To make it a ‘good and simple’ tax, its approach to dispute resolution needs a rethink
Soon after the new government takes over in June, we will have completed seven years of the introduction of the goods and services tax (GST) in the country. Given that a detailed programme for the new government’s first hundred days in office is already being drawn up, it is quite likely to feature further reform in this new tax system.
The GST project continues to be a work in progress. Some major concerns persist. Primary among them appears to be the lack of certainty or predictability. Disputes about the applicable rate of tax, availability of exemption or input tax credit (ITC), or even the taxability of certain supplies arise frequently. Investigations are often initiated by multiple central and state authorities. The system churns out thousands of demand notices mechanically based on (what trade perceives to be) “minor” discrepancies or gaps in data submitted in the returns.
According to one media report, in December 2023 itself, GST authorities issued demand notices totalling `1.45 trillion to around 1,500 businesses for inconsistencies in annual returns and ITC claims for FY18. There is cynicism about whether tax authorities would fairly resolve such a large stock of demands or show cause notices. The chances of prolonged litigation in many cases are high, increasing uncertainties both for revenue and trade and also clogging a burdened dispute resolution mechanism.
