Supreme Court said that the stability of the taxation system raises serious questions from the taxpayers. The court instructs the GST council to find out a workable solution. The import tax case from Gujarat high court brought the issue to the desk. There are critics of the GST in the parliament by the opposition party. The Gujarat high court said that IGST on ocean freight lack legislative competency. GST council need to check the voting provision for the decisions. The vote from the state government is two-thirds, and the vote from the central government is one-third. The voting process happened in the year 2019. Around 28 per cent of votes were against the GST system. The GST system came into existence with majority votes. Yet, the dispute resolution mechanism has not been materialised. The decision of the GST council serves the state and central taxes as guiding principles. ICAI offers a certificate course on GST that aims at providing specialized knowledge and analytical skills to the students. This blog is worth reading for those who wish to work as a tax consultant and tax research analyst. The recent Supreme Court judgement educate the students about the concerns with GST.
Philosophy of GST:
GST is a tax with common philosophy for state and central governments. It replaces other indirect taxes. The powers of state and central government over the indirect taxes process are reduced after the introduction of GST. Legislative competence is the issue that GST is facing as an intra-state and inter-state tax. The advantage behind the one tax, one nation philosophy is the low tax rates and timely interstate movement. The digital system help for grouping the process across the states. The quality tax administration reduces the tax rates. The tax credit was blocked for certain products under the GST system. The case of Safari retreats from Odisha revealed that input tax credit is not allowed to the owner. The petitioner purchases the construction materials such as sand, cement, steel, wires, aluminium, paint, plywood, lifts, air-conditioning plant, escalators, chillers, special facade, electrical equipment, and DG sets, transformers, and building automation systems. Because of the OGST act and CGST act petitioner did not get the tax credit. The construction industry and hotel industry have an identical process. Businesses with civil structures can claim the credit in future as an implication of the judgement provided by the Supreme Court. The government’s reliance on GST blindly will lead to inequalities in future. The philosophy behind GST is equality. The revenue collected from the direct and indirect taxes must be used for the social sector schemes.
What is the one nation one tax concept?
GST is inculcated in the process of production, distribution and sales. The taxes that undergo the process GST is on the purchase or sale of raw materials, GST on the sale of products to retailers, GST on purchase or sale to wholesalers, and GST on the sale of products to the end customers. Uniformity with GST will improve the payment of SGST and CGST. The laws of GST are not according to the parliament. It is decided as per the GST council’s decision. GST reduces tax evasion and by the way, increases the revenue from indirect taxes. It promotes accuracy with computer skills. Technology helps in timely payment, fetching the data required for tax calculation and collecting the non-payment of tax details.
How does GST affect import tax?
IGST stands for interstate Goods and services tax. IGST is the import tax for the import of goods and services inside the country. The tax amount of CGST and SGST is added to the price of the goods. The CGST amount goes to the central government and the SGST rate goes to the state government. The business head cannot utilise the credit of CGST and SGST together. The additional duties such as education cess, customs duty, safeguard duty, and anti-dumping duty are subsumed by GST.
Supreme Court judgement on ocean freight:
Supreme Court ordered against M/S Mohit minerals Pvt Ltd on 19, May 2022. The fright invoice and the ocean freight comes under CIF transaction. It is not an IGST transaction. The petitioner argued that payment of ocean freight and customs duty lead to double taxation. The importer is paying additional tax. Here the transportation cost is accepted by the exporter, and the shipping is taken care of by the importer. The importer is not involved in the transportation service. Supreme Court said that in a CIF transaction, there is no need to pay IGST. If the taxpayer had made the payment, he can claim the refund. The ‘CIF’ stands for cost, insurance and freight components. The custom duty includes the amount of freight. So, no need to pay the GST amount.
Major issues with GST for Indian taxpayers:
The following points elaborate on the concerns of the small and big businesses about the GST:
• The buyers get tax credit only if the supplier pays the tax on time. In the tax pursuit, the business people find it difficult to check the payment of tax by the supplier.
• ITC payment is bothering the MSME sector. The payment within 180 days to the supplier is difficult.
• Small business owners find it difficult to explain to the buyers about the MRP. Certificate of GST exemption explains to the buyers about GST.
• Businesses with the transport of goods find the e-way bill generation procedure as difficult. Simple e-bills are needed to manage the small transport companies. The mistakes like an error with the date, expiry and wrong calculation of tax lead to high penalties. The penalty range from lakhs and crores. Keeping it simple and flexible makes it easy for the taxpayers.
• The interest rate for late payment is 18 per cent or 24 per cent. The interest rate for a refund is 6 per cent. The rate of interest for GST should match the bank interest rates. The high-interest rates create stress for the taxpayers.
The Supreme Court and high court are hearing cases emerging from the GST process. The idea behind the new system is to bring the data under the digital process and trace the payment. Apart from revenue collection, the government should focus on administrative issues. The state and central governments have powers to legislate the decision of the GST council. The amendments from the government make the process workable.