7 Years of GST: My Experience

Facts matter, not truth

In the world of tax professionals, there are two distinct groups: one that prioritizes facts and the other that values jurisprudence and law. Reflecting on my seven years of experience with the Goods and Services Tax (GST), I've observed that the GST department frequently imposes its interpretations under the guise of the "intention of the legislature."

As litigants, we firmly believe that the words in the law should be strictly interpreted unless they yield an absurd meaning. Interpretation should be left to the courts. Case laws are invaluable for understanding the law, but judgments from the indirect tax (IDT) era cannot be directly applied to GST without modifications, as the laws differ significantly.

The Challenge of Finding Relevant Case Laws

Searching for case laws with identical facts is almost impossible, but many are available with reasonable similarities. Last year, we received a significant number of notices for adjudication. Most of these notices fell flat based on interpretation and/or facts. However, the department proceeded with additions and litigation. The next round of litigation before the GST Appellate Tribunal will be particularly interesting, as it is the final fact-finding authority.

The Three Primary Objectives of Implementing GST

The implementation of GST aimed to achieve three primary objectives:

1. Removal of the Cascading Effect
2. Reduction in Litigation
3. One Nation, One Tax

1. Removal of the Cascading Effect

The main goal of removing the cascading effect has been partially achieved. However, instances like notices denying input tax credit (ITC) for centralized air conditioners as immovable property and cases like Safari Retreats indicate that GST has not fully met this objective. GST is gradually shifting from removing the cascading effect to double taxation, as seen in various cases where the demand is confirmed on the recipient if the tax has not been paid by the supplier.

2. Reduction in Litigation

In 2022, the first round of adjudication involved "Scrutiny" (ASMT-10). In 2023, adjudication notices (DRC-01) on the same issues were issued and converted into demands (DRC-07). Fresh notices under Section 74 could mark the beginning of the third round of litigation. Therefore, GST has not achieved its objective of reducing litigation.

3. One Nation, One Tax

The issuance of notices for IGST claimed as CGST and SGST revealed that "One Nation, One Tax" is more of a marketing punchline than a reality.

Conclusion

While GST may have faced challenges in achieving some of its initial objectives, it has also brought about significant positive changes.

Here are some notable achievements of GST over the past seven years:

1. Streamlined Tax Structure: GST has simplified the indirect tax structure in India by subsuming multiple taxes into a single tax, making compliance easier for businesses.
2. Increased Transparency: The implementation of GST has increased transparency in the tax system. The use of technology and digital records has made it easier to track transactions and reduce tax evasion.
3. Boost to Formal Economy: GST has incentivized businesses to move from the informal to the formal economy, thereby broadening the tax base and increasing revenue collection.
4. Ease of Doing Business: By creating a uniform tax rate across states, GST has reduced the complexity of doing business in India. This has particularly benefited small and medium enterprises (SMEs).
5. Logistics and Supply Chain Efficiency: The removal of state border check posts and the introduction of the e-way bill system have significantly improved the efficiency of logistics and supply chains, reducing costs and delivery times.
6. Enhanced Competitiveness: By creating a common national market, GST has enhanced the competitiveness of Indian businesses both domestically and internationally.
7. Reduction in Tax Burden: For many goods and services, GST has led to a reduction in the overall tax burden, benefiting consumers and businesses alike.

Looking Forward

GST might not have fully achieved all its initial objectives, but it has undeniably made significant strides in transforming India's indirect tax landscape. By reducing the number of returns, simplifying the law, and ensuring uniformity across the country, GST has laid a strong foundation for future improvements. As the system continues to evolve, there is hope that it will address existing challenges and further streamline tax processes, benefiting both taxpayers and the economy.