Since 2017, we have been evaluating and debating various GST developments and challenges and the narrative continues. Naturally, a mammoth tax reform of this size will continue to evolve and chart its course over the years. Considering the impact of the pandemic, the government issued various notifications relaxing compliance timelines and reducing interest rates and waiving late fees for belated tax payments and filings for specified periods.

The government also eased annual return compliances by replacing the CA certification of GSTR 9C with self-certification, this has further intensified the need for tighter systems and processes at the taxpayer’s end, to ensure accurate and timely reporting. 

Important GST clarifications in last one year

A great anomaly was put to rest clarifying that interest under Section 50 of the CGST Act is payable on net tax liability and not gross tax liability retrospectively.

Two clarifications that need a specific mention are regarding ‘intermediary of services’ and ‘services rendered by an establishment of a company in India to another establishment located outside India’. Both the clarifications brought huge respite to the industry in the context of qualification as export of services and consequent availability of refund of unutilised ITC.

The most arduous provision has been the power to arrest under Section 69 read along with Section 132 of the CGST Act causing extreme anxiety to taxpayers. Further, the power to block credit under Rule 86A of the CGST Rules has caused havoc for the industry at large..

Key GST judgments in last one year

In the case of Bharti Airtel , the divisional bench of the Hon'ble Delhi High court allowed M/s. Bharti Airtel to rectify its GSTR-3B returns, to claim refund excess tax deposited since GSTR-2A was not operational at that time. 

However, on further appeal, the Hon’ble Apex Court on 28 October 2021 held that such unilateral change in returns would have a cascading effect on the recipients and suppliers associated with the concerned transactions. Hence, the rectification of GSTR 3B is not allowed and denied the grant of refund.

The Apex court has put the burden on the assessee for self-assessment of tax and payment thereof through cash or utilisation of credit and provided that the system is a mere means and not an end for undertaking compliances. 

Further, in the case of VKC Footsteps India Pvt. Ltd , the Apex court held that the distinction between ‘Goods’ and ‘Services’ made under Rule 89(5) is reasonable. Goods and services being distinct at the constitutional level, can have different treatment while considering refund of tax paid. 

The Apex Court may have denied the refund of ITC on input services in case of inverted duty structure, however, the observations on the anomaly in the prescribed formula may go a long way in taking up the matter before the GST council to frame a fair proposition.

The Hon’ble Madras High Court in M/s. D. Y. Beathel Enterprises v. the State Tax Officer held that ITC availed by the buyer cannot be reversed for non–compliance by the seller. The first port of call for recovery should be the seller and not the buyer.

But ITC Restrictions Continue to be challenging 

Input Tax Credit (ITC) restrictions continue to be a challenge. The most recent one is an assessee can avail ITC on the invoice or debit note only after the details of such invoice or debit note are furnished by the supplier in their statement of outward supplies and appearing in GSTR-2A/2B.

Expectations in the Year Ahead 

Lastly, there are numerous expectations from the government more so matters pending GST Council’s consideration. The thrust should be on effecting amendments or providing clarifications on matters where there have been unwarranted and excessive litigation, including:

a) Cross charge of expenses by HO to branches 

b) Taxability of related party transactions (inter GSTIN, employer-employee)

c) Ease conditions for availing ITC 

d) Set-up of a National Advance Ruling Authority 

e) Expedite the set-up of the GST tribunal 

f) Standardise the practice and procedures to be followed for audit, investigation, cancellation of registration, blocking of credits, encourage pre-consultation and put a curb on undue harassment to the taxpayer

g) Standardise the process of processing and grant of GST registration applications across India 

h) Create more room for associations and taxpayers to file representations on specific issues and provide speedy redressal.