GST AND ITS IMPACT.pdf

All India Central Excise Inspectors' Association Representing the Inspectors of Central Excise throughout India. (RECOGNISED BY THE GOVERNMENT OF INDIA, MINISTRY OF FINANCE, VIDE CBEC F.NO.B.12017/1/2004Ad.IV A dated 27.05.2013) 27.05.2013) Date:-30/01/2015 TO, The Secretary General, AICEIA Respected Comrade, Sub:- Goods and Service Tax and its impact on the cadre At the very outset outset , I express my sincere gratitude gratitude Body

vide

that

our

National

its resolution taken in the Co-Ordination Meeting held on 06.09.2014 at

 New Delhi , had entrusted me to perform this task . It is not exaggerating to state that

the

Indirect Taxation is heading towards a new regime in the form of GST(Goods and Service tax). In this endeavor , I have tried to be lucid and comprehensive without compromising the rigour and at the same time not too pedantic so that the fraternity members will find in it much that is essential to understand at least the basics of GST. I will be amply rewarded if this work is of any use to the members of our AICEIA fraternity. Thanking you, Comradely Yours Rajasish Dutta Joint Secretary

Implementing GST: CBEC working on massive restructuring of administrative setup and its possible impacts on our cadre WHILE the implementation of GST and the modalities of the requisite administrative administrative and legal roadmaps are being drawn drawn for the purpose, there were recently some actions within the CBEC,

which

administration

is of

the

designated

GST,

to

authority

provide

the

for

overall

Administrative

Roadmap for an effective implementation of GST. Towards this objective, CBEC constituted a Committee or rather a  ‘Group on Implementation of GST' (‘Implementation Group'

for short). The Implementation Group which consisted of several Chief Commissioners and a few Commissioners, discussed

and

deliberated

on

various

aspects

of

GST

administration and the requisite administrative framework for its effective implementation. After intense deliberations, the Implementation Group came out with a comprehensive report on this subject, which was submitted to the Board and the CBEC has circulated it to all the CCs and DGs for their views. The CBEC wants the CCs to constitute small group of technically proficient officers which should include technically sound

Superintendents

and

Inspectors,

to

study

the

recommendations. As per the Implementation Group, the estimated tax base would be in the range of 50 lakh assessees (which is four times the existing number of 13 lakhs). Since the new regime would entail concurrent tax administration by the Centre and States on the same supply chain of goods and

services, the Implementation Group is of the view that there is a strong need for harmonization of business processes and procedures between the Central and State Governments to take advantage of the synergy between the two tax administrations and also to avoid duplication of compliance requirements for taxpayers. Probable

impact:-

base/numbers of

With

the

manifold

increase

of

tax

assessees , more numbers of Officers are

required for the purpose of assessment of tax liabilities of the tax payers. payers. Kelkar Committee also also stressed stressed on recruitments to cope up with the task. Moreover, our Officers should also get the opportunity of being provided with proper trainings on technical aspects of GST and also on Computer skills required for interacting with State State Government Government Agencies Agencies for checking GST credits as there should be harmonization between the two tax administrators.

Re-engineering of business processes: Based on study of various practices, the Implementation Group

has

identified

the

following

core

business

processes/changes as vital to the new tax administration: (i) Registration process; (ii) Filing of return and processing and payment of tax; (iii) Minimum information to be contained in a GST invoice and books of account of all taxpayers; (iv) Tax compliance issues – Audit & Anti-evasion;

(v) Dispute Resolution System; (vi) A robust IT system to streamline the operations of the tax administration; and (vii) Establishing an organization to handle a large number of taxpayers. The highlights of the proposed business processes in the new GST regime would be: (i) The registration processes for all the three taxes viz., CGST, SGST & IGST should be common and online, with physical verification of a small percentage of taxpayers based on risk assessment parameters. (ii)

A

taxpayer

would

be

given

a

single

PAN-based

registration for all the business premises in a State. (iii) There should be a single return for all the three taxes and the same should be filed online through a common portal. (iv) The frequency of filing of returns for small taxpayers may be made half-yearly or on an annual basis. For medium and large taxpayers, the frequency can be quarterly and monthly respectively. Option to be given to all taxpayers to file monthly returns, if they so desire. (v) Common Facilitation Centres to be set up in each State for all the three taxes, on an outsourced model. (vi) The refund amount to be credited to the claimant's bank account.

(vii) For procedural and minor technical irregularities a fixed percentage as penalty may be prescribed in the law, which can be paid by taxpayers on their own assessment, without the requirement of issue of show cause notice and follow up adjudication. (viii) Submission of Annual Audit Reports by the taxpayer above a specified threshold to be prescribed. Audit may be done by the professionals like CA/CWA, format of the audit report to be finalised by the Board in consultation with ICAI/ICWAI. (ix) A very small percentage of small taxpayers to be selected for audit, based on the risk parameters. (x) The present practice of mandatory annual audit of the large taxpayers to be dispensed with and replaced by an audit regime based on stringent risk parameters. Probable other

impacts:-As

the

registration

and

process will be common and online and

many scope of

interface with the taxpayer is minimum, proper scrutiny of available records will be of paramount importance and our Officers will have to be well equipped with Rules and Procedures .Audit will be the major tool to unearth the evasion of taxes taxes and our Officers will

require extensive

knowledge on technical aspects of GST with particular emphasis

on

Financial

Accounting

as

the

CBEC

is

contemplating that large taxpayers will be audited by

professionals like CA/ICWA. This move of the CBEC may ruin our career .All Associations should fight unitedly against this design of the Government as we are also capable in the task of Auditing. While we need to fight

unitedly against against this

decision of the CBEC, we should also upgrade our skill of Auditing Financial Records for the evaluation of tax liabilities and unearth revenue evasion by the Offenders.

Revamp of Organizational Structure: For effective implementation of these business processes, the Implementation Group has proposed a complete revamp of the existing organizational structure. It proposes that one common centralized portal for online registration, e-payment, e -payment, and return return filing etc etc should be there with a recommendation to augment human resources in the Directorate of Systems working under CBEC. In the field formations, formations, the new regime would consist of GST Commissionerates to be organized mostly on functional basis and there is a proposal for separate Audit and Anti-Evasion Commissionerates in each State, except in smaller states. The multi-locational and large l arge tax paying units in complex business sectors would be audited by the Audit Commissionerates and the rest by the  jurisdictional GST Commissionerates.

With respect to GST Commissionerates, there is a proposal to form

four

types

of

Commissionerates

with

each

Commissionerate having a specified territorial jurisdiction. The four types are: i) One-tier (exclusively for big cities where

entire

functional

work

will

be

handled

by

the

Commissionerate itself); (ii) Two-tier (consisting of divisions working on functional basis - where taxpayers are spread over a relatively large area); (iii) Three-tier (consisting of divisions, ranges - where taxpayers are spread over a very large area) and (iv) A combination of all the above (for areas where there is uneven spread of taxpayers). The proposal is to

have

150

GST

Commissionerates,

45

Audit

Commissionerates and 20 Anti-Evasion Commissionerates across the country In addition to these there is a proposal to establish State level LTUs in major States for providing better taxpayer services and co-ordination in matters relating to CGST, SGST and IGST. Probable impact :-With :-With the workload increasing manifold, the requirement of more and more Officers are a must. The  Association should move the Board for more recruitment in tandem with the anticipated workload. The Officers careers should also be looked into account by the Board. There should be promotions in time bound manner say after every 5/8 years so that the Officers are also motivated to enhance their skills and work devotedly. d evotedly.

Investigation/Arrest/Search/Seizure: In addition to the above changes in the business processes and the requisite supporting administrative and functional mechanism to oversee these processes, the Implementation Group

also

proposed

certain

changes

in

the

Dispute

Resolution Mechanism. To begin with, the Implementation Group

suggests

that

there

should

be

an

institutional

mechanism for periodic or real-time sharing of information or intelligence between the Central and State Governments, like the existing REIC model.  Authorities

for

searches/seizures

would

be

devolved

separately on Central and State Governments for issuing warrants under CGST/IGST and SGST laws. Towards this end, the legal provisions under CrPC may be replicated with suitable modifications in the proposed legislations. Search warrants under CGST/IGST would be issued by officers of the rank of Jt./Addl. Commissioner or the Commissioner. One authority

undertaking

search/seizure

operations

should

inform the other authority (CGST to SGST and vice-versa) for better coordination and conducting of joint operations. Goods and documents would be seized by the authority which actually issues search warrants. The

Implementation

Group

further

recommends

that

investigations may be carried out independently by the ‘concerned'

authority.

The

pro posed

legislations

would

 provide for mechanism to hand over incriminating documents

to the other authority for further investigation within the ambit

of

their

jurisdiction.

Both

Central

and

State

Government officials may be given powers under CGST/IGST and

SGST

laws

to

arrest

and

prosecute

persons

for

serious/repeated offences and officers not below the rank of Commissioners may be vested with the powers to authorize arrest. Dispute Resolution Mechanisms: The

Implementation

Group

recommends

two

alternate

models of dispute resolution under GST after analyzing the  pros and cons of both models. In the first model there will be separate

adjudication

processes

by

CGST

and

SGST

authorities and integration of the two processes only at the stage of appeals to the Tribunals at the State and National level. In this model there would be four stages. In the first and second stage, the adjudication and the appeal processes will be separately carried out by the authorities under the Central and State governments; in the third and fourth stages, appeals in the State and National level GST appellate tribunals will be heard jointly by members selected by both the Governments – Central and States. In the second model, adjudication and appeal processes will be integrated under one single Tribunal viz., the National GST Appellate Tribunal (NGSTAT) which may be headed by a serving or retired judge of the Supreme Court. The officer working

as

adjudicator

as

well

as

the

Commissioner

(Appeals) would not be under the administrative control of CGST or SGST authorities, but functions under the control of the proposed NGSTAT. Officers from Central or State Government as well as judicial service officers would be eligible to work on deputation. The adjudication for the show cause notices issued by both the CGST and SGST authorities would be carried out by one adjudicator, and he would issue a single / common order. Against the said order, an appeal would lie to Commissioner (Appeals), who would again pass a single order. Appeals against the order of Commissioner (Appeals) would lie to State level Tribunal, and further to National GST Appellate Tribunal ( probably the proposed National Tax Tribunals which never saw the light of the day will assume the avatar of NGSTATs ). Adjudicators will be selected through a special process, ensuring appropriate representation of the Central and the State governments and with adequate experience in handling VAT/GST matters along with members drawn from the judicial/legal fraternity. Review and Appellate Mechanism:  And the Implementation Group recommends a common review mechanism for both the above models. Officers of the rank of Commissioners, under the Central and the State Governments

will

adjudicating

authorities

recommendations,

review appeals

the

orders

lower

in

can

be

passed rank. filed

by

On with

the their the

Commissioner (Appeals). Officers of the rank of Chief

Commissioners, under the Central or the State Governments (there is in fact only one Commissioner of Commercial Taxes for an entire State – usually a post which is donned by a not so

senior

IAS

officer

and

no

such

rank

called

Chief

Commissioners exists in the current VAT models of States) will review the adjudication orders passed by officers of the rank of Commissioners or the Orders-in-Appeal passed by the Commissioners (Appeals). On their recommendations, appeals can be filed with the State level GST Tribunals. Officers of the rank of Chief Commissioners, under the Central or the State Governments will review the orders  passed

by

the

State

level

GST

Tribunals.

On

their

recommendations, appeals can be filed before the NGSTAT.  Alternative Dispute Resolution mechanisms: mechanisms: To minimize and reduce litigation, the Implementation Group recommends setting up of an Authority for Advance Rulings whose scope may be sufficiently enlarged to bring within its ambit all categories of domestic and overseas tax-payers including individuals, proprietary & partnership firms, public/  private limited companies, PSUs and other categories of taxpayers. Its rulings shall be binding on all parties (in States, the orders passed by such Advance Ruling Authorities are generally discarded and not accorded much respect by their Commissioners). Further, there is a recommendation to continue with the present system of settling disputes through the institution of Settlement Commission with suitable

modifications in its structure and powers to conform to GST environment.  Also there is a recommendation to set up an office of Ombudsman, with concurrent jurisdiction over CGST, IGST and SGST, in each State (to be combined for smaller States) to redress grievances of tax payers. There is also a proposal to set up Common Trade Facilitation Centres for GST taxpayers across the country. Internal/External Awareness campaigns: To achieve the above goals and objectives by April 1, 2016, the

proposed

date

of

pan

India

GST

roll

out,

the

Implementation Group has recommended setting up of Joint Working Groups in each State with officers from both Central Excise/Service

Tax

department

and

Commercial

tax

departments to exchange complete database of taxpayers, identify premises for setting up of new common-GST offices,  jointly

organize

taxpayer

education

programs,

organize

seminars, workshops, road shows, publicity through print and electronic media, create a website for dissemination of information on GST including FAQs, brochures, leaflets/  pamphlets etc. Internally within the CBEC and its field formations, the Implementation Group has proposed vigorous pursuance of cadre reviews to make available additional manpower at the earliest to ensure a smooth transition to GST. In addition to

this, it recommends that the department should immediately devise a program for familiarizing the staff with the broad framework of GST regime with in-house training programs in Commissionerates through workshops, seminars and also training by NACEN and its Regional Training Institutes. It appears that CBEC is getting ready for GST – April 1, 2016 Probable impact on Officers:- The quasi judicial process of  Adjudication will require more numbers of Officers with sound knowledge of various indirect tax laws as it is evident evident that there will be disputes of wrong credit credit availment on SGST for  paying final duty of CGST and vice-versa.To ascertain the veracity of such

cross credit credit utilization , knowledge knowledge on

various tax laws especially indirect ones is a must for proper adjudication/appeal or even for booking of an evasion evasion case. case. Hence,

it

is

re-iterated

that

our

Officers

must

equip

themselves with proper knowledge. The Association Association can take up

with

the

comprehensive  procedures.

administration trainings

on

that the

Officers

are

relevant

imparted

Laws

and