Arise, Awake, and Stop Not…
Till the Fair GST Act is enacted!
- An Open Letter to Business Community of India
An Open Letter to Business Community of India
his clarion call I am giving, inspired by the
famous quote of Shri Swami Vivekananda, to all
the business community of India when Goods and
Service Tax (GST) is in the offing. The situation
that prevailed some few hundred years ago is,
unfortunately, still prevailing, albeit in a different
form and the apathy of the people is still continuing.
People have suffered from the rigours of taxation
– rather rigours of tax administrators and
the docile citizens have endured meekly; except
some murmuring and soliloquizing, occasionally.
The years of servitude has taught nothing to the
business community which is snoring like Kumbh
Karna when GST is on the prowl. Bureaucrats, who
are like peanut brained giant dinosaurs, are grabbing
more and more power to quench their insatiable
appetite for power and thereby growing in their
size and strength.
Let us take the example of the State of Maharashtra
which is considered as one of the Best Administered
States so far as Sales Tax Administration is considered.
Look at the way in which all the provisions which
were provided to give justice to dealers are clipped
in a systematic and progressive way.
Interest:
The concept of levy of interest has undergone
a sea-change. Previously there was a concept of
penal-interest. To explain the technicality to
the common man in simple terms it means before
levying interest the sales officer had to give
notice for the levy of interest, then the hearing
was to be given to the dealer. Dealer can plead
his case why he could not make payment of tax
in time for example reasons due to act of God,
such as fire, earthquake, etc. or a peculiar reason
to his business like money blocked with debtors,
financial losses, etc.
On a proper ground interest could be waived also.
And if at all the officer wants to levy interest
he had to give reason for levying the same. This
process, the bureaucrats were finding very cumbersome!
So, the law was amended and from ‘penal interest’
it was just termed as ‘simple interest’!
The effect of this change was that now the office
need not go through all the procedure. Payment
of interest became automatic.
However, still there was a provision of remission
of interest which in a fit case can reduce the
interest levied.
Again, this was not palatable to bureaucrats,
so when VAT Act was enacted they have removed
the power of giving remission in interest. So
now, no reduction in he amount of interest, you
have to pay the same howsoever there might be
mitigating factors.
Penalties:
Previously, there was a concept of ‘mens
rea’ or ‘guilty mind’. In other
words the Department had to prove guilty mind
of the dealer and once it is proved then and then
only they can impose penalty on the dealer. Again,
this concept was not liked by the bureaucrats.
So the burden of proof was then shifted to dealers.
By a ‘fiction of law’ it was assumed
that dealer had committed a particular offence.
The burden was now on dealer to prove that he
has not committed a particular offence.
So far so good, but the bureaucrats were still
not happy with this situation. So, now in VAT
era they have removed all such words that require
proving ‘guilty mind’ either by the
Department or by the Dealer. The moment there
is a breach of a provision you simply pay the
penalty – a concept of automatic penalty
is introduced. Of course, the Constitutional validity
is yet remains to be tested of such provisions.
Still, it was not enough for the bureaucrats,
so the law was amended and made certain offences
as non-appealable. No appeal can be filed against
such penalty; howsoever there might be good mitigating
factors. If there is a downpour on the last day
of filing of returns and banks are closed, even
then, still all the dealers require to pay the
mandatory penalty of Rs. 5,000/-. As informed
earlier, the constitutionality of this provision
is also yet to be tested.
Recently a penalty is introduced in the garb of
interest. It requires a dealer to pay 25% of the
additional demand raised at the time of business
audit, irrespective of a time lag, when it is
paid.
Again, in the case of prosecution it is provided
that existence of a 'guilty mind' will always
be presumed.This is patently illegal and must
not see light of the day in GST era.
Cumbersome procedures for obtaining refund:
To get refund is always a Herculean task for dealers.
However, during the Sales Tax regime certain cross-checks
were done and refund was granted, of course after
greasing the palm of the officer, in most of the
case. Of course there were and there are certain
officers who are very honest, but the number of
such officers one can count with one's fingers!
The important feature to note here, the refund
was granted on the basis of return filed and no
separate ‘Application for Refund’ was
required to be filed.
Enter the VAT era, wherein refund should have
allowed more simplified manner since ‘Refund’
in the intrinsic part of VAT world over. You go
to Singapore or for that matter any European Country
and buy any goods and carry with you to India,
you will required to fill up simple declaration
form at the airport and within a fortnight ‘Refund
of VAT’ will reach to your home.
But in VAT era to claim ‘Refund’ is
as if you have committed a crime. A dealer first
of all has to make an application during the prescribed
time for ‘Refund’. Though, in the return
he has already claimed such ‘Refund’
but that is not enough. If there is a refund of
Rs. 10,000 – 15,000 dealers feel not to claim
the refund. Because just to claim that refund
he has to give details of entire purchases made
during the year. There would be 100% cross-check
of the purchase invoices. Not only that even if
you have paid VAT to your supplier, but the supplier
has not paid that VAT in the Government treasury,
you will not be granted set-off of the same, though
there is no fault of yours! Such draconian and
cumbersome ‘Refund Procedure’ has resulted
in thriving ground of corruption, and even the
present Hon’ble Commissioner who avowed to
eradicate corruption from the Department did not
get success and on the contrary it has increased,
thanks to such provisions.
Remember, up till now, dealers had to take refund
only from the Sales Tax Department, but in the
GST era they will require to take ‘Refund’
from the Excise Department as well. What will
be the fate of dealers only God knows.
Arise and Awake:
The above are just a few examples of atrocious
provisions that exist. There are many such other
draconian provisions; e.g. no challenge of 'jurisdiction'
at a later period, assessment without sending
any notice to a dealer, multiplicity of proceedings
etc. It is the right time for the business community
to awake and arise when the GST is at the drafting
stage to ensure from the Governments that they
provide just, simple and transparent piece of
legislation, if India has to become economic super
power over the world.
It is suggested that the various Trade Associations
should approach the local ‘Sales Tax Practitioners’
Association’ and seek proper guidance and
understand the intricacies involved in the law
and weed out insidious provisions, if any.
The business community should sternly demand from
the Governments, thorough public debate of the
proposed GST draft and not allow implementing
the same in a hurried and half-baked manner which
we have witnessed at the time of VAT implementation.
If the business community is not awake at this
juncture then be prepared for atrocities of the
taxmen for which business community only should
blame themselves for not arising and awaking at
the right time.
So, business community …your time starts
now… Arise, Awake, and Stop Not…
Till the Fair GST Act is enacted!
(ASHVIN A. ACHARYA)
Editor
