Model GST law and dispute resolution
V S Krishnan
Advisor, Tax Policy Group, EY India
The 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 however not gone far enough in the area of dispute resolution. One of the common grievances that tax payers 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 the 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 world class 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 matters must be ensured by facilitating those who draft the law, to interpret the law
- System must ensure speedy adjudication of cases within definite time lines
- Tax payers 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 new GST law put out in the public domain provides a great opportunity to create such a world class dispute resolution system. Some of the provisions are truly a considerable improvement on the law as it stood hitherto for e.g., 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 for giving 100% tax credit on taxes paid on capital goods is truly a radical change even going beyond the practices of some of the countries of 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 para 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 to issue such binding instructions on assessment matters to the field officers. Needless to mention TRU is in the best position to interpret the law as they are 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. First appeal against the orders must go to the Tribunal rather than the Commissioner Appeals, as this would help fast track finality of adjudications. In the CBEC there is a feeling that such a proposal may create considerable disparity between the level of officers adjudicating similar cases in the 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.
Creation of a technical secretariat would help periodic discussion between the Centre and the States to discuss contentious issues in assessment matters. The tax payers 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 GST law and prescribe one uniform period of three years to complete the 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 maybe a better way of dealing with this distinction rather than a through a time period difference. This amendment will considerably reduce litigation as many tax payers are incensed by wrong invocation of the suppression period and therefore opt to litigate rather than pay the tax.
Finally, in order to reduce the area of disputes a large number of minor procedural infringements could be subject to non-appealable 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. Similarly the chapter discusses in para 68 the principles for imposing minor penalty. It is suggested that instead of imposing minor penalties a list of cases of procedural infringements maybe listed out and maybe subject to specify administrative levies. This would ensure that such cases are decided at the level of junior officers and don't clog the dispute resolution system. Maharashtra has such a provision which could be borrowed.
To sum up, these three changes in the GST law will help to create a world class dispute resolution system and make India an attractive investment destination.