tax law: how the uniformity of tax law made a common national market


One of the main advantages of deploying the GST is the consolidation of more than a dozen indirect taxes into a single tax. Also, unlike the previous VAT system, where tax rates on products differed from state to state, the GST rate has been uniform across the country. Therefore, the tax arbitrage that existed under the old VAT at the state level and which led to an artificial restructuring of supply chain operations solely on tax results no longer exists today. Hence, the provenance of the products/services no longer matters and hence it has been beneficial only for business reasons.

As with the tax rate, there has been standardization of provisions relating to input tax credit, compliance, interstate or intrastate procurement, etc., which was not the case. in the past ; one of the main examples being the tax treatment of after-sales rebates. In some states credit was allowed and in other states there were restrictions. After the introduction of the GST, the guidelines are the same all over India. The same goes for refunds, especially for exporters whose operations are spread over several States.

Uniformity of practice also permeates the adoption of tax technology. Currently, a single online portal manages the full range of GST compliances, including generation of electronic invoices or E-Way invoices, filing of returns, filing of refund claims, assessment process, etc. . All taxpayers use the same portal whether or not they operate from Punjab or Tamil Nadu, which was even hard to imagine in the past. Taking the typical case of a supplier of goods, the portal has been designed in such a way that the moment a supplier issues an invoice, the e-invoice is generated, followed by the creation of an e-invoice. The movement of the transport vehicle is electronically tracked and all reports are routed through the common online portal (applicable across India) even if it is an interstate movement crossing multiple states (e.g. Gujarat in West Bengal). There have been many media reports of travel time being cut in half due to the abolition/reduction of state level checkpoints, resulting in faster turnaround times and reduce logistics costs.

The GST Act is guided by the recommendations of the GST Council, which is a body composed of representatives of central and state governments, thereby promoting uniformity of tax law, practice, processes and standardization reports or filings. This has largely ensured uniformity even in operational guidelines and the promotion of “ease of doing business”. The legislator has also granted numerous procedural flexibilities to the MSME sector in terms of reporting requirements as well as exemptions based on thresholds.

Despite this paradigm shift, some areas still require special attention to improve the ONE NATION ONE MARKET experience. One of the critical challenges being conflicting advance rulings on the same issue (tax levy, rate, assessment, etc.) in different states. A central ruling authority that goes beyond income considerations to take an unbiased view is the need of the hour. It is also essential to address restrictions and limitations on the use of tax credits and to improve the fungibility of credits between states.

Another problem with dealing with certain tax disputes is the recent trend of some state governments to issue their own set of guidelines. For example, on the issue of input tax credit mismatch, a few states have issued their own guidelines on how such cases should be handled. Differences in state practice can dilute the preliminary goal of uniform tax law and practice. Uniformity of assessment-related procedures and guidelines would help businesses manage their tax assessments/audits/disputes more efficiently and centrally, especially a taxpayer operating in multiple jurisdictions.

From a general perspective, the GST Act has taken us a long way towards achieving the goal of ONE NATION ONE MARKET, which ten years ago was hard to imagine. . While the Legislatures, Central and State Government and the GST Board have worked tirelessly and proactively to address many concerns and initiate corrections on the right track, there are some rough patches that need to be addressed. be flattened. It is expected that some of the burning issues related to advance rulings, the pending constitution of the GST tribunal, the issue of state-specific guidelines, etc. are also processed in a timely manner.

(The author is Partner – Indirect Tax, BDO India)

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