GST laws today are an amazing amalgam of restrictions through percentages, different threshold limits and a bewildering array of dates for filing of returns and complying with different provisions of the law.
Composition dealers have a different threshold limit while the small taxpayer has been defined as one with a turnover less than ₹5 crore. Different dates for filing have been announced depending on whether the taxpayer is located in South or North India. The GSTR 3B form, which was introduced as a temporary form, has become semi-permanent at least till March 31, 2021.
But it is in the restrictions through percentage ceilings and floors that the law-makers truly revel in. Rule 36(4) was introduced in 2019 through a Notification that restricted credit that could be availed to 20 per cent of the eligible credit that has been uploaded by the counterparty to the transaction.
Seeing an uptick in GST collections after this announcement, the percentage was altered to 10 per cent. The latest meeting of the GST Council announced that as a further step towards reducing the compliance burden particularly on small taxpayers having aggregate annual turnover less than ₹5 crore, the Council’s earlier recommendation of allowing filing of returns on a quarterly basis with monthly payments by such taxpayers would be implemented from January 1, 2021. Such quarterly taxpayers would, for the first two months of the quarter, have an option to pay 35 per cent of the net cash tax liability of the last quarter using an auto generated challan. Why only for the first two months or what was the basis to arrive at 35 per cent apart from a fascination for artificial restrictions by playing the percentage game?
Since this is only an option, it is expected to remain that way as the small taxpayer would not be in any mood to park 35 per cent of his cash with the GST department in these times when he has another option. The GST Council also announced that taxpayers with a turnover less than ₹5 crore would need to fill in the 6-digit/4-digit HSN/SAC Codes for supplies to registered and unregistered counterparties respectively. But the government will have the power to notify an 8-digit HSN on notified class of supplies by all taxpayers. The GST Council would do well to simplify the HSN/SAC Codes before embarking on further changes.
Compensation issue
A solution to the GST compensation issue has eluded the GST Council. There is no doubt that there would be a further extension of the GST compensation cess — by how much and at what rates remain to be discussed.
Whether State governments will agree to a haircut on the promised growth of 14 per cent in the extended period of the compensation cess would also prove to be a thorny issue.
According to the CAG, the Centre, in violation of the GST Compensation Cess Act, 2017, short-credited the GST compensation cess fund to the tune of ₹47,272 crore during 2017-18 and 2018-19, retaining the amount in the Consolidated Fund of India.
By doing so, the funds collected through the compensation cess route could be used for purposes other than those provided in the Act. This accounting sleight of hand led to an overestimation of the Centre’s revenue, and as a consequence, an underestimation of its fiscal deficit. The GST Council could form a Compliance Committee that would take care of the pronouncements while it focuses on the big picture of revenue sharing and audit objections.
The writer is a chartered accountant