Advance rulings system under GST will take time to resolve, says CBIC

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The industry might have to live up with the current structure of the authority of advance rulings (AARs) under the Goods and Services Tax (GST) since there is no consensus between the union government and states over the uniform central body, said a key member of the Central Board of Indirect Taxes and Customs (CBIC). 

"The Centre is also trying to push for that there has to be a single, uniform, advance ruling authority. But unfortunately, think about a situation, every state says, I am having an equal right as the Centre," John Joseph, CBIC member (budget) said addressing a conference organized by Associated Chambers of Commerce (ASSOCHAM).

He said even for regional benches too, there is a huge disenchantment between the states.

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Currently, each state has its own AAR and its rulings are specific to the concerned states. As such, contrasting rulings by AARs on solar panels and other issues have disturbed the industry. Also, members of AARs are all government officials, and as such the industry complains that it is tilted towards the authorities. 

"I do agree that industry is having a serious problem with regards to advance ruling. We have been seeing that in the case of solar power," Joseph said. 

He explained that currently the government goes through the entire ruling, study the issue and then issue a clarification. 

"Once the clarification is issued, the entire advance ruling thing becomes null and void. Maybe for some time, you will have to adjust to the situation till a trust is being developed between the Centre and the states," he said.

The CBIC member said that the issue will take time to get resolved, especially due to the “trust deficit” between the Centre and states in the GST Council, on account of allocation of revenue that accrues from the rulings.  

Despite the huge clamour for two rates under the Goods and Services Tax (GST), Joseph said it is “a wish of a tall order”. 

“In a country with about 20 per cent of the world’s population, one just cannot have a uniform tax rate which can take care of everybody. It will be totally unethical and illogical too,” he said.

Except for handful of items, all items are being taxed at a lower rate than before, he added. “But the consumer is still not happy due to a perception issue with regard to earlier and current rates with subsumed taxes.”

Saying that the recent election results will not impact GST in any way, he praised the “sagacity” of politicians across the spectrum for the consensus built around the tax. He was referring to the issues arising between the Centre and states with regard to advance rulings and place of supply issues.

However, the coordination between the Centre and states will save the tax, and it will not be thrown out “in a lock stock and barrel fashion” that happened in Malaysia, he said. The CBIC member admitted that some procedural changes might happen.

Joseph said that a simpler and better version of the new GST return format will be released initially, which will become comprehensive later, improving the quality of the return over time. “Things that happened in the past may not happen this time,” he said.

On compliance, he admitted that initially, the government did not want to go hard on businesses, but has changed the stance since April. “We have detected almost Rs 120 billion worth of GST evasion this year. This is huge compared to what happened in the central excise regime,” he added.

The most important outcome under GST is the improvement in the logistics chain. The time taken for trucks to move from one point to other point has almost been halved or one-third, he said.

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