“The original objectives of introducing Goods and Services Tax (GST) were to simplify the tax regime, improve ease of doing business and reduce cost of doing business. However, after five years of GST regime, we are seeing increase in the number of tax audits, departmental scrutiny and litigation between assessees and tax departments. A lot of tax payers are denied input tax credit or they are asked to reverse the already claimed input tax credit because of negligence or non-compliance by their vendors. Procedural lapses by tax payers or by their vendors lead to audit, scrutiny, show cause notice and subsequently to litigation, which increases the compliance cost and time for assesses, thereby defeating the goal of ‘Ease of Doing Business’,” said CA Pritam Mahure, CEO & Founder, Pritam Mahure & Associates at a workshop on Practical Insights to Handle GST Litigation and Audit at WTC Mumbai.

Mr. Mahure suggested three-pronged policy measures to mitigate audit and litigation in GST procedure. These are: 1) Reduction or exemption of penalty for any procedural lapses by tax payers, 2) Immunity for taxpayers for non-compliance or cancellation of registration of vendors, 3) issuance of detailed guidelines for claiming input tax credit against payment made for intermediary services such as investment banking.

Speaking on this occasion, Ms. Anindita Chatterjee - Partner - TCN Global and Economic Advisory Services LLP raised concern that tax payers have to pay two times their tax liability as penalty if they have not filed E-way bill or if there is discrepancy in the E-way bill (even if the Tax Payer has raised a valid Tax Invoice/Paid Taxes on the Same/Reported the Supply). Government may reconsider this penalty as it puts undue financial burden, especially on micro, small and medium enterprises (MSMEs).

She further remarked, “India’s growth story has a direct nexus with the maturity of the GST regime….At this juncture, given the texture of notices or orders being issued by the GST Department, it is essential to reconsider Departmental Actions on the basis of preamble of the GST Law in India (i.e. to remove the cascading effect of taxation and ease of doing business). It is time the government analyses business transactions based on substance over form.”

Ms. Chatterjee informed that of the more than 1.39 crore registered GST assesses, the government has sent audit notice to approximately 55,000 tax payers under section 65 of CGST Act on various grounds such as non-payment or inadequate payment of tax liability, wrongful claim of input tax credit or mis-match of data in tax returns and audited books of accounts.

Ms. Chatterjee suggested tax payers to take precautionary steps such as reconciliation of statements in tax returns and books of accounts, avoiding claim of input tax credit for invoices that remain unpaid for more than 180 days and prompt payment of taxes under reverse charge mechanism.

Ms. Chatterjee recommended, “Tax payers should ensure that their tax returns reconcile with the numbers on their books of accounts, sales/purchase ledgers, copies of Foreign Inward Remittance Certificate, Purchase Order and others. Any discrepancy between tax returns and these documents can lead to audit, scrutiny and issuance of show cause notice by the tax department…..”

Mr. Firoze B. Andhyarujina, Senior Advocate, Supreme Court of India proposed vote of thanks for the event.

The event was attended by finance and tax professionals, corporate executives and MSME entrepreneurs.

Audit by GST Authorities and Key Case Laws

Practical Insights To Handle GST Litigation