The draft model goods and services tax ( GST) law that has been put in the public domain represents the collective consensus between the Centre and the states. While the law has many redeeming features, especially in the area of input credit, it has not gone far enough in the area of dispute resolution.
One of the common grievances that taxpayers have in India relates to delays in the dispute resolution system. It is argued rightly that justice delayed is justice denied.
This argument has three aspects: •When does a disagreement between the department and taxpayers take the form of a " dispute" in a legal sense; •Once the dispute arises, how does one resolve it expeditiously with a degree of finality; •When disputes involve principles of assessment ( matters relating to principles of classification, valuation, etc) how does one ensure that such decisions taken are uniformly applied all over the country Flowing from the above, we can broadly outline the features of a worldclass dispute resolution system: •Disputes must be clearly defined and non- serious infringements should be kept out of the domain of disputes •Uniformity of practice in assessment must be ensured by facilitating those who draft the law to interpret it •The system must ensure speedy adjudication of cases within definite time lines •Taxpayers should be encouraged to settle disputes without resorting to litigation •Non- inclusive mechanisms of interactions must be created between the taxpayer and the tax department The draft GST law put out in the public domain provides a great opportunity to create such a world- class dispute resolution system. Some of its provisions are truly a considerable improvement on the law as it stood earlier. For instance, the wide definition of input credit would go a long way in relieving the assessee of the cascading effect of tax on tax. Similarly, the provision to give 100 per cent tax credit on taxes paid on capital goods is truly a radical change, going even beyond the practices of some countries in the European Union.
Fixing the dispute resolution system holds the key to easing the cost of doing business and will also help in attracting more foreign and domestic investment. One of the pain points today is the uncertainty in tax rates created by non- uniformity in assessment decisions taken by field officers.
To remedy the pain points a conceptual distinction must be made between offence cases and assessment cases. Offence cases are period specific and do not have recurring implications. Assessment cases, on the other hand, relate to principles of classification, valuation and eligibility of cenvat credit and have recurring implications. Field officers could be allowed to decide offence cases on the basis of the facts available. On the other hand, a centralised system of binding instructions must be put in place for field officers for adjudicating assessment matters. In this connection, in Chapter XXIII relating to Miscellaneous Provisions, amendments must be made in paragraph 134 so as not to forbid any centralised competent authority from issuing binding instructions to any GST officer on a particular assessment matter.
It is, therefore, suggested that a technical secretariat may be created as a part of TRU ( tax research unit) to issue such binding instructions on assessment matters to the field officers. Needless to say, the TRU is in the best position to interpret the law as it is associated with its drafting. It must also be provided that such cases relating to assessment matters must be adjudicated only by officers of the rank of Commissioner, without reference to monetary limits. The first appeal against the orders must go to the tribunal rather than the Commissioner Appeals, as this would help fast- track adjudications. In the Central Board of Excise and Customs (CBEC) there is a feeling that such a proposal may create considerable disparity between the level of officers adjudicating similar cases in state governments as they tend to be bottom heavy in their administrative structures. To obviate this problem administratively, the Commissioners powers of adjudicating assessment matters could be delegated to the additional commissioners.
The creation of a technical secretariat would help periodic discussion between the Centre and the states to look into contentious issues in assessment matters.
Taxpayers will benefit from certainty in assessment matters, which would help in the ease of doing business and also reduce the cost of doing business.
The other important change is to do away with the distinction between suppression and non- suppression cases in the draft GST law and prescribe one uniform period of three years to complete adjudications. The suppression aspect could be addressed in the adjudication order on the basis of facts and a higher penalty could be imposed. Therefore, the penalty route may be a better way of dealing with this distinction rather than athrough a time period difference. This amendment will considerably reduce litigation as many taxpayers are incensed by wrong invocation of the suppression period and, therefore, opt to litigate rather than pay the tax.
Finally, to reduce the area of disputes alarge number of minor procedural infringements could be subject to nonappealable administrative levies. In the model GST law, in Chapter XVI, relating to offences and penalties, the list of offences on which major penalties could be imposed is listed out so as to dilute the discretion of the field officers. This is a welcome provision. The chapter discusses the principles for imposing minor penalty. It is suggested that instead of imposing minor penalties, a list of cases of procedural infringements may be listed out and may be subjected to administrative levies. This would ensure that such cases are decided at the level of junior officers and dont clog the dispute resolution system.
These three changes in the GST law could help create a world- class dispute resolution system and make India an attractive investment destination.
Business Standard New Delhi, 27th July 2016
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