GST Implementation Group's Report - Certain Issues
WHILE GST implementation is taking shape in the CBEC, we carried a summary of the report in our TIOL TOP, we bring you analyses on some important aspects of the report. We will bring you the comments on various issues in the next few days. Today we cover Re-engineering of Business Processes. The recommendations are in black font and our comments in red.
The registration process for all the three taxes viz. CGST, SGST & IGST should be common and online, with physical verification of a small percentage of taxpayers based on assessment of risk.
This looks good for reading in a report, but “How do you assess the risk at the time of giving registration?” How do you decide the character of a person at the time of birth?
The frequency of filing of returns for small taxpayers may be made half yearly or on annual basis. For medium and large taxpayers, the frequency can be quarterly and monthly respectively. Option to be given to all taxpayers to file monthly returns, if they wish to.
The GST regime will have assessee base of around 50 lakhs which the group also recognises as a big number to handle. In such a scenario, why do they need quarterly or monthly returns even for large or medium taxpayers? Even if we average on quarterly basis, the number of returns would be somewhere in the range of 2 crores per annum. When focus of tax compliance is based on audit and anti-evasion, why to bother the larger / medium taxpayers with monthly/quarterly returns? What is wrong in making the frequency of return annual for all the taxpayers? Once the returns are filed on yearly basis, it will be convenient for the auditors also to check the compliance on Year on Year basis.
For procedural and minor technical irregularities a fixed percentage as penalty may be prescribed in the law, which can be paid by taxpayers on their own assessment, without the requirement of issue of show cause notice and follow up adjudication.
It is not clear whether they want a fixed percentage or a fixed amount as penalty. The Presentation says, “ For procedural/technical lapses - fixed penalty can be paid without SCN and adjudication”, while the executive summary says, “For procedural and minor technical irregularities a fixed percentage as penalty may be prescribed in the law”
The present practice of mandatory annual audit of the large taxpayers to be dispensed with. Based on stringent risk parameters, such units to be selected for audit.
Even the EA 2000 audit was conceptualised on risk parameters. But, in practice, it has rarely been followed and auditors knock the doors of assessees paying more than one crore at the stroke of one year from the previous audit as if they are habitual offenders. Some assessees grumble whether more payment of duty means more evasion and vice versa.
The EA 2000 Audit Manual reads “Given that audit is an activity requiring substantial, high-quality human resources and the large assessee base, it is impossible to subject every assessee to audit each year. The units for such selective audit should be identified on the basis of assessment of the risk potential to revenue. This process is known as Risk Assessment”
But this lofty ideal is rarely implemented. It remains to be seen whether the “risk based audit” would be a reality in GST regime and a real re-engineering of business process will take place or only the same old engineering is continued.
We will bring you more comments tomorrow.