GST – Law Guide
Our Founding Fathers, in the Constituent Assembly, looked at the bevy of indirect tax laws and improved upon them. The concepts inherited from the British Raj were largely preserved. However, a major change was introduced in Sales Tax to cure what the Fathers perceived as the deliberate indulgence of the British towards multiple provincial levies on a single transaction of sale. If India was to become strong economically, this subversive system of taxation had to go. Constitutional restrictions were thus introduced to discipline the disaster that Sales Tax had come to represent by the 1950s. Over the next seven decades, Sales Tax as well as other indirect tax laws were revised to reflect new economic theories and methods of taxation. But at no point of time, before GST came in, had India attempted a wholesale renovation of the entire indirect tax arena. As with all changes, the new regime brings positive and negative changes. Much has been written about the benefits which will accrue to trade and industry in the long term from the fundamental structural changes effected by the GST regime, for example: the cross utilisation of credit between goods and services. However, the greatest effect will be felt in the fight against the shadow economy. By the time this book is printed, it has become apparent that many people have been forced to bring all their transactions into the books due to the new cross-checking mechanism inbuilt into the GST system. The shifting of all statutory processes to the digital platform, including those of collection of tax, registrations and assessments, is also expected to reduce a great deal of corruption for which the tax departments in the country had become legendary. Now, as I have said earlier, no generation of Indians have seen a transformation of the tax laws so massive and grand as the one that GST has brought in. The challenges, therefore, are many. For one, the Constitution amendment and the actual GST legislations were pushed through with great haste. While ordinances and amendment bills can deal with defects in ordinary legislation, a Constitution amendment is somewhat of a difficult proposition. The final versions of the CGST and the IGST laws were shrouded in much secrecy and brought directly to Parliament, before being passed in extremely short periods of time and under the auspices of a debate session which lasted not more than a few hours. One should compare the excruciating process through which the annual Finance Acts go every year with the short vacation that the GST Bills enjoyed in Parliament. State GST laws have also not fared any better on this count. The apprehensions about this hasty law-making process are not entirely misplaced. At the Constitutional level, it is still unclear if the definition of “services” in Article 366(26A) – “anything other than goods” covers transactions of immovable property. Nor has the Constitution ruled out with certainty the possibility of parallel taxation of petroleum products under GST, VAT/Sales Tax as well as Central Excise (See para 1.1-5). As far as the ordinary GST legislations are concerned, the Integrated GST law has not defined “location of supplier of goods”, leaving taxpayers with nothing more than analogies and their own good fortunes while dealing with inter-State supplies of goods. I was involved with representations made by many tax associations when the “model laws” were floated for public comment. This particular anomaly was pointed out by various tax associations and consultants. Till date, no particular clarification has been issued on this point. And in the State GST laws, one can only be amused by the attempt made by the proviso to section 22(1) of the Chhattisgarh GST Act to mandate that registration be obtained in a Coastal State when supplies are made in the territorial waters. These anomalies in the State laws can only be traced to the blind cyclostyling of the Central GST law and passage in the State Assemblies without any meaningful scrutiny or debate. Lastly, the introduction of the HSN system of classification for goods and services has also been a source of great discontent amongst taxpayers. The system is not easy to understand for ordinary taxpayers and frequently calls for trips to the tax consultant’s office. As on the date of penning this preface, no Authority for Advance Ruling has been constituted, and no provisional assessment mechanism is in place. All and any guidance from the Government of India emanates either from Twitter or from Press releases, the lawfulness of which is entirely in doubt at all times. To add to these woes, Central Government clarifications are not binding on State Officers. The GST Tariff notifications also direct the taxpayers to apply the HSN classification system as per the rules of interpretation prescribed under the Customs Tariff. But these rules do not always work well when applied in the context of the rules of classification for composite and mixed supplies in section 8 of the CGST and SGST laws. Section 8 rules are prescribed through primary legislation and cannot be ignored in favour of rules brought in through secondary legislation. Now, I must make some acknowledgements before closing. My training in the taxation laws commenced under the guidance of Mr. V. Sridharan, who is one of the legends of the indirect tax world. I was introduced to the GST and VAT concepts from around the world under his tutelage. A similar mention must be made of Mr. Gautam Ankhad, whose Chambers I joined for understanding the nuances of civil litigation and general law. The perspectives I have gained in his Chambers have contributed immensely towards the views I have taken in this book. I must also thank CA. Sujata Rangnekar and Ms. Namrata Shah, who have painstakingly read the entire manuscript and made significant editorial inputs.