The number of petitions being filed against the various clauses of the earlier launched goods and services tax (GST) system in the different courts is only increasing with each day. The tax department is presently struggling to respond to the notices issued by courts in response to such petitions. Tax officials are worried that negative rulings in these cases might adversely affect the tax revenue of the government.
In one of the many petitions filed in the Delhi High Court, applicants have requested that the government should allow transitional credits on the stock of good purchased over one year before the GST implementation. As per GST act, transitional credit cannot be claimed for goods with invoices issued before June 30, 2016. However, these restrictions are arguably causing cascading of taxes.
The government had earlier launched an investigation on the unusually high number of requests for transitional credit, as it was suspecting a fraud in the case. If a court rules against the GST act regarding transitional claims, the government would have to pay credits in a very large amount.
Abhishek A Rastogi, the partner at Khaitan & Co, who filed the petition, said, “The objective of the GST is no tax cascading, and as a corollary, we filed a petition to seek proportionate credit on capital goods used in area-based exempted zones.”
Other courts around the country are also receiving similar kinds of petitions. In a recent one admitted by the Uttarakhand HC, the petitioner has challenged the government’s decision to refuse transitional credit for firms involved in the dealing of capital goods and working under the earlier area-based excise exemption scheme. If the act is rejected, the government will have to pay a huge sum in credits.
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Some other courts received petitions against the procedures being followed by the anti-profiteering committee for determining frauds in some cases. While the committee has fined several dealers in the profiteering cases over the last year, the procedure to compute price cuts has not exactly been specified by it.
“There is a need to formulate consistent provisions to determine the quantum of profiteering. While Section 171 talks about two important factors, these are not the only two factors to reach the commensurate reduction of prices,” Rastogi said.
If the Delhi HC decides in the favor of the petitioner, the government will be forced to review the procedure for appointment of Appellate Authority for Advanced Ruling (AAAR) members. As per the Supreme Court ruling, such authorities must have majority members from the judiciary, but as per the current GST Act, the AAAR may have one judiciary member and two from the tax department. The court has sought the government’s clarification regarding that.
