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Monday, June 25, 2018

Simplifying GST : With massive tax refunds pending clearance, will the tax inspector have a field day?

As the time to match returns and give tax refunds arrive and the cash crunch bites the industry and some inspectors get ready for a post Deepavali bonanza

Written by Sandip Sen | New Delhi | Published: October 26, 2017 3:39:48 pm
gst, Goods and Services Tax,  GST compliance, GST refunds, Simplifying GST, Union minister Pon Radhakrishnan said wrong information should not be spread through cinema and actors should not confuse people using the medium and try to derive political mileage.

Almost Rs 65,000 crores have been claimed back as transitional credit by taxpayers in the TRAN-1 form as businesses moved from the old tax regime to the new GST protocol. This is the credit for the the excise, service tax and VAT paid before the GST was implemented from July 1. The amount is not much considering that Rs 95,000 crores was collected as GST in the month of July. It is just taxes paid for around 20 days of goods in the billing cycle.

You not only pay, but prove that you paid right

However, the amount caused raised eyebrows and the CBEC in a letter dated September 11 asked tax officials to verify GST transitional credit claims of over Rs 1 crore by 162 business houses.  The GST tax collection system has been made fool proof for the Government. Those who have paid taxes have also the responsibility of proving that they have paid the right taxes. Not only online but also to the inspector who will come to his premises to check and verify. It is the inspector’s who will decide if and when you will get your refund. It is nearly two months and the refunds for most of the claims are waiting. Only a few claims of exporters have been cleared because some export councils have been very vocal about the working capital crunch.

Mismatch error delays GSTR 1 refunds

A similar logjam has hit the tax refund of Rs 753 crore of IGST to exporters. Only Rs 150 crores were refunded. The disbursement of refunds to exporters that started from October 10 has been hit by the mismatching errors. The Government spokesman says that a mismatch between the number quoted by the Exporters in the EGM Export General Manifest and the GSTR 1 invoice has slowed down the process of disbursement of refunds to exporters. But this was bound to happen because there is an inherent drawback in the GSTN invoice format that does not permit more than 1 product per bill. The same is being rectified now by Infosys/GSTN. Why should tax officials be needed to reach out to the exporter in cases where the mismatch has been detected?

It is not that tax refunds were never pending in the past. Prior to GST, exporters got refunds of excise duty paid in about two months. Only in the last quarter of the financial year the Govt used to delay refunds as it had to manage its fiscal balance. We must also take into the fact that the Central excise and Service Tax credit worth Rs 1.27 lakh crore was pending as on June 30.

Have we got rid of the inspector in GST ?

The revenue secretary had promised that all exporter credits will be refunded by two months, but that may not happen. But IGST refunds to exporters is less than Rs 10,000 crore a small part of the total refunds of Rs 65,000 claimed, What happens to the rest of the refunds and why is no timeline set for them. Why should the tax inspector verification at all be needed in the case of refunds?

The big issue is whether we have been able to remove the inspector from what was an old corrupt system of refunds of taxes? Whether we have been able to create a distinctly robust and transparent, electronic, automated tax payment and refund system as we framed a spanking new GST law. If we have not been able to do that we must not shy away from rewriting the GSTR Act again. Today it is too complex, too rigid and too confused for ease of business. It needs repeated inspector intervention and inspection to ensure compliance. The entire act is neither easy for compliance nor easy for automated evasion detection.

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