25th January 2024 (7 Topics)

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A GST Dispute Settlement Scheme for a More Effective Tax System

Context:

The GST regime, now approaching its seventh year, faces challenges related to a surge in show-cause notices, recovery proceedings, and disputes.

The absence of a functioning GST Appellate Tribunal further complicates the resolution process.

1. Increased Disputes and Lack of Appellate Tribunal:

-The rise and Complexcities: A substantial rise in show-cause notices and recovery proceedings. Timelines for order passing have been extended, leading to a rush of orders before expiration. The complexities include reconciliation issues, return mismatches, and disputes over input tax credit (ITC).

- Lack of tribunal: Absence of a GST Appellate Tribunal hampers the resolution of disputes. Further - challenges arising from classification disputes and multiple tax rates.

- Ineffective Process: Disputes referred to the Authority for Advance Ruling with doubtful efficacy. Adverse rulings often create uncertainty for assesses.

2. Proposal for a GST Dispute Settlement Scheme:

- Need for Settlement Scheme and success criteria: Considering the challenges, proposing a GST settlement scheme. Examining the success factors of previous settlement schemes.

- Sabka Vishwas Scheme Comparison: Drawing parallels with the successful Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

- Challenges of Retrospective Amendments: Highlighting challenges posed by retrospective amendments. Proposing a 25% settlement option for disputes arising from retrospective liabilities.

3. Recommendations for the GST Dispute Settlement Scheme:

- Percentage of Tax Payment and waivers: Suggesting a flat payment of 33% of the disputed tax amount. Advocating for a complete waiver of interest and penalty.

- Inclusivity and immunity: Extending the scheme's coverage to pre-show cause notice stage demands. Ensuring immunity from penalty and prosecution for participants.

- Simple and easy: Simplified payment structure and comprehensive waiver, will streamline the resolution process, reduce pending disputes, and potentially alleviate the burden on the proposed GST Tribunal.

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