Date: 12-10-2017
To
Ministry of Commerce and Industry
Department of Industrial Policy and
Promotion
New Delhi
Subject: representation against the
notification regarding budgetary support under Goods and Services Tax Regime to
the units located in states of Jammu & Kashmir, Uttarakhand, Himachal
Pradesh and North East including Sikkim
Dear Sir,
The Ministry of Commerce and Industry
through Department of Industrial Policy & Promotion has released a
notification dated 05.10.2017 wherein the procedure for claim of refund for
units availing area based exemption under Central Excise. In this regards we would like to raise the
following objections:
1.
It has been clearly stated as per para 5.1
that the reimbursement shall be granted only to the extent of 58% of CGST and
29% of IGST paid through cash ledger by the eligible units. In this regards,
following objections are being raised:
a. Since
India has adopted dual concurrent GST model, that does not mean that the
sharing of tax between the centre and state should damage the taxpayer. Earlier
VAT rates as compared to today’s SGST rates were very nominal which were
bearable to the eligible units availing area based exemption. But under GST
regime, where both the centre and the state governments have equal share in the
tax revenue, then why the taxpayers are not allowed the reimbursement of SGST
component. The GST Council should decide and instruct both Centre and State
authorities for reimbursing the taxes.
b. As
per proviso to para 5.1(ii), it has been mentioned that where the unit
purchases any input from composition taxpayer, the reimbursement component
shall be proportionately reduced. This will have double taxation effect: 1) the
eligible unit cannot claim Input Tax Credit and 2) the amount of reimbursement
will also be reduced on account of composition purchase.
c. It
has been clarified that the claim shall be calculated after set-off of input
tax credit pertaining to CGST and IGST. As per section 49 of the CGST Act and
as preference of described for set-off of input tax credit, a taxpayer has to
first set-off IGST against CGST and then SGST. In such a scenario especially in
area based exemption units which are procuring goods from outside the state and
supplying within the state, would not virtually pay CGST in cash. CGST
liability shall be set off against IGST. It is to be noticed that GST is a
destination based consumption tax, where IGST has both CGST and SGST Component
including the share of both centre and the state governments. Hence proportionate
set-off should be allowed with both CGST and SGST, whatever remains payable
should be paid in cash and the taxpayer can be reimbursed the amount of CGST
paid by him.
2.
As per para 5.7, it has been prescribed
that the eligible unit has to submit number of documents with the
jurisdictional officer, who shall further process the same. Where eligible
units were already enjoying area based exemption in pre-GST era, then why are
these documents to be submitted again, that too with an Affidavit-cum-Indemnity
Bond. This will encourage corrupt practices and result in harassment of
taxpayer. It should be categorically noted that by virtue of para 5.7
government is calling for those documents which are already in its possession.
3.
As per para 6 it has been prescribed that
upon submission of documents, a team as deputed by DIPP shall inspect the
eligible units and scrutinize the details of implementation of previous
schemes. Based upon the inspection report, the claim for reimbursement shall be
further processed. Such type of inspections should be done away with. This
shall certainly lead to corruption and harassment to tax payer. When all the
records including earlier law returns, GST returns, and exemption documents are
available with the department, such inspections is nothing but an opportunity
for the officers to indulge in corrupt practices and create embarrassing
situation for taxpayers. Even if in rare cases, inspection is required, prior
approval from the Commissioner GST should be obtained that too with reasons
recorded in writing and intimated to taxpayer. Making inspection a mandatory step
for claiming of reimbursement is totally against the spirit of law.
4.
Also there is no relief for the third party
manufacturers. Most of the units operating the special areas are manufacturing
for the third parties. In this regards the GST paid by the unit for the job
work/contract shall not be reimbursed to the units. This will prove to be an
additional cost for the units. The government should allow the reimbursement in
respect to the GST paid on job work charges for the job work procured from
these states.
5.
The para 9.1 has prescribed that in case
of claim in excess of eligible claim the taxpayer shall be liable to return the
amount along with the interest of 15% per annum. On the same analogy there must
a time barring on the jurisdictional AC/DC of one month i.e. in cases where the
officer fails to pass an order for reimbursement within one month of
application, the amount shall be reimbursed along with interest of 15%. In case
the appropriate office has reasons to believe and the same are informed in
writing to taxpayer, the period of one month may be extended for another 15
days with prior approval of Commissioner.
The government should sincerely consider
our objections, if it really intends to bring flawless scheme for area based
exemption units. There must be transparency and clarity in minds of both the taxpayer
and the proper officer. Otherwise if the scheme is implemented without
considering the above objection, it will become den of malpractices and source
of harassment to taxpayers.
Regards
Keshav R Garg
(B.Com, FCA, CS, ISA (ICAI))
Author: Bharat's GST Ready Reckoner
A Handbook on GST
Member: Indirect Tax Committee of
CII,
Founder: MyGst.MyTax Foundation
Adviser: Industries Association of
Chandigarh
Adviser: Chambers of Chandigarh
Industries
Address: 3328, First Floor, Sector 27
D, Chandigarh, India - 160 019
Phones: +91-172-461-3328, +91-98880-90008
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