The GRC meeting convened on April 22, 2024, commenced with a cordial welcome extended to all members by the Chairman.
Agenda Points:
- Issues Raised by Federation of All India Vyapar Mandal
- Issues Raised by Confederation of Indian Industries (CII)
- Major Issues Raised by ASSOCIIAM
- Major Issues Raised by FICCI
- Conclusion
Minutes of the GRC Meeting held on 22.04.2024
The meeting started with welcome of all members by the Chairman.
The Chair informed that the purpose of holding GRC meeting is to have discussion on the issues affecting trade and the issues pointed out by trade are to be sorted at the level of GRC itself or shall be escalated to higher forums.
Thereafter, discussions were held on major agenda points submitted by various trade associations, as detailed below.
1. Issues raised by Federation of All India Vyapar Mandal :
(i) Minor Discrepancies: It was brought to notice of the committee that applications having minor discrepancies such as variation in name and address of the applicant in documents are being rejected. Further, there is lack of uniformity in acceptance of supplementary documents/ utility bills and applications are rejected as different officers are accepting different documents as proof of Place of Business.
Recommendation of the Committee :
The Committee informed that the issue raised by the Federation is procedural in nature and the applicants have to follow the due procedure including submission of correct and valid documents having no discrepancy.
(ii) Suo-Moto Cancellation: The Federation raised concem regarding suo-moto cancellation of registration with retrospective effect by the GST Authorities mainly on account of failure on the part of the assesse to file returns. Due to such cancellation, the small businesses are getting affected and requested to consider requests for revocation of registration sympathetically.
Recommendation of the Committee:
The Committee informed that filing of retums is an obligatory requirement and sufficient opportunity to present their viewpoint is given to the taxpayers before cancellation of registration and all such cases are treated on merit.
(iii) Other issues: raised by the Federation were regarding high penalty imposed against small taxpayers under Section 125 of the CGST Act, 2017 for late filing of returns, denial of input tax credit for not claiming credit within the specified period, difficulties in claiming input credit due to mismatch in invoices, denial of ITC due to non-compliance on the part of suppliers such as failing to upload invoices or paying GST on time, forcing the recipients for reversal of ITC in cases where suppliers registration has been cancelled etc.
Recommendation of the Committee : The Committee informed that these issues are procedural in nature and all action is taken by GST Authorities as mandated under the legal framework.
2. Issues raised by Confederation of lndian Industries (CII):
(i) Confirmation of demands: without considering the justifications submitted by taxpayers. In many cases demands are confirmed at the first adjudication level without considering the submissions made by the taxpayers and ignoring the clarificatory circulars issued by CBIC. The confirmation of demands without application of mind results in the increased litigations and involve time and money. Requiring the exaggerated / increased pre-deposit in filing the appeal causes imense hardships to the taxpayers by way of cash flow issues. It is admitted fact that initially at the introduction of GST there were many misinterpretations and ambiguities. Department was also liberal to ignore the minor procedural flaws/mistakes initially made by the registered persons. It is also expected that similar approach be carried at the ground level staff so that the intended treatments are passed on the stakeholders.
Recommendation of the Committee : The Committee informed that the submissions of notices are taken into consideration before passing of adverse orders and in case there is lapse in this regard on the part of order issuing authority, such order is liable to be set aside at the appellate forum.
(ii) Issuing deficiency memos: of refund applications without giving valid reasons Refund applications are returned by the department under deficiency memo but without mentioning the specific reasons or requiring any specific documents. It is simply mentioned that the attached documents are insufficient to process the refund. Re-submission of applications later results that the refund becomes time bar causing unwarranted litigations and immense hardships to the taxpayers.
Recommendation of the Committee : The Committee did not find merit in the grievance as proper Deficiency memo is issued in all such refund cases where deficiency in documents is noticed. However, the committee advised the CII representative than if in any specific case, they are not satisfied with the Deficiency memo, they may approach the senior officers of the concemed jurisdiction for redressal of their grievance.
(iii) Timeline for Notices: increase Timeline to 30 days to respond to the notice issued in Form GST DRC-01 Rule 88C of CGST Rule 2017 provides that where the tax payable declared by a registered person in FORM GSTR-I exceeds the amount of tax payable declared in GSTR-3B in respect of a tax period by specified amount and specified percentage, the said registered person shall be intimated of such difference in Part A of FORM GST DRC-0lB, electronically on the common portal, and a copy of such intimation shall also be sent to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said difference and directing him to either pay the (a) pay the differential tax liability, along with interest under section 50, through FORM GST DRC-03; or (b) explain the aforesaid difference in tax payable on the common portal, within a period of seven days.
In case the aforesaid is not complied, the differential amount is recoverable without any further proceeding under section 79. The timeline provided in the rules to explain the reason of difference within seven days is very stringent. The taxpayer may not even be aware of such notice within 7 days and also may not be able to reply within the short timeline due to unavailability of concerned employee due to various pre-engagements – related deadlines or personal exigencies. Since, the consequences of non- filing of appropriate reply in short time are harsh on the taxpayer, sufficient time should be provided to file their response.
Recommendation of the Committee : The Committee agreed with the hardship faced due to stringent time limit and informed that since it is a policy issue, reference can be made to Board by the trade body under intimation to the Committee so that the issue can be taken up speedily.
(iv) Service of Show cause Notices/orders: through post and the registered mail of the taxpayer The show Cause Notices/ DRC 01 are uploaded on the portal. Many times, Notices and orders are not reflected directly on the portal but though the separate window as additional Notices/orders. The timeline for reply is given for 7 days and date of personal hearing is mentioned therein. The manner of service of notice and timeline of reply being very small that the registered person misses the required compliance and the objective. It is not possible for small taxpayers to login the portal every day for searching for the notices. Even at the time of filing of IFF/ monthly return, it remains unnoticed causing the unwarranted litigations and increase in the correspondence/ appeals.It is, therefore, highly desired that a convenient and effective mechanism of service of notices and orders should be put in place. Notices and orders also be served through mail and post to the registered person so that he may get informed of the same timely, and accordingly can make the required compliances. The timeline for submission of replies should also needs to be increased at least to 30 days.
Recommendation of the Committee : The Committee informed that this issue is no longer being faced as the technical glitch in portal has been rectified. It was further informed that integration of centre and state data is also underway under Model-2, all such issues are likely to be resolved.
(v) Dark Store Registrations: Smoothen the process of registration of places of business which are operated as “dark stores” With the rapid growth of e-commerce in India, the concept of “dark store” is also getting popularized increasingly. Nowadays, even big FMCG companies are extending “dark store” arrangement to their customers to optimize the warehousing and handling cost. A “dark store” is generally a large warehouse that can be used by multiple customers of a Company, as their fulfilment center, without incurring any rental cost for warehouse space. In this case, the warehouse is generally taken on rent by the Company (E-commerce operator) and their customers (or supplying partner) are allowed to store their goods and supply to end consumers from there. As such, those customers or supplying partners are not having any rental agreement with the Company or the warehouse owner, in absence of which, many a times they are facing procedural issues in registering such “dark stores” as additional place of business under their respective GST registrations. With more and more rigid prerequisites to eliminate the fake registrations, this issue is apprehended to be a major issue and point ofconflict in dark store arrangement.
Recommendation of the Committee : The committee informed that issue is in the knowledge of Board and detailed SOP/guidelines is expected in near future. However the representation on the same may be sent to CGST/SGST Zones so that it can be examined and comments sent to higher forums.
(vi) Input Tax credit Denial: Allow input Tax Credit in case of default /noncompliance by the supplier In certain scenarios, the supplier defaults in depositing GST in cash and make payment through inadmissible ITC and files returns. The immediate impact of the same in felt by the recipient. The recipient is mandated by Section 16 of CGST Act, 2017 to reverse ITC for default/ non-compliance by the supplier even though the recipient has duly complied with all the requirements. As per sub-section 2(aa) of section 16, registered person shall not be entitled to Input tax credit unless the details of such invoice or debit note have been furnished by Supplier in its outward return. Further, the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted. Thus, recipient is eligible for Input tax credit subject to necessary compliance by Supplier. This later reversal of ITC gives unnecessary hardship to recipient who has no fault and no control over the compliance by third party i.e. suppliers. It is the responsibility of the Govemment to ensure due compliance by supplier and to recover tax from default/ non-compliant supplier along with interest and penalty instead of penalizing innocent recipient who has already paid taxes to the Supplier and has no control over such supplier. Denying ITC to recipient due to default of third party is legally not tenable and it’s ultra vires and un-constitutional. In this arrangement genuine recipient who is paying all applicable taxes in full compliance of law is getting penalized. Further, it may also happen that on one hand ITC is disallowed to recipient even after making pa),ment of tax, and on the other hand, govemment may end up recovering tax and penalty from defaulting supplier. It would be unfair to disallow ITC to the recipient of goods/ services for supplier’s default where the recipient of goods / services has actually paid for value for goods / services (+) GST to the supplier.
Recommendation of the Committee : The committee informed that at present the GST laws mandate like this only and since this is a pan India issue, the GST Council is examining the issue and any development in the matter shall be communicated to all stakeholders.
(vii) Reply to Show Cause Notices: Lack of information regarding reply to be filed to the Show Cause Notice issued by DGGI In the show cause Notices issued by DGGI, it is not mentioned exactly whom (address of the officer) to submit the reply. For example, broadly it is mentioned that reply be submitted to the Additional/ Joint Commissioner of CGST North Delhi Commissionerate. Since CGST offices are located at many places, non mentioning of location/ address of the concerned office results that the Notice keeps on moving from one location to the other location of the CGST department.
Recommendation of the Committee: The committee informed that all Show Cause Notices issued by Delhi and Jaipur Zonal Unit of DGGI are adjudicated by the Additional Commissioner, CGST Delhi North. As such, the Notice can approach CGST Delhi North Commissionerate for submission of reply.
(viii) Delay in ITC Flow: Delay in flowing ITC of IGST paid on import goods In some cases, input tax credit (lTC) of IGST paid on import goods during the last 2-3 days of the month is not reflected in the GSTR2B. It results into the delay of one month in availing ITC and impacts the cash flow of the taxpayer which is otherwise planned in advance.
Recommendation of the Committee: The committee informed that the issue is no longer being faced and the problem was at the end of NIC as only I server was earlier functional. Now, due to functioning of 2 servers, the issue has been resolved.
3. Major Issues raised by ASSOCIIAM:
(i) Rule 42l 43 of CGST Rules: In terms of Rule 42 of CGST Rules, 2017, reversal is required to be undertaken on ITC pertaining to input/ input services/ capital goods used for taxable and exempted supplies.
Recommendation of the Committee: The committee enquired whether there was any specific case referred by the trade body and advised them to approach the concemed officers with specific cases for necessary guidance/ resolution.
(ii) Section 74 of CGST Act,2017: Issue was raised during the meeting that SCNs under Section 74 of CGST Act,2017, SCN is being issued instead of Section 73 even in cases of taxpayers having submitted all relevant documents and disclosed all facts in GST returns during Audit.
Recommendation of the Committee: The committee informed that issuance of SCN under Section 73174 of CGST Act,2017 depends upon the findings of the Audit team. SCN under Section 74 is not issued in routine manner but only in cases where fraud or any willful misstatement or suppression of facts is noticed. In any case before issue of SCN in DRC-01, response of the taxpayer to the findings of the Department is sought During the course of certain audits, Officers contend that the reversal ratio should be applicable on complete ITC availed by the taxpayer even which is exclusively used for taxable activities in DRC-0lA and only after examining the same, SCN is issued. The Committee also opined that in case such frivolous SCN is issued, the same is most likely to be dropped at the level of adjudicating authority/appellate forum.
(iii) Schedule of CGST Act,2017:. In terms of Schedule I of CGST Act, supply of goods or services or both between related persons or between distinct persons shall construe as supply even if made without consideration. In compliance to same, taxpayers undertake cross charge of expenses undertaken at HO for providing support services to branch offices. Such cross charge is ideally undertaken on annual or quarterly basis against MOU signed between such distinct person. In some of the cases, Officers contend to differ from said approach and allege that cross charge should have been done on monthly basis and thereby demanding interest for delayed payment of tax.
Recommendation of the Committee: The committee informed that cross charge shall be undertaken as per the conhact. In the absence of contact, cross charge shall be undertaken on monthly basis.
(iv) Special Audit u/s 66 As per Section 66 of CGST Act, special audit can be conducted where valuation is incorrect or ITC is not availed in limits. However, in some of the cases, Officers initiate special audit even when the Department Audit has been concluded for same period, wherein, ITC and valuation were already verified.
Recommendation of the Committee: The committee informed the trade body that Special Audit is not a routine exercise and is resorted to for determining the tax liability only in cases where complex issues are involved or when new facts emerge during Audit.
(v) Pre-deposit through ITC As per recent circular, it was clarified that pre-deposit while filing appeal can be done through ITC balance. However, in some of the cases, the taxpayer faced the issue of non acceptance of Appeal by the Appellate Authority on account that pre-deposit is not made through cash.
Recommendation of the Committee: The Commissioner, CGST Appeals, Delhi informed that no such instance regarding non acceptance of Appeal by the Appellate Authority on account that pre-deposit is not made through cash has been noticed. However, he advised that in case of any difficulty, higher officers of Appeal Commissionerate may be approached.
(vi) Audit proceedings through offline mode, Issuance of DRC-01 without confirming observations under ADT-02, Issuance of DRC-01 without issuing DRC-O1A
Recommendation of the Committee: The committee observed that the grievances are generic in nature and requested to bring up specific cases before the committee.
(vii) Audit by Department and CAG simultaneously causing hardship to the taxpayers. Recommendation of the Commiftee: The committee informed that CAG is having constitutional mandate to conduct Audit of taxpayers and as such this grievance is beyond the scope of discussion before the Committee.
(viii) Refund sanctioned but amount not credited Demand of CA certificate by officers even in cases where refund is filed for unutilized ITC against export made by taxpayer and rejecting the refund while same is specifically excluded in terms of proviso to Rule 89(m) of CGST Rules, 2017; Offline serving DRC-07 due to which the taxpayer is not able to file appeal online which leads to issue in making pre-deposit and acceptance of appeal by Appellate Authority.
Recommendation of the Committee: The committee requested to present specific cases before the Committee and also advised to take up the matter with concerned jurisdiction officers to further clarity/ resolution.
(ix) Delay in granting registration and Denial of GST registration without providing opportunity of being heard
Recommendation of the Committee: The committee informed that specific timeline has been fixed for the registration process and as such if any delay happens on the part of Departmental officers, regisffation is granted automatically by the system. As regards denial of GST registration without opportunity of being heard, the Committee informed that the registration process is document based with or without Physical verification and there is no procedure of giving Personal hearing as the entire process is to be completed within strict timeline of 30 days.
4. Major Issues raised by FICCI:
(i) Requirement of uploading of photograph of senior management personnel at the business premises for well established business houses may be done away with for taking GST Registration. Recommendation of the Committee: The committee informed that there is no such requirement of uploading photograph of concemed person at the business premises. It was advised that if any such difficulty is faced, the management may approach the senior officers of the jurisdictional office.
(ii) What is the relevant date for payment of interest in respect of wrongly availed Input Tax credit? Recommendation of the Committee: The committee informed that relevant date for calculation of interest is the date ofutilization ofsuch wrongly availed ITC.
5. Concluding remarks: The Chair thanked all the participants and Trade representatives for attending the GRC meeting and informed that they shall feel free to approach jurisdictional officers as and when required for redressal of their grievances and advised them not to wait for GRC meetings.
The Chair further requested the trade representatives to sensitize the taxpayers having annual turnover of more than 5 crores to mandatorily issue e-invoices as the issue is being pursued vigorously by the Board.
The meeting ended with a vote of thanks to the chair
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