PremiumNEW DELHI : The practice of rule-tightening by bureaucrats for stricter enforcement of goods and services tax (GST) compliance away from the political oversight of the GST Council and with serious impact on the industry is set to be questioned in Friday’s GST Council meet.
Punjab finance minister Manpreet Singh Badal has informed Union finance minister Nirmala Sitharaman that these bureaucratic decisions—ranging from restricting input tax credits to cancellation of GST registration—set the dangerous precedent of delegating excessive powers to bureaucrats and that Punjab will not incorporate such substantive legal changes in state legislation in future unless cleared by the council.
Punjab’s move highlights the hardships that many businesses face owing to sustained tightening of rules meant to improve tax compliance at a time the second wave of the pandemic and reduced consumption have disrupted their cashflows.
Badal referred to the substantive nature of the decisions taken by the GST implementation committee, a panel of officers tasked with routine and procedural matters. These include the rule changes for payment of minimum tax in cash even while tax credit is available in certain cases, cancellation and suspension of GST registration on additional grounds, restrictions on validity of e-way bill, e-invoicing requirement for ₹100 crore- ₹500 crore sales companies and other changes that lead to higher compliance burden. These, Badal said, should be either reversed or be placed before the council as a separate agenda for formal approval with retrospective effect.
“..GST is being increasingly perceived to be causing excessive harassment and arbitrariness (eg. freezing of productive assets of businesses, suspension of registrations and denial of eligible tax credits) and moving away from a fair and non-adversarial tax system that forms the foundation for a progressive tax," Badal said in his communication to Sitharaman on Monday. Mint has seen a copy of the communication.
Emails sent to the finance ministry seeking comments for the story remained unanswered till press time.
Industry representatives said the situation of businesses on the ground is very bad due to the pandemic. “This is not the time for tighter compliance requirement. Many offices remain closed and consultants do not have the wherewithal to do the work of their clients from home. Relief on all compliance obligations relating to GST and income tax should be given till December," said a Maharashtra-based entrepreneur on the condition of anonymity.
Friday’s virtual meeting of the council is expected to be lengthy as state ministers are expected to share their hardships, especially the decline in revenue. Since states have to procure vaccines, many state ministers have also sought a reduction in GST on locally produced vaccines and other medical supplies. The council is expected to examine these demands. Many chartered accountants have also sought further relaxations in filing tax returns and paying taxes. Earlier this month, the Central Board of Indirect Taxes and Customs (CBIC) offered some relief by a cut in interest and late fee for delayed reporting of March and April sales and for paying applicable GST.
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