Skip to main content

GST: Preparing for tax litigation

By
The hope of the goods and services tax ( GST) being implemented has revived with the model GST law being put out in the public domain for comments and the support of virtually every state for the GST in the last empowered committee meeting.
The model GST law with 184 sections and four schedules is longer than each of the laws relating to indirect taxes that the GST seeks to subsume. But it is still incomplete.
There is a mention of another schedule in the charging section, but this unnumbered schedule is yet to be made available. Some of the schedules also mention the list therein is only indicative, revealing the model GST law is still a work in progress.
While many of the existing areas of dispute may continue, Isee potential for new avenues opening up for disputes between taxpayers and tax authorities. Let me illustrate: The GST seeks to tax supply of goods and services. The question of whether a supply will be supply of goods or of service will remain contentious if and so long as there is a tax rate differential between goods and services.
While the classification scheme has not been clearly spelt out in the model GST law, so long as the rate structure is not simplified and unified, there can be disputes regarding classification of goods between tariff items having different rates. Similar will be the position in case of services.
The model GST law seeks matching of documents between supplier and receiver for allowing input tax credit (ITC). In case of a mismatch and where the supplier has not made the tax payment, the ITC shall be reversed with interest. But what if the mismatch is on account of, say, some system glitches? The receiver should not be disallowed the ITC so long as he can establish his eligibility to take credit otherwise.
The provision relating to valuation is quite complex and contains a number of specific inclusions and exclusions. But it requires clarity on the circumstances to reject transaction value between two unrelated parties, valuation for captive consumption, valuation of services between branch and head office, valuation in case of cost allocation of common services, and trade or volume discounts and business practices, which are potential areas of dispute and litigation.
Elaborate provisions have been made for transition from the existing law. But still the question remains unanswered about eligibility to credit on certain pre- GST taxes such as credit of excise duty or service tax in respect of duty- paid invoices lying with the erstwhile valueadded tax ( VAT) dealer, or of credit of central sales tax- and excise duty- paid stock held by the trader.
There is no discussion on how the area- based exemptions and other timebound exemptions or concessions will be grandfathered.
Otherwise, there could be a challenge on the grounds of promissory estoppel.
When there is a change in law, commercial disputes may arise between parties if adequate clauses are not included in the contracts according to the new law.
Business Standard New Delhi, 20th June 2016

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more