At present a taxpayer needs to pay their tax liability both on their sales and some defined procurements (such as imports). In most cases, the tax payable on procurements is akin to an advance payment of taxes, as taxpayers are entitled to claim input tax credit. There is an urgent need to relax norms that necessitate this advance payment. Taxpayers should be allowed to utilize accumulated credits for payments of both output and input taxes (reverse charge).
Release refunds and incentives
Administration has been proactive in the release of GST refunds related to exports. However, there is a need for more to be done to ensure a more pervasive efficient administration of refunds. To this end, a campaign to drive refunds needs to be initiated at a structural level. Clarifications and instructions on issues that impede refunds should be issued and a robust mechanism to continuously removing roadblocks are required.
Survival and revival equally relevant
The government is looking at formulating financial stimulus and this could include deferral of tax payments and remission of taxes paid linked to employment. In this regard, ensuring availability of cash to sustain operations and investments is important.
Further, some of the impacted sectors are not going to witness any reasonable revenue at least for a few months. Their stress needs to be contained. Financial support can be given by as removing elements in the GST legislation that lead to cascading taxes. This includes considering micro elements such as expanding avenues that allow refunds of blocked input tax credits and inverted duties as also reducing the list of disallowed credits such as input tax credit of taxes paid on inputs that go into construction of civil construction such as airports, leased commercial buildings, as also macro reforms such as expanding the ambit to GST to include sectors such as aviation turbine fuel, petroleum and real estate.
It is important to acknowledge that the changes in supply chain forced by the crisis come bearing opportunities. Incentives and schemes - encouraging production and employment, such as accelerated credit/refund regime, instituted under the GST law are effective. Similar schemes under the erstwhile VAT and excise laws have driven a lot of growth and investments in the past when conceptualized well. There are credible examples of the same and therefore should be considered.
(Sonam Bhandari, Senior Manager, Indirect Tax, EY India also contributed to the article).