Law and behold – economy editorial with
vocab for IBPS Po or RRB Po bank exam and interview
GST
needs critical tweaks before it is rolled out
Everybody
connected with the implementation of GST appears to be on a mission to ensure
that it is implemented on April 1, 2017. The GST Council has been set up and
has had its first disagreement, a massive training exercise is being done and
draft rules and forms have been issued for public comments. If the GST Council
approves the rates of tax and the State legislations this month, we might be on
course for an April implementation.
While
this is commendable, the Government
may do well to press the pause button for a while and take a re-look at some
critical provisions. Any law that is ambiguously
drafted tends to get into needless litigation later on, despite any number of clarificatory circulars.
Invoice matrimony
Seamless
granting of input tax credit is the foundation of any GST law that believes in
the concept of value-added tax. The foundation of the present GST law is
extremely weak because no effort has been made to rewrite the rules for
availing input tax credit. By copying and pasting bits and pieces of the
present input tax credit under Central Excise and Service Tax, the Government
has also imported all the inefficiencies of the present tax system.
They
have also managed to add to the inefficiencies by framing Section 29 of the
Model GST law which is titled ‘Matching, Reversal and Reclaim of Input Tax
Credit’. The details of every inward supply furnished by a taxable person for a
tax period will be matched with the corresponding details of outward supply
furnished by the counter party in his valid return for the same or a previous
tax period and for duplication of claims of input tax credit. If these match,
life moves but if they don’t, both the parties are intimated about it. An
intimation received in April 2017 will have to be rectified in the return that
is filed in May 2017, failing which it gets automatically added to the tax
liability of May 2017.
Every
supplier and buyer would now need to get into the matrimonial service of
matching their invoices with each other. Differences in invoices can arise
because of innumerable factors— different accounting systems, using codes for
invoicing, differences in designating different types of goods and services and
basic accounting errors.
A
taxpayer who is prompt and correct in the payment of his taxes will now have to
ensure that the rest of the population from whom he receives invoices are like
him. GST is based on the fact that there is no threat of the input tax credit
in the entire supply chain being broken. The ill-advised concept of matching of
invoices will ensure that there will be disruptions in input tax credit due to
administrative errors of the counter party.
Forms, and more
In the
mission to bring in GST from April 2017, draft forms have also been issued.
Filling up any tax form in India normally requires some knowledge of the
respective tax laws and loads of patience. Apart from these two qualities,
filling up the GST forms for ITC Mismatch Report (GST ITC 1A,1B &1C) would
also require a good degree of imagination.
The
Government should see how this scheme works for a period of one year without
penalising the taxpayer by disallowing his input tax credit. Else, Indian
taxpayers would use their innovativeness and ensure that there are as many
versions of invoices as are necessary to get an input tax credit.
Commendable / adjective - deserving praise
Ambiguous / / adjective - having or
expressing more than one possible meaning, sometimes intentionally
Clarification / / noun [ C or U ]- an explanation or more
details that makes something clear or easier to understand
Seamless / / adjective - happening without any sudden changes,
interruption, or difficulty
