New Delhi: The Central Board of Indirect Taxes and Customs’ (CBIC) clarification on its decision to implement a new set of rules amid a nationwide lockdown for claiming the Input Tax Credit has failed to cut ice with tax experts. GST experts see it as an attempt to defend a wrong decision rather than a genuine effort to reduce the compliance burden of taxpayers in this difficult time.
In a circular issued on March 31, six days after the announcement of a nationwide total lockdown by Prime Minister Narendra Modi, the CBIC asked the GST payers to provide HSN, SAC data along with GSTR-2A forms to claim input tax credit.
“Exporters don't have any objection in providing HSN/SAC data. But they are concerned because they cannot provide these details during the lockdown as this information is available in the invoices that are locked in their factories or offices,” said Pritam Mahure a Pune based Chartered Accountant.
“GST authorities should know that this will disable the exporters from submitting refund claims,” he told ETV Bharat.
HSN-SAC and their use in tax administration
Harmonised System of Nomenclature (HSN) number and Service Accounting Code (SAC) denote the precise category of goods and services supplied by a vendor.
HAS and SAC numbers are widely used worldwide for identification of goods, in international trade and also for taxation purposes.
It is mandatory to mention the relevant HSN or SAC number in an invoice but they were never fed in the GSTR-1 form uploaded by a supplier in the GSTN portal. In fact, the relevant fields were never created in the GSTR-1 form that can auto-populate this data in a buyer’s GSTR-2A for inward supplies.
What CBIC wants taxpayers to do
In its circular dated March 31, the CBIC asked GST registered businesses to provide the HSN and SAC details in the annexure-2 while submitting the GSTR-2A forms.
Now the CBIC has asked the companies to provide HSN & SAC numbers by amending the format of Annexure-B which a company is required to upload along with the GSTR-2A form.
Is this information readily available
The GSTR-1 form for outward supplies, which auto-populates a GST registered buyers GSTR-2 form for inward supplies, does not contain this HSN-SAC information.
Industry sources say, though a supplier fills summarised data of HSN-SAC number in the GSTN portal but it is only shared with the government and not with the recipient of goods or service.
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Industry sources and tax experts complain that it is almost impossible for them to manually collect and manually feed all these details in the annexure during the lockdown period.
Taxpayer’s expectations
Pritam Mahure said: “As an interim measure, the CBIC can provisionally release 90% of the claimed amount and withhold 10% amount if it has any doubts.”
Another tax expert, CMA Mallikarjuna Gupta says that taxpayers should be allowed to claim refund during the lockdown period without HSN/SAC data.
“Many of them do not have access to this data during the lockdown, especially the MSMEs, and their value cash is being blocked,” he told ETV Bharat.
CBIC’s justification for implementing new rules
In its clarification, the CBIC said the provision for asking the HSN & SAC data was implemented to expedite the refund process after obtaining the clearance from GST council last month.
CBIC also said the earlier system of seeking this data at the time of processing of claims was leading to delays and an increase in compliance cost. In a press release issued on April 17, the board said it has processed funds worth Rs 5,204 crore since March 30.
CBIC’s defence fails to cut ice with experts
However, it has failed to cut ice with the two GST experts contacted by ETV Bharat. These specialists have written several books on GST and are closely involved with taxpayers and tax administrators.
Both of them advocated returning to the old system during the lockdown period. They say the GST law provides for several mechanisms, including arrest and recovery, in case of a fraudulent claim of Input Tax Credit refund.
“The new requirement does not seem to be in line with Government’s claim to support exporters, therefore either the earlier system should be reinstated, otherwise authorities should relax it for time being and this information can be asked when the lockdown is lifted,” asked Pritam Mahure.
“GST Authorities have 5 years to recover any refund granted erroneously,” pointed out Pritam Mahure who has written several books on GST, VAT and international taxation.
“To ensure that there is no revenue leakage, a declaration can be taken and if any wrong doing is found the same can be recovered. By adopting this method it will be a win-win situation for all the stakeholders,” explained CMA Mallikarjuna Gupta.
Demand for long-lasting solution to taxpayer's problems
CMA Mallikarjuna Gupta, a practicing cost accountant, says that the government should expeditiously roll out the new return format where a supplier is required to provide all these details in GSTR-1 form.
He said a buyer’s GSTR-2A form, which is auto-populated using GSTR-1 data, will have this information, including HSN and SAC codes.
“It will automate the process of refund claims and reduce human errors,” he told ETV Bharat.
How UAE authorities are handling tax issues during the Covid?
Tax experts and industry sources complain that the government has not given any substantial relief to taxpayers to help them deal with the dire situation caused by the outbreak of COVID-19 pandemic that has disrupted businesses across the world.
The highly infectious virus has so far killed more than 650 people in the country and over 1.82 lakh people across the world.
The USA, European nations, Japan and other countries like UAE have announced substantial relief measures to protect their economy from the adverse impact of the global pandemic.
“To support exporters, neighboring countries like the United Arab Emirates are processing VAT refunds expeditiously without insisting on new or additional procedural requirements,” said Pritam Mahure.
(Article by Krishnanand Tripathi)
