Page 39 - GSTL_16th July 2020_Vol. 38_Part 3

2020 ] NEWS DESK J81
and the use of the commodity. Rationalisation of rates is important not only to
simplify the tax to enable better compliance but also to avoid anomalies and in-
verted duty structures.
Reforming the rate structure of GST is important, but carrying that out,
in the present juncture, may not be easy. First, the Centre itself should be con-
vinced that rate rationalisation is important. Second, passing any reform of the
structure would require 75% of the votes in the GST Council. The Centre has on-
ly one-third of the votes to carry and it needs to secure the support of at least 20
of the 31 States and Union Territories with legislature to get the reform passed in
the Council. However, when the revenue is declining and with so much trust
deficit, it is doubtful whether the GST Council will vote for substantial rationali-
sation in the rate structure. They may make minor changes, but drastic reduction
in the number of rates may be difficult in the prevailing environment.
Serious reform of the tax structure is feasible only when there is promise
of increase in revenue productivity. A major reason for low revenue productivity
of the tax is its poor compliance. The most important reason for the failure to
evoke better compliance of the tax, unlike in many countries, is the failure to sta-
bilise the technology platform even after three years. The original idea of having
three returns in a month and 100% matching invoices for verifying input tax
credit has failed to take off. The monthly return prescribed now does not have
the details of input purchases and cannot be used to verify input tax credit. The
annual return filing, that is supposed to contain the details to facilitate verifica-
tion, has been repeatedly postponed and the last date prescribed now is March
31, 2021. In the absence of a verification mechanism, the GST has turned out to be
a voluntary tax; with the fake invoice industry mushrooming, compliance has
been low, providing a scope for inspector raj. This is mainly due to the failure to
stabilise the technology platform. There cannot be any excuse for the technology
service provider and the GSTN for not firming up the technology platform even
after three years, and the GST Council must take up this issue on a priority basis.
There are press reports that the Council has discussed it with the service provid-
er, but it is not clear when we will have the benefit of a robust technology inter-
face. It is only when we have buoyant revenues that the reform of the structure of
taxation becomes feasible.
[Source : M. Govinda Rao in the Financial Express, New Delhi, dated
7-7-2020]

Government, industry quarrel over GST on hand sanitisers
Multiple Goods and Services Tax (GST) rates have now become a bone of
contention between hand sanitiser manufacturers and the Government.
Last month, the Central Economic Intelligence Bureau alerted GST au-
thorities about manufacturers of alcohol-based hand sanitisers paying 12% GST
by “wrongly classifying” them as “medicaments” (under Tariff Heading 3004)
instead of disinfectants (under Tariff Heading 3808), which attract an 18% levy.
In a letter to Principal Commissioners, the Director General of GST Intel-
ligence has alleged that this has led to “substantial evasion” of tax. Authorities
have analysed data for 62 manufacturers and have asked field offices to verify if
other producers, including distilleries and sugar mills, have also “mis-classified”
the product that is being used across households and offices.
GST LAW TIMES  16th July 2020  39