Shades of grey in GST: 5 provisions that need greater debate

Shades of grey in GST: 5 provisions that need greater debate

Goods & Services Tax (GST) was launched with much fanfare at midnight, July 1, 2017 replacing 17 erstwhile laws, both Central and State level. The learning curve of both, the Government and the industry, has been steep over the near nine months that have elapsed. And, astonishingly, the multitude of notifications, circulars and press releases have left India gasping and clutching at straws to stay afloat.

Having said that, the intention is honourable and must be respected and supported in every way. The long run will prove that GST is certainly good for the Indian economy contrary to oscillating views doing the rounds as of now. Any new legislation takes time to settle down, as will GST. Till then, thoughts and deliberations between the two stakeholders, the Government and the industry, will continue. Amongst many others, the following five things have the potential of disruption to a much larger ..


Taking a cue from the Malaysian GST law, this was also picked up for the Indian law. However, other than a few lines of legislation and no detailed guidelines on the subject, this will prove to be the proverbial “pandora’s box” of litigation, especially when assessments commence. The law requires the benefit arising under GST to be passed on to the consumers, and rightly so. Simple enough to read, but extremely complex to implement. The law is silent (intentionally!), on how to calculate this benefit – compute for the company as a whole or on individual stock keeping units (SKUs); transition expenses incurred permitted as a set-off from benefits under GST or not; how do businesses in the service sector evidence passing on the benefit; and the list goes on and on. An organization’s nightmare and an accountants delight! It would augur well if the government considers releasing adequate guidelines and framework, not just for the businesses, but also for its jurisdictional authorities to prevent unnecessary litigation for all and sundry.

Supplies without consideration

I call this the “Damocles sword” hanging on every tax payer. Transactions between related parties, different offices of same company, even activities between employer and employee are now taxable even if done without consideration. Looks quite innocent on first read but as you delve deeper into the relationships and activities between branches, other than just stock transfer, the mischief of this provision hits, and hits hard. Think of all the activities that are done between various offices for each other and between the employer and the employee, and it becomes messier. Included in the quagmire are the services taken by Indian subsidiaries from their overseas parent. Now, at the time of assessment, this pit will be dug deep and tax demand raised for all such activities identified by the authorities on which tax has not been paid. The story does not end here. In addition to payment of interest and penalty, the tax amount so paid would also not be available as input credit to be offset against any future tax liability. Double whammy!Help is surely needed here from the lawmakers.

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