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Home >Politics >Policy >GST: A brewing ground for litigation?

We are approaching the first anniversary of the goods and services tax (GST) in India, the historic and much-needed tax reform which is expected to play a significant role in transforming the country’s economic landscape.

In its present form, GST is far from ideal and suffers from various imperfections, including multiple tax slabs and exemptions, cumbersome returns and compliance procedures.

Nonetheless, the government to its credit has been very proactive in trying to resolve the problems faced by taxpayers. GST rules and compliance procedures are being constantly fine-tuned based on the feedback received from the industry. The government is clarifying issues at a frantic pace by not only issuing circulars and public notices, but also through FAQs, tweets and e-fliers.

Despite the best efforts of the government, the imperfections in the GST law have left enough scope for litigations and disputes. Various writ petitions and advance rulings provide just a glimpse of upcoming litigations. Multiple proceedings have been initiated against many taxpayers on the premise that the input credit of various cesses imposed prior to the introduction of GST, was not available for transition in GST. Further, companies have already started facing multiple investigations relating to anti-profiteering, transitional credit and e-way bills. Clarifications issued by the government through informal means (tweets, e-fliers, FAQs), are not legally binding on taxpayers and tax authorities. In some cases, it has been noticed that these clarifications are contradictory and not in line with legal provisions. Therefore, while the intention of the government has been to promptly clarify important aspects through accessible channels for taxpayers, in reality, this is only abetting confusion and litigations.

Going forward, classification disputes due to multiple tax rates, input tax credits, scrutiny of tax returns and technical problems in the GST Network, are likely to be among the most contentious issues.

It is worthy to note here that since the rollout of GST, the law has evolved considerably with the government issuing multiple circulars and notifications for clarifying the scope of provisions under the GST law. The tax rate structure under GST has also undergone multiple revisions since implementation. There have also been many revisions to the procedures and formats prescribed under GST rules. While the government is earnestly trying to bring frequent GST reforms, the constant tinkering with it has exposed companies to risk. Therefore, it has become vital for the companies to constantly revisit their GST positions and be aware of all recent changes.

Rajeev Dimri is partner at Deloitte India.

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