thus, mustering courage from gospel, I took upon myself the task of learning the new law.  All these 4 months ( in Nov 2016 Revised GST was put in circulation ) I read the new law and out of whatever was gathered as knowledge, I have successfully conducted 4 seminars also in February 2017 in which more than 500 members participated  shooting volley of arrows of doubts towards me showing lot of interest.  That was a memorable experience. I feel it is time for me to share such knowledge in this forum also for the benefit of all. 

Now, in the succeeding posts, I intend to pour my knowledge of GST in layman’s language distinguishing it with Central Excise and Service Tax.  Members are welcome to participate and  to chip in their doubts ( no matter who silly or small it may be )  which would open the new window of knowledge not only to you but also to others and me too!

I take leave of you for the time being……    Venkatesan