CA Pooja Jajwani

CA Pooja Jajwani
Government
Department
JudiciaryEconomy
Assessee
Industry

CA Pooja Jajwani
Impact of GST on Assessee

CA Pooja Jajwani
Various notices issued by GST department
• Differences in GSTR 2A and GSTR 1 and in Form 3B and Form 1.
• WIP credits/KKC and Cess credit claims.
• Verification of credits claimed under TRAN 1.
• ITC being more than tax payable.
• Defaults in return filling.
• Anti profiteering

CA Pooja Jajwani
Client’s casual attitude
• A wake up call - GST is the era of survival of the fittest i.e. the most
compliant.
• Enterprise cannot survive without proper tax governance.
• If the client is casual in his attitude then, it is a prerequisite that he
should have an ERP that provides tax sensitized data on real time
basis.
• Without ensuring that the decision making is supported by proper
legal reasoning, the businesses may not survive in the long run.

CA Pooja Jajwani
How to handle various notices issued by GST department?
• Challenge notice on technical grounds
• Challenge on jurisdictional grounds – CGST Vs SGST
• Challenge on designation of Authority issuing notice
• Praying for some time in case of GSTR 2A reconciliation notice

CA Pooja Jajwani
• Impossibility to submit large number of documents
• Earlier regime issues – Check the test of repeals and savings clause
• Notices based on data analytics to be responded on technical lines. For example,
difference in ITC and output tax may be because of BOT model, huge amount of
transitional credits etc.
How to handle various notices issued by GST
department?..(cont.)

CA Pooja Jajwani
Cross empowerment
• Center/States divided assessee’s between them
• Concept of cross empowerment
• Presently, cross empowerment only for sanction of refunds
• Search/Audit/Preventive inquiries to be conducted by the jurisdiction in which the
assessee belongs to

CA Pooja Jajwani
Show Cause Notice under GST
• Section 73 of CGST Act – SCN can be issued if -
- Tax is unpaid/short paid or,
- Refund is wrongly made or,
- Input tax credit has been wrongly availed/utilised
• For reason other than fraud - Maximum time limit for payment order is 3 years from due
date of annual return. Proper officer obliged to issue the show cause notice 3 months
before the time limit.
• For fraud – SCN must be issued 5 months prior to adjudication date. If SCN issued it needs
to be adjudicated within 5 years from the date of filing of annual return for the relevant
year.
• Notice to return defaulters u/s 46 doesn’t mean assessment u/s 73. If return filled, the
effect of notice under Section 46 is complete.

CA Pooja Jajwani
Summons to owners
Circular No. F. No. 207/07/2014-CX-6 dated 20th January, 2015 issued by CBEC under Service tax
• Summons by Superintendents after obtaining prior permission from AC with the reasons for
issuance of summons to be recorded in writing. However, under GST a Superintendent of Central Tax
is empowered to issue Summons as per Circular No. 3/3/2017 - GST dated 5-7-2017.
• Senior management officials such as CEO, CFO, General Managers of a large company or a PSU
should not generally be issued summons at the first instance. They should be summoned only when
there are indications in the investigation of their involvement in the decision making process which
led to loss of revenue.
• Summons at the initial level can be issued to Finance/Tax Managers of the businesses.

CA Pooja Jajwani
Validity of Service Tax Audit
Service Tax Audit is failed on the grounds of validity on following grounds:-
• Service tax audit is a special audit and cannot be initiated unless the specified circumstances
prevails. - Travelite (India) vs UOI And Ors. on 4 August, 2014, Delhi High Court
• Rule 5A of Service tax rules is excessively delegated, overriding the powers conferred under
the Act and is liable to be struck down - Mega Cabs Pvt. Ltd. vs Union Of India & Ors. on 3
June, 2016, Delhi High Court
• Whether service tax audit can be initiated after 1.7.2017? No – M/s Ows Warehouse Services
LLP on 17-10-2018, Gujarat High Court and Karnataka High Court in WP 35252/2018 dated
01.10.2018/Calcutta High Court in Writ Nos. 29554/2017

CA Pooja Jajwani

CA Pooja Jajwani
West Bengal received 0
compensation in 2018.
Best performing States
with 127% increase
tax base.

CA Pooja Jajwani
Center Collections - Expected Vs Actual
• Centre’s FY19 GST revenue target continues to look ambitious — the monthly mop-
up need to grow a quarter to meet the budget estimate of Rs 7.44 lakh crore.
• During the July, 2017 – February, 2018 period, the monthly average GST collection
was a tad below Rs 90,000 crore; assuming nearly half of this — around Rs 43,000
crore — goes to the Centre’s kittty, the shortfall is a huge `12,000 crore a month.

CA Pooja Jajwani
Compensation given to States
Year Collection Figures (Rs. in Crores) (April to
May 2018)
FY 2017 – 18 Rs. 48,178
FY 2018-19 Rs. 3,899

CA Pooja Jajwani
Issues in collection faced by the Government
• Huge amounts of pending refunds.
• Increase in credits.
• Resources not competent to calculate ineligible ITC.
• No MIS for defaulters.
• New law and compliance not clear to all.
• Cash crunch on businesses after demonetization, RERA and GST.

CA Pooja Jajwani
Govt. is building a lot of database
• Data analysis show only 16 % sales in summary returns under GST matched with
final returns till December 2017
• Focus shifted from reporting of tax liabilities to forming strong base for information
quantifying relevant economic factors (GDP/Share of GDP of a particular
product/Contribution by Goods and Service Sector in GDP etc.)
• Transparency, tax sensitiveness, completeness and accuracy to taxpayers. A 5 days’
time limit to produce the documents
• Inquiry based on data analytics
• Aggressive and focused enforcement increasing the role of Intelligence, Audit, Anti-
evasion wings

CA Pooja Jajwani
• Quantitative information regarding every provisions asked from the
assessee to know the approx. figures of revenue loss to make any
change in policies and further tax amendments.
• To judge the seriousness of industry to adhere to any specific provision
• To judge the consumption pattern and demand of any commodity as the
same can be know traced through HSN.
• Govt. issuing notices with aggressive enforcement methodology as the
notices are now coming in the same year on the basic reconciliations
and data analytics .
Govt. mindset in issuance of notice and data analytics...(cont.)

CA Pooja Jajwani
GST Council’s Role
• The council to intensify
• Quick response towards technical glitches
• Failure on the part of solving legal matters even after heavy
representations from the businesses.
• Flexible for reduction of rates
• GST helpline not useful for most of issues and there are
significant delay in responses

CA Pooja Jajwani
• Positive circulars after some adverse advance rulings
• Representations to constitute a single central advance ruling
authority however council not made any attempt
• Remarkable job for reduction in rates on essential commodities
• Inclusion of non GST items cause revenue loss to States. Govt.
constantly reducing rates, the revenue loss from which is still in
recovery for States. So to expect that Govt. will being non GST
items not reasonable
GST Council tantrums…(cont.)

CA Pooja Jajwani
Recovery of subsidy given on Fuels
• Govt. provided subsidy in Taxes on Fuels
• Recovery pressure on GST for balancing the revenue streams
• Now is the time to reduce tax rates and may be consolidate tax slabs
• In this scenario, Govt. may pay attention to defaulters and be strict in
enforcement activities.

CA Pooja Jajwani

CA Pooja Jajwani
Department’s Strength
Place
of
supply
Time
of
supplyTaxability
issues
Constitutional
Challenges
Complexities
of Businesses
Credit
availment and
reversal
Precedents set
under earlier
regime
International
Practices
Loop holes
in Statue
Technical
glitches
Relying on
2A for credit
availment –
Legal sanity

CA Pooja Jajwani
Department preparedness
Department
Functions
Compliance
Return Registration Assessment Recovery
Enforcement
Intelligence
/Preventive /
Audit
Driven by
Man and IT
resources
Depends
upon
compliance
function

CA Pooja Jajwani
Intelligence Jurisdiction
• CCT's Ref. No. CCW/GST/74/2015
dated 23-8-2018 – Andhra Pradesh
empowered Center and State to take
intelligence based enforcement
Action.
• It will have pan-India jurisdiction
having presence in all the
States/Union Territories - LETTER
D.O.F. NO.8/B/208/HRD (HRM)/2015-
PT, DATED 13-5-2017

CA Pooja Jajwani
Procedure followed by Intelligence under GST
• Central Tax Audit Commissionerates and DGGSTI exercise powers only to issue SCN.
• SCN issued to be adjudicated by the Competent Central Tax officer in whose
jurisdiction the noticee is registered.
• If more than one noticees mentioned in the SCN having their principal places of
business falling in multiple Commissionerates, SCN to be adjudicated by Central Tax
officer in whose jurisdiction the principal place of business of the noticee from
whom the highest demand of central tax and/or integrated tax (including cess) has
been made falls.

CA Pooja Jajwani
Department’s Preparedness
Resources
required by
Department
Man Material Method
Not enough to
compensate
lack of IT
resources
Lack of trained staff
at State level
Lack of
sufficient IT
resources

CA Pooja Jajwani
Enforcement by Central and State
• States have 90% assessee’s in their jurisdiction (in Numbers)
• Center has 10% assessee’s in their jurisdiction (in Numbers)
• Grade 1 States lack IT resources to check and analyize tax evasion and tax defaulters
• Grade 2 States are capable to manage the assessee.
• Central Govt. not active in enforcement activities due to lack of IT resources.

CA Pooja Jajwani
System of bogus invoicing
Gujarat
issued invoice
and filed only
1, not paid
tax
Maharashtra
issued invoice
and paid
nominal tax
Punjab
passed on the
invoice and
paid nominal
tax

CA Pooja Jajwani
Symptoms of bogus invoicing
Short life of entity
Entity does not have any property in its ownership
GSTR 1 with positive figures, GSTR 3b and GSTR 2A filled NIL
Purchase and sale almost equal with very less margin and tax paid for nominal
amount

CA Pooja Jajwani
Department tools to catch bogus entities
States are of two kinds
Grade 2 – MIS for
department designed
independently by State
Grade 1 – MIS for
department is same as
Centre designed by
GSTN

CA Pooja Jajwani

CA Pooja Jajwani
Over 500 HC and AAR orders have so far been
reported and more than 500 writ petitions are
pending besides hundreds of Advance Ruling
applications.

CA Pooja Jajwani
Advance Ruling / Pain in Advance
• GST rulings pronounced by Joint Commissioners – Quality and validity
• Major AAR for Classification related issues
• Service tax rulings handled by past SC judges
• Department not adhering to Advance rulings time limit of 90 days
• Unintended issues like different rates for machine and its parts are troubling people,
Interpretation of intermediary, liquidated damages, Columbia ruling on Inter branch
cross charging.

CA Pooja Jajwani
Where do you belong to?

CA Pooja Jajwani
Validity of High Court Judgements
One HC law applicable to
all HCs in India
Unless the jurisdictional
HC has taken opposite
view
Benefit granted by one HC
can be claimed against
others

CA Pooja Jajwani
How courts approach to search, seizure and investigations?
Courts are generally pro assessee in procedural aspects however pro revenue in crucial matters
Madhya Pradesh High Court – Pro Revenue
2018-VIL-26-SC - M/s GATI KINTETSU EXPRESS PVT LTD Vs COMMISSIONER COMMERCIAL TAX OF MADHYA
PRADESH & ORS
• High Court had upheld the penalty on non-updation of Part B of the E-way bill and not transporting the
goods under the cover of an invoice. Upon payment of dues also vehicle was not released by the
department.
• On an appeal to Supreme Court, it was held that on payment of dues, the vehicle should be released.
2018-VIL-392-MP - ADVANTAGE INDIA LOGISTICS PRIVATE LIMITED Vs THE UNION OF INDIA AND OTHERS -
Jurisdiction of SGST Officers upheld in case of inter State movement of goods.

CA Pooja Jajwani
UP High Court – Neutral Approach
2017-VIL-613-ALH M/s ZEBRONICS INDIA PRIVATE LIMITED Vs STATE OF U.P. & 3 OTHERS – Penalty not
to be imposed on technical breach
Kerala High Court – Neutral Approach
2017-VIL-600-KER M/s SAMEER MAT INDUSTRIES Vs STATE OF KERALA – Assessing Officer is
empowered to question valuation and not the check post officer.
How courts approach to search, seizure and investigations?

CA Pooja Jajwani

CA Pooja Jajwani
Impact of GST on Indian Economy
Positive Impact
• India’s GDP slipped to 6.1 in the first quarter of the year 2017 it has bounced back to 6.3
and continues to progress
• Increase in competition
• Uniform tax rates across the country
• Increase in exports for reduction in cost of production
Negative Impact
• Increase in prices of goods and services
• Lack IT Infrastructure.
• Legal issues

CA Pooja Jajwani
Thank you