Administration in GST-Moving Upstairs or Downstairs

ADMINISTRATION IN GST – MOVING UPSTAIRS OR DOWNSTAIRS

Prepared By:

CA Pradeep Jain,

CA Preeti Parihar and

Sukhvinder Kaur, LLB [FYIC]

Introduction:

“Too many cooks spoil the broth” perhaps this would have been in the thoughts of Group on Implementation of GST while analyzing the organizational structure for GST. This group is a committee constituted by the Government that has been framed to analyze all the aspects which will be affected by implementation of GST. On 12.07.2010, the Group has given their report. In this article, we are discussing the administrative changes proposed by the Group under GST regime.

ü      Organizational Structure proposed under GST: -

The Group has recommended that the organizational structure under the GST regime should be on functional basis rather than on territorial jurisdiction basis. The present organizational structure is based on territorial jurisdiction and one office i.e. Range handles all the different functions pertaining to units falling under their jurisdiction. Thus, one office handles the various functions of registration, audit, refund, adjudication, legal, recovery, taxpayer services etc.

Under GST, the Group has recommended functional division of work. It is proposed that different divisions of an office should handle different functions of registration, audit, refund, adjudication, legal, recovery, taxpayer services etc. This has been done to encourage specialization as well as better organizational structure.

It has been proposed that the new structure would be having (i) GST Commissionerates having a functional or combination of functional & territorial jurisdiction and (ii) Separate Commissionerates for Audit & Anti-evasion. Thus, exclusive Audit and Anti-evasion Commissionerates have been proposed.

ü      Audit Commissionerates: -

Present scenario:

At present, the Audit work in Central Excise Commissionerate is done by the Audit teams which work under the direct supervision of an AC level officer who reports to the Commissioner. This is the case where units are located at one place. In the case of Multi Locational units (MLU) belonging to same assessee is co-ordinated by the office of ADG (Audit).

Proposal for GST:-

Looking to the success and achievements of DGCEI, it is being accepted that an entity entrusted with a specialized function snatch a better result. As such, it is proposed that separate and exclusive Commissionerates should be set up for audit and anti-evasion work. For the taxpayers having Multi-locational units (MLU) in a state, for high revenue-paying units and for some of the complex business sectors, it is recommended that the Audit must be conducted by Audit Commissionerates. And for other assessees, it is proposed that the jurisdictional GST Commissionerates should do the Audit work.

Within the Audit Commissionerates, it is proposed that there should be specialized Cells for specific industry or sector. For example, specialized audit groups for banking and financial services in Mumbai, for Mining Industry in Chhattisgarh, or for Petrochemical Industry in Gujarat. This is being proposed under a thought that this will enhance the domain knowledge of the audit officers and will develop a professional approach. It has also been suggested that these specialized groups may provide policy inputs to the Board also.    

However, the group has not clarified what will be the status of the audit paras raised by the audit Commissionerates. Whether these will be replied directly to these Commissionerates only as regards present scene where these are routed through the range and division. While analyzing the need of formation of audit Commissionerates, the Group has perhaps not thought over the staff-recruitments. Since one audit Commissionerate will be holding watch-over on a no. of assessees what will be the status of frequency of audits. The Commissionerate will surely need adequacy of staff to accomplish its tasks. But what will be the consequences of the audit paras so raised. By whom the resulting show cause notice will be issued? To whom they will be replied and the consequences of these notices will be followed up by whom? If the Audit Commissionerate is itself going to accomplish all these tasks, one can presume of a day when the audit Commissionerate will be indulged in routine matters like follow up which in present system is carried on by the officers of lower rank.

Anti-Evasion Commissionerates: -

Present Scenario:

Anti-evasion work is done by three types of teams – (i) Anti-evasion wing of the Commissionerate Headquarters; (ii) Preventive units of the Divisions; and (iii) Directorate General of Central Excise Intelligence (DGCEI). Out of the three, the DGCEI is carrying out the work of intelligence and investigation at national level. It is top-ranked of three as regards quality of cases booked, value of goods and amount of duty involved in offence cases. The reason is being analyzed as this is an independent and specialized entity devoting its 100% in this particular task only.

Proposal for GST:-

It is proposed that the anti-evasion work should be handled by a more specialized and exclusive Anti-evasion Commissionerate. Proposal for set up of one exclusive Anti-evasion Commissionerate in one state is forwarded. However, in case of certain states where there are smaller numbers of taxpayers like in North-eastern states, Uttarakhand etc., one anti-evasion Commissionerate may have jurisdiction over more than one State. Case may be vice versa in the States like Maharashtra and Gujarat where one state may require more than one Anti-evasion Commissionerate. Just like audit Commissionerate, anti-evasion Commissionerate will also face a lot of similar problems like follow up of the cases made by the anti-evasion team. If no proper follow up is there, the efforts/aim of setting up separate Commissionerate will be senseless.

ü      Staff of Audit/Anti-evasion Commissionerates:  -

The Group has proposed that the entire staff of Audit/Anti-evasion Commissionerates is not required to be centralized at the headquarters. They can be placed at different places within the state which will be as per the administrative requirements. However, whether all the staff will be fit for every location? The Group itself has proposed the establishment of specialized cells for specific industry or sector. Working there for certain time will adversely affect their competency in a different sector. It is also proposed to divide the Commissionerates on functional basis which will also affect the movability of the staff and their services. It will also be limited to that particular function. If they are moved to another sector/department, it will reduce the quality of work. Further, if it is decided to transfer the staff on a frequent basis, it will increase the related costs to government and will reduce the sense of responsibility amongst them.

ü      Supervision of Work: -

The Group has recommended that Audit/Anti-evasion work at Commissionerates should be supervised by officers of the rank of Chief Commissioners. One Commissioner can be made in-charge of 3-4 such Commissionerates. At the apex level, the Group proposed that DG (Audit) and DG (Anti-evasion) should be made Nodal Officers to ensure proper co-ordination of work of Chief Commissioners of Audit and Anti-evasion. As such, in the hierarchy, the audit/anti-evasion Commissionerates alongwith jurisdictional Commissionerates will report to Chief Commissioners who in turn will report to DG (Audit)/DG(Anti-evasion) (also known as nodal officers). The nodal officers will be accountable to the Board. 

ü      GST Commissionerates: -

The Group has recommended three types of GST Commissionerates to be set up. This has been done keeping in mind the fact that taxpayers within a state and amongst the states are not uniformly located. Also, some assessees have more than one premises in a state. It has also been considered that now CBEC will be administering manufacturers, types of dealers, service providers and inter-State dealers.

Thus, it has been provided that a uniform organizational structure for the entire country would not work and different types of organizational structure is required depending upon dispersal/diversity of assessees in an area.

The Group has recommended following types of Commissionerates which will have a clearly defined geographical jurisdiction:

(a)        One-tier functional Commissionerate

(b)        Two-tier functional Commissionerate

(c)        Three-tier territorial Commissionerate

One-Tier functional Commissionerate: -

Characteristics:-

·              It is proposed for cities having large concentration of assessees.

·              It will be formed on functional basis.

·              It will comprise of different divisions wherein specific functions like registration, processing of returns, refund, adjudication, administration, appeal, recovery of arrears etc. will be performed.

·              Each division may further have sub-divisions.

This type of Commissionerate will promote specialization and improve efficiency. It would also avoid movement of files from Range to Division and from Division to Commissionerate Headquarters as is being done presently. Duplicity of work will also be minimized.

Two-Tier functional Commissionerate: -

Characteristics:-

·              It is proposed for cities where taxpayers are spread over a relatively large area i.e. within 50-100 Kms from the Commissionerate Hqrs.

·              Under this type of Commissionerate, there will be territorial Divisions.

·              The divisions will work on functional basis. It means each division will perform specific function like registration, processing of returns, refund, adjudication, administration, appeal, recovery of arrears etc.