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Tax authorities take ‘soft’ approach to get industry to comply with GST regulations

Tax authorities take ‘soft’ approach to get industry to comply with GST regulations

The Goods and Services Tax Bill was introduced in the country in 2017 and it replaced all the indirect taxes that were prevalent in our country. The government, while launching the new tax regime, declared that their intent was to introduce a uniform tax regime for the entire country.

The e-Way Bill is one of the most important by-products of the GST regime and it is an important anti-evasion measure that has the potential of increasing government revenue by Rs 10,000 crore a month by filling in the cracks in business-to-consumer transactions.

The initial apprehensions
Initially there were some apprehensions among taxpayers about the enforcement mechanisms that would come into force under the goods and services tax regime. However, the tax administration has adopted a pragmatic and non-intrusive approach and demonstrated to the people that most of their apprehensions were unfounded. For example, the much-dreaded anti-profiteering mechanism has not issued orders which can have a profoundly adverse effect on enterprises. On the other hand, the initial two orders from the National Anti-profiteering Authority (NAA) have exempted the businesses concerned of the allegations of not handing over the benefits from GST by way of lower tax rates and/or input tax credit to consumers.

Furthermore, even after two months after the roll-out of the Digital e-Way Bill, only a handful of incidents have been reported of the interception of any goods in transit for the purpose of verification. This has mitigated the fear of ‘inspector raj’ to some extent. However, analysts say that these issues still have the chance of cropping up when the tax department escalates its enforcement actions.

The e-Way Bill System
The government had initially launched the Digital e Way Bill system on the 1st of February. However, the system crashed as it could not take so much traffic. However, the system was made operational on the 1st of April and it has functioned without any major problems since.

The intra-state Electronic Bill is being implemented in phases and the tax department has been very lenient towards businesses so as to allow them to get adjusted to the new system.

According an official of the Bihar government,
“We have been handling the transporters with a ‘light touch’ and even correcting bona fide mistakes made in generating e-way bill without imposing fines. Besides, there is no widespread checking of bills in the state.” He however denied that there was any explicit order to go easy on defaulters.

Experts’ Speak
Ketan Kulkarni, the senior vice-president and head of marketing and communications at Bluedart, said,
“Some states have asked their tax departments to step up vigilance on e-way bills to clamp down on evasion. For example, Maharashtra has issued instructions that tax authorities should start taking action against those found to be transporting goods without e-way bill.”

MS Mani, partner at Deloitte India, said,
“While the authorities have been fairly understanding during the initial phase of the roll-out, businesses would hope that the same spirit of mutual respect prevails once all the other anti-evasion and tax enhancement measures are put in place over the next few months.”

Anti-profiteering
The industry was initially worried about the approval of the anti-profiteering provision by the GST Council. They believed that the mechanism to calculate amount of profiteering by a manufacturer or dealer was difficult as an increase in input cost which leads to rise in prices can be taken to be as profiteering.

However, the initial decisions taken by the NAA have been in favour of business. The orders were regarding complaints made against a car dealer in Uttar Pradesh a packaged rice seller. The NAA found the firms not guilty of profiteering. The NAA is currently investigating over 50 complaints.

Rajat Mohan, partner at AMRG and Associates, said,
“Electronic way bills and anti-profiteering provisions were innovative steps in Indian tax structure aimed at ironing out tax evaders and unethical profiteering, but several strata of the business community predicted recurrent technical glitches and coercive methods by director general, safeguards. These predictions have been disproved. Hopefully, tax systems would be more agile and smooth with passage of time, and ease of doing business would gain further momentum.”

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