The industry body has recently submitted a policy memorandum to the government, outlining a comprehensive set of 12 recommendations aimed at enhancing the efficiency of the indirect tax system, primarily through improvements to the GST portal. This move comes as a response to the prevailing challenges that taxpayers are currently grappling with.
Despite strides made towards the ‘one nation, one tax’ objective with the implementation of Goods and Services Tax (GST), there remain distinct complexities due to multiple tax slabs and exemptions. In light of this, the industry body has put forth a series of pragmatic measures to address these issues and bring about greater clarity. An imperative among these measures is a call for clear guidelines regarding the application of GST on Employee Stock Option Plans (ESOPs), a matter that has triggered summonses and inquiries from GST authorities in specific states such as Karnataka. The memorandum asserts that prompt clarification by the government can preclude similar summonses and inquiries from emerging in other states.
MVIRDC World Trade Center has voiced its recommendations directly to the Central Board of Indirect Taxes (CBIC) and the GST Council. The memorandum highlights the situation faced by service providers and goods exporters who allocate a significant portion of their expenditures to capital goods. Presently, these entities encounter challenges in obtaining input tax credit (ITC) for capital goods procurement when exporting their products or services without paying IGST under LUT (Letter of Undertaking). Despite the zero-rated status of exports under GST law, the existing formula does not facilitate the refund of input taxes, thereby posing an obstacle. To resolve this, the industry body proposes that the government ensures genuine exporters can benefit from zero-rated supply by granting input tax credits for capital goods procurement.
In summation, the memorandum presents a pragmatic and actionable roadmap for refining the current indirect tax framework, addressing pertinent issues like GST on ESOPs and input tax credit on capital goods procurement. By taking heed of these recommendations, the government can steer the nation’s tax system towards enhanced coherence and efficiency, benefiting both taxpayers and the overall economy.
Officer’s Authority and Limits in Vehicle Inspection and Interception Explained
The powers vested in officers for the interception and inspection of vehicles under the GST regime warrant a closer look. Instances have arisen where GST inspection officials have caused delays in releasing goods in transit. They achieve this by scrutinizing factors such as the valuation of goods, the accuracy of goods classification, and the adequacy of tax payments. These officials possess the authority to verify documents like invoices and e-way bills. However, it’s crucial to note that their jurisdiction does not extend to investigating matters related to goods valuation, classification, and tax rates.
Notably, there have been instances of High Court rulings asserting that, in accordance with GST Laws, these authorities lack the prerogative to detain cargo if proper e-way bills and invoices are furnished. In light of this, it is advisable for the Central Board of Indirect Taxes and Customs (CBIC) to issue clear directives to investigating officials, guiding them to abstain from withholding goods based on matters that do not fall within their purview.
Add Functionality to the GST Portal
Currently, the GST portal lacks the necessary features to accommodate the filing of multiple and supplementary claims when taxpayers genuinely overlook certain refund claims. To address this gap, the CBIC should implement new features within the portal that enable seamless filing for such cases. Furthermore, it would be prudent for the government to incorporate a mechanism for rectifying errors in both form GSTR 1 and GSTR 3B. This proposal aligns with the recommendation of the Karnataka High Court, which emphasized the importance of allowing taxpayers to rectify inaccuracies in these forms.
Enable Real-time Data Transfer from Bill of Entry to Form GSTR 2B
Businesses that import input materials encounter a predicament: they cannot promptly avail of input tax credit in the same month of import due to the lack of synchronization between data in the Bill of Entry and form GSTR 2B on the GST portal. Despite the availability of an option on ICEGATE to transfer Bill of Entry data to GSTR 2B, this process is not executed in real-time. To eliminate this hindrance, the CBIC should incorporate a feature that ensures the seamless and real-time flow of data from the Bill of Entry to form GSTR 2B within the GST portal. Such an enhancement would empower importers to swiftly claim input tax credits without unnecessary delays.
Eligibility Confirmation for ITC/Refund of CVD & SAD Paid Before GST Era Transactions
It’s essential to address the eligibility criteria for claiming Input Tax Credit (ITC) or seeking refunds for Countervailing Duty (CVD) and Special Additional Duty (SAD) payments made in transactions preceding the GST era.
In situations where imports were carried out during the Central Excise regime prior to the GST’s enactment, certain provisional assessments have remained pending. The tax department has opted to maintain these assessments as provisional under the Customs Law in numerous instances. Once these assessments are eventually concluded, taxpayers will find themselves liable to settle the Countervailing Duty (CVD) and Special Additional Duty (SAD), alongside any differential customs duty. Unfortunately, within the current GST framework, individuals cannot assert credit or refunds for CVD or SAD payments, which were formerly admissible under the former Central Excise setup.
The entitlement to credit against CVD and SAD represents a legitimate advantage for taxpayers, a privilege that should not be unjustly withheld by the governing authority. Therefore, it is prudent for the government to consider extending relief to these taxpayers. This relief could be in the form of permitting credit or refunds against the CVD and SAD payments made following the conclusive assessment of these older transactions.
Appeal for Reopening FORM TRAN-1 on the GST Portal for Legitimate Cases
A significant number of taxpayers have encountered difficulties due to unintentional omissions in claiming transitional credit during the implementation of GST. Despite the proactive measures undertaken by the government, certain genuine issues persist in asserting these credits.
In response to this, the government introduced a common portal, offering a two-month window for taxpayers to revise their TRAN-1 and TRAN-2 forms. This provision aimed to rectify errors in these forms and facilitate the claiming of transitional credits. The government issued comprehensive guidelines through Circular 180/12/2022 on September 9, 2022, outlining procedures for filing or revising TRAN-1 and TRAN-2 forms, along with Circular 182/14/2022 on November 10, 2022, providing guidance for verifying transitional credits.
Despite these commendable initiatives, a subset of taxpayers continues to encounter genuine challenges in asserting missed credits from the GST’s inception. To support these honest taxpayers, it would be prudent for the government to introduce an additional opportunity. This new window would enable them to assert the credits that inadvertently slipped through during the initial stages of GST implementation.
Let’s reconsider Rule 96B of the CGST Rules.
Exporters who find themselves issuing financial credit notes due to reasons such as price negotiations or defects in goods are encountering significant challenges stemming from their GST liabilities. In this context, a reevaluation of the provisions outlined in Rule 96B of the CGST Rules is warranted. This rule currently mandates the surrender of refunds equivalent to the unrealized portion of export proceeds. However, there is room for amendment to alleviate the burdens faced by these exporters. One potential adjustment could involve the recrediting of the IGST amount surrendered due to the issuance of financial credit notes.
Addressing the Applicability of GST under RCM.
A pressing need exists for the government to provide clarity on whether Indian exporters bear the responsibility of GST payment under the reverse charge mechanism (RCM) in relation to bank charges that are deducted by overseas banks when foreign buyers remit sales proceeds to Indian exporters. This matter is compounded by the fact that the exporter is not the designated recipient of the foreign buyer’s bank’s services, given that payment is made through the Authorized Dealer Bank of the Indian exporter. The absence of a clear legal standpoint is underscored by conflicting judicial verdicts regarding the true recipient of the service—be it the Indian exporter, the Authorized Dealer Bank, or the foreign buyer. In light of this, it is imperative for the government to provide a definitive clarification on the identity of the service recipient within this particular context.
Clarifying Eligibility for ITC against IGST Paid via TR-6 Challan.
To address prevailing ambiguities, it is advisable for the government to furnish clarification on whether exporters can legitimately lay claim to input tax credit against payments of Integrated Goods & Services Tax (IGST) made through TR-6 Challan for the import of input materials. A number of Export Oriented Units (EoUs) and exporters who have imported input materials under advance authorization licenses currently find themselves barred from seeking refunds for IGST payments associated with their exports, in accordance with Rule 96 (10) of CGST.
Unveiling the Appraisal of Value for Transactions Among Associated Entities
In accordance with Schedule I of the CGST Act, exporters are mandated to remit IGST through the mechanism of reverse charge even when facilitating transactions between interconnected entities without any monetary exchange. For instance, when an Indian subordinate employs the branding of its overseas parent company, it triggers an implied transaction, even in the absence of any monetary compensation from the former to the latter. The key quandary here revolves around the identification of the valuation or price for this transaction, given the absence of any financial considerations exchanged between the involved entities. Thus, there arises a necessity for governmental clarification regarding the methodology for determining the value of such interrelated transactions.
Clarity Sought on the Application of GST to Dispatching Samples Abroad
At present, a lack of lucidity persists regarding the obligation of remitting IGST for the export of samples. It is imperative for the government to elucidate the manner in which GST obligations are to be addressed concerning the dispatch of sample goods to foreign entities—whether they are affiliated or unrelated—or the consignment of sample merchandise abroad, intended for quality assessment, research and development, and other such objectives.