As the GST Council takes up the issue of invoice matching on the lines of Infosys Chairman Nandan Nilekani's presentation in its next meeting, Central Board of Excise and Customs (CBEC) Chairperson Vanaja N Sarna says the new mechanism will be put in place after a thorough stakeholder consultation. She tells Dilasha Seth and Indivjal Dhasmana that there is no point introducing another return if it leads to disappointment among taxpayers. Edited excerpts:
The hike is neither inflationary nor protectionist. The items on which the rates have gone up were chosen extremely closely and carefully. This isn’t about protectionism, but for encouraging Make in India by ensuring greater domestic value addition and establishing India as a global manufacturing hub.
The three per cent cess was imposed across the board on items on which the basic customs Duty (BCD), countervailing duty (CVD), and special additional duty (SAD) were imposed. The base has reduced now with the CVD and SAD subsumed in the GST. Only the BCD is left, and it is just one-third of the pool. This amount of the surcharge is almost the same as the kinds of cess imposed earlier.
Eight months down, the GST is yet to stabilise. Did you anticipate these glitches or roadblocks before the roll-out?
The GST is a large reform and it has taken time the world over to stabilise. In India it has happened pretty fast. The roll-out started eight months ago and issues or glitches were addressed very quickly and transparently in the GST Council or through other systems. They were very proactively addressed. The entire government machinery has responded to every issue raised by stakeholders. Whatever problems come to me, I look at them from a policy point of view and whatever relates to the GSTN, I send it to them. Every Council meeting has come up with something or the other to address the problems, be it the exporters’ package or the MSME (micro, small, and medium enterprises) package. The rates were brought down for several items and, in general, were rationalised for both goods and services.
While the government is proactively responding to industry’s concerns, the GST appears to be getting complicated. What do you feel?
While some do say that too frequent changes are very disturbing, let me tell you they are being done to benefit the assessees. For a new taxation system in a country like ours, it is good that some churn is taking place. This ensures that action is taken and the problems are smoothened. The system has stabilised and whatever remains will straighten out soon.
When will invoice matching begin?
The new format is yet to come. We will do thorough stakeholder consultations on the proposal. At present, the invoice level may not be done but credit validation on the basis of credit claimed by buyers in GSTR 3B returns vis-à-vis sale by suppliers as reflected in their GSTR-1 may be carried out.
But companies had worked out their software in accordance with the GSTR 1,2,3 forms. It also seems like a setback for GST Suvidha Providers (GSPs)?
On the GSTR-1/2/3 design, the general feedback was that it was very complicated. I understand the big companies and GSPs prepared the software and a lot of work went into it. Let us wait for the new process and return design as some of building blocks of GSTR 1/2/3 may still be useful.
How has been the response to Infosys Chairman Nandan Nilekani’s presentation on invoice matching?
It did seem simple. Stakeholders also need to be consulted on it. The Law Committee and states are doing consultations and there will be a consensus. Some of the elements of his presentation such as doing away with the legal requirement of paying tax for allowing credit will require states’ concurrence. There is no point introducing another return if it leads to yet another barrage of disappointment. So it needs to be seen holistically. For now, everybody believes this option is better than before and may be acceptable with some tweaking in design to achieve a larger consensus.
The recommendation that the onus be put on the buyer and supplier to do invoice matching appears onerous. Shouldn’t the tax department do it?
There are two models on this. One is that you leave it to the buyer and the supplier to sort out the matching themselves. The other is that the GSTN does it. Matching in the system leads to a very high percentage of mismatch because even a comma has to match. Handling such a large percentage of mismatch will lead to intrusive checking.
What is the actual TRAN credit due?
There is a preliminary verification going on for TRAN credit sought. Almost 85 per cent of the verification is complete. It appears that ineligible credit is not more than 6-10 per cent. We are matching the gross figures given by the GSTN and our DG Systems, and we will have the exact figures in 10-15 days. A detailed exercise for identified taxpayers will be carried out when granulated data is analysed as TRAN credit has multiple components.