January 25, 2024
• The Goods and Services Tax (GST) regime, set to complete seven years in July, has witnessed a surge in disputes and recovery proceedings. The existing mechanisms, including the absence of a GST Appellate Tribunal, coupled with issues in the dispute resolution process, have led to a backlog of cases. This article proposes the implementation of a GST dispute settlement scheme in the upcoming Union budget to alleviate these challenges.
Challenges in the Current Scenario:
• Rise in Disputes: The escalation of show-cause notices and recovery proceedings has strained the GST system, necessitating an effective resolution mechanism.
• Timelines Extension: Extended timelines for order issuance have resulted in a last-minute deluge of orders, particularly on issues like reconciliation, return mismatches, and input tax credit (ITC) denials.
• Classification Disputes: Differential tax rates due to multiple notifications have led to classification disputes, exacerbated by a lack of alignment with customs tariff.
Issues in Appellate Authorities:
• Lack of GST Appellate Tribunal: The absence of a GST Appellate Tribunal has left many appeals unresolved, with the formation process hindered by statutory provisions and pending Supreme Court matters.
• Inefficacy of Advance Ruling Mechanism: Disputes referred to the Authority for Advance Ruling, dominated by officials, have often yielded adverse results for assesses.
Proposal for GST Dispute Settlement Scheme:
• Considering the success of previous settlement schemes, such as the Sabka Vishwas Scheme, the article suggests the introduction of a GST dispute settlement scheme in the Union budget. Key elements of the proposed scheme include:
• Flat Payment: Assessees could pay a flat 33% of the disputed tax amount, making the scheme financially feasible and attractive.
• Waiver of Interest and Penalty: A complete waiver of interest and penalty would further incentivize assessees to participate in the scheme.
• Applicability to Various Stages: The scheme should cover matters pending in appeal, show cause notices, and pre-show cause notice stages, providing comprehensive coverage.
Addressing Retrospective Amendments:
• To tackle demands arising from retrospective amendments, the proposed scheme suggests:
• Reduced Liability: Assessees facing demands due to retrospective amendments should have the option to settle disputes by paying a reduced amount, specifically 25%.
• In light of the challenges faced by the GST regime and the success of previous settlement schemes, the introduction of a GST dispute settlement scheme in the Union budget is imperative. A well-structured scheme with a flat payment, waiver of interest and penalty, and coverage across various stages of disputes could streamline the resolution process, reduce the burden on the system, and pave the way for a more efficient GST framework.
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