GST implementation can stabilize field of indirect taxation
Deepak V Rao
Tax & regulatory services
The festivities around Union budget 2013 have commenced. Union budget, an annual affair of presenting the financial robustness of a country and the plans for the year ahead, is in general considered to be a routine matter. However, in the context of Indian economy, Union budget captures momentous attention largely driven by the expectations of the business community and the common man.
On the indirect tax front, introduction and implementation of goods and services tax (GST) remains the mother of all expectations. Though GST is not a magical tonic to cure all the issues faced on the taxation aspects of goods and services, implementation of a well-designed GST could stabilise the field of indirect taxation and mitigate, to a large extent, the complexities under the existing indirect tax regime. Even if GST is not visible at present on the horizon, the industry widely expects budget 2013 to embark on a mixture of important measures to eliminate the present inadequacies under the indirect tax legislations, some of which could include as follows.
The cenvat credit rules, which enables an assessee to avail credit of taxes paid on inputs, input services and capital goods has suffered plentiful alterations over a period of time, primarily concentrating on restricting availment of credit for various inputs and input services. The cenvat credit legislation as it stands today, with its abundant restrictions, does not integrate effectively into the negative list of services regime and has exposed itself to manifold interpretations both by the assessee and the tax. As we move into the GST family, budget 2013 has to eliminate the artificial restrictions and facilitate seamless integration of the cenvat credit rules into the negative list of services regime.
Authority for advance ruling (AAR) for proposed transaction has been traditionally marketed as an effective forum to achieve certainty on taxability and valuation issues and avoid litigation, especially in an environment of aggressive tax enforcement and damaging penal consequences. However, omission of ruling options for current/in-progress transactions and in-country grown assessees has limited the utility of AAR and has created a mad rush at the tribunals and courts for remedy through litigation. Budget 2013 should enable extensive utilisation of AAR and limit protracted litigations at courts, thereby promoting a more business enabling environment.
Show cause notices (SCN) are being served by the tax offices to assessees at an appalling frequency, with frivolous and untenable allegations. Lack of accountability on the tax office for ill-conceived SCNs has shaped a rampant circulation of SCNs that badger assesses into the quagmire of litigation. Budget 2013 should prevent the misuse of provisions and hold the tax office accountable for misadventures.
Refund and rebate of input taxes remains a marathon run for assesses and even when refund/rebates are sanctioned after countless years, the assessee is denied the interest on the delayed refunds at the jurisdictional level and is forced to pursue the annoying litigation route to claim the interest due. In the interest to equality of rights, if the assessee has to part with interest and penalty for tax omissions, the tax office should also be equally held responsible to part with interest when refund/rebate accrues to the assessee.
Knowingly or unknowingly, the procedural and documentation requirements on indirect tax matters have crossed the boundary walls and simplification seems to be the only way ahead. The attempt to create a common/single tax return structure for excise and service tax on a monthly basis is still buried underground and re-introduction of ‘category of service tax’, as it existed earlier, for the purpose of service tax registration and payments has turned the clock backwards by a decade. Budget 2013 should aggressively push for long-term simplification measures instead of short-term quick fix.
The speech of the finance minister on budget 2013 will be devotedly heard by one and all to get a committed date for implementation of GST and for solutions on the large-scale issues surrounding indirect taxation.
(The author’s views expressed are his own)