Tightening the GST net: Time to expand base, streamline flow of credit

The new government will have to tighten the GST net in its upcoming tenure. The government will have to expand the GST base in the country. At present, real estate (land and building) and petroleum products are outside the GST net. Their absence in the GST net results in a breakage of the credit chain and adds to the cost of the businesses. Alth­ou­gh, petroleum products are inten­tio­nally kept out of GST for a particular period, bringing these products under GST would lower the price of the output supplies. 

V Lakshmikumaran

Streamline flow of credit 

The government should consider doing away with exempt-ions which are subject to the condition of non-availment of credit on inputs and/or input services. Like petroleum products, such exemptions restrict the free flow of credits. 

GST is nearing its second anniversary. Yet the issues relating to transitional credit have not faded away. Issues such as credit on services received in the earlier regime but the invoices of which are received in the GST regime have been still not settled. The government needs to look at these issues and address the same by making changes in the GST law. 

Illustration by Binay Sinha

Transparency in anti-profiteering framework 

The next big task for the new government on the GST front should be to extend the period of applicability of the anti-profiteering framework. Aimed at protecting consumer interest under GST, it was initially meant to be in place for two years. However, considering the recent orders passed and lack of clarity on the principles, there are a number of cases to be resolved by the National Anti-Profiteering Authority. However, merely increasing the tenure of the anti-profiteering authority will not be sufficient. The government should issue clear guidelines to determine the cases where the supplier has profiteered due to the reduction in output tax or an increase in the input tax credit availability. 
 

Centralised Appellate mechanism 

Further, the Advance Ruling Authority is a state-specific authority, which at times results in conflicting rulings issued in different states. Therefore, there is an urgent need for having a Centralised Appellate Mechanism to resolve such disputes. The Authority of Advance Ruling consists of both central and state officers. Therefore, the scope of Advance Ruling should be expanded to cover issues relating to the place of supply.  

Owing to the absence of a mechanism to resolve issues where conflicting/contradictory rulings have been given by different states’ Advance Ruling Authorities, Corporate India is bound to suffer. So, unless the machinery is provided for that, the assessee will have to take up the matter in a high court and thereafter, in the Supreme Court, leading to a considerable cost of prolonged litigation. 

The writer is managing partner, Lakshmikumaran & Sridharan