GST reforms: Suggestions to boost ease of doing business and reduce costs

In his Independence Day speech, Prime Minister Narendra Modi made many announcements, but the one that caught the attention of the businesses — small and big — was the promise of a Diwali gift by way of next generation goods and services tax (GST) reforms. Daily-use articles will become cheaper and facilities will increase for small businesses and entrepreneurs, he said. His announcement has raised expectations of rationalisation and reduction of tax rates, especially on goods and services of everyday consumption. On reforming some other aspects of the GST regime, here are some suggestions.

 

There should be no restrictions on taking input tax credit (ITC), on the essential principle that once tax is paid, it should either be refunded or go into the ITC chain. ITC should not be denied because the recipient has not paid the supplier. There should be no time limit for taking the ITC.

 

There should be no restriction on taking the ITC on motor vehicles or for the construction of immovable property used or intended to be used in the course of furtherance of business. The refund of GST paid on export goods or the refund of unutilised ITC on account of exports without GST payment should not be denied on the grounds of non-realisation of export proceeds based on the principle that GST can be collected only on the supply of goods or services in India, the taxable territory. Refund of unutilised ITC should be granted electronically immediately after receipt of the application electronically, and any scrutiny should be done afterwards.

 

ITC of the integrated GST paid through challan in the Customs portal should automatically flow into the GST electronic credit ledger, without any need for reassessment of the bill of entry.  

 

The following suggestions of experts at a recent seminar organised by ‘taxindiaonline.com’ should be considered seriously. An independent body should give advance rulings. The government must identify and address the major issues that cause litigation as a priority. All steps must be taken to get the GST tribunals functioning soon. 

The tribunals must use artificial intelligence to scan all pending litigations for similar matters, say those relating to ITC or interpretations of legal provisions or fraud or classification, etc., and bring all similar issues before separate benches for quick resolution, so that the maximum number of cases are disposed of quickly.   

The hearings must go on without adjournment, with limited time for pleadings, rebuttals, rejoinders, etc. In matters relating to interpretational issues, the interest and penalties should be waived.   

The government must avoid frivolous show-cause notices and pointless litigation. Breakdown of the central GST and the state GST should be done at the back end rather than by the taxpayer.   

The Prime Minister made no direct reference to the higher tariffs imposed by the United States on goods from India. However, he made it clear that the interests of our farmers, livestock keepers, fishermen and small businesses will not be compromised.

His calls for self-sufficiency and for buying goods made in India were intended to convey a message that India will not give in to unreasonable demands from the US. 

Now, we have to wait and see how the US President Donald Trump reacts to the firm stand of our government, after his talks with the Russian President Vladimir Putin on Friday in Alaska.

 

Email: tncrajagopalan@gmail.com