NEWS LETTER. Indore Branch of Central India Regional Council of The Institute of Chartered Accountants of India. November-2018 Vol.-22 No.

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1 Indore Branch of Central India Regional Council of The Institute of Chartered Accountants of India NEWS LETTER November-2018 Vol.-22 No. 11 Dear Esteemed Professional Colleagues, We encountered number of issues while uploading GST Returns in the last month. We sent representations to GST Council through Central and State Tax Authorities for extension of time limits to 31st December so that the dealers can match their data and submit the same alongwith finalization of Annual Returns. We also sent an e mail on regarding the slow speed of the server to the GST Council. The Government extended the date for submission of Form 3B till 25th October Still lot many issues have left unresolved. It is an immense pleasure to inform you that the Union Government contemplating various facilities/ priority to the good & compliant tax payers. This demand was raised by our members at the time of felicitation of highest tax payers by the Department at Indore sometime ago. The dynamic Chief Commissioner forwarded this recommendation to CBDT and is being considered at the high levels. We had the opportunity to meet Pr. Chief Commissioner of Income Tax, Shri P K Dash on his recent visit to Indore. Though we are aware about the difficulties faced by the members, we had requested them to inform us about the issues that can be discussed with the authorities. We have received a good number of issues related to CPC, giving appeal effects, rectification of mistakes etc. and the same were given to the authorities in a memorandum. Hon'ble Pr. CCIT has assured for regular camps at Indore by the Nodal Officer for CPC related issues and the authorities for Exemption & TDS matters. We have planned Diwali Milan with the tax authorities and some good academic meetings in this month. The details of which are given somewhere in this newsletter. With the following words I wish you all a Very Happy Diwali and prosperous year ahead; ख य ल त क बदलन स भ न कलत ह नय द न, स र फ स रजक चमकन स ह सव र नह ह त!! With warm regards, CA. Abhay Sharma Chairman Member : CA. Anand Jain, CA. Garjana Rathore CA. Vipul Padliya Ex. Officio Member : CA. Kemisha Soni, CA. Churchil Jain, CA. Nilesh Gupta

2 Challenges in Classification of Goods and Services under GST The GST Council meeting held in Srinagar on May 18th& 19th, 2017, has approved different rates for goods &services. As far as goods are concerned, various goods manufactured/traded/supplied have been put in different buckets attracting rates of taxes at the rate of 0%, 5%, 12%, 18% and 28% along with Compensation Cess, as applicable. In addition to that, certain supplies have been treated as zero rated. Similarly, the rates of tax for services are also fixed at 0%, 5%, 12%, 18% and 28%. While fitment of the goods in different buckets generally follow the Harmonized System Code (HS Code), fitment of services has been admitted under Services Accounting Code (SAC). Determination of applicable rates for goods: The information put up in the public domain for the classification of goods in all places mentions the relevant HS Code No. at the Chapter level or at the 4- digits/6-digits/8-digits level. I assume that the Section Notes/Chapter Notes & Interpretative Rules of HS Code will be made applicable for the classification of goods in different Headings or Sub headings. In the absence of such provisions, classification of goods under different Headings/Sub headings can become chaotic. Further, in many cases, the rates of tax have been mentioned with some condition attached to them. Non-fulfilment of those conditions can result in steep increase in the tariff rate for such commodities. To this extent, fixation of tariff rate with the conditions attached to it, is a unique feature under the GST regime. Rates of Tax on Services: Here again, various services are categorized under SAC. While fixing the rate of taxes for services, the corresponding SAC has not been mentioned. Therefore, the activity of services rendered by a supplier will be classified under different heads mentioned in the schedule of rates approved by the GST Council. The categorization under SAC, if not binding for classification purposes, will be helpful only for the statistical purpose & filing returns. There is anotable deviation from the goods tariff. This is the practice even today followed while paying service tax and filing service tax returns. Both the Central & State Governments seem to have valid reasons for levying different rates of GST on different commodities and services depending upon the people who would consume those goods and services. GST being an indirect tax, levying a single rate can become regressive in nature where the burden falls equally on the haves and have nots. Any welfare Government would like, as much as possible, not to burden the public unduly. But at the same time, commodities and services which come under the category of conspicuous consumption would attract progressively higher taxes. When I look at the rates for different commodities and services, I can see that this fundamental principle has been adopted in the fitment exercise undertaken by the GST Council. I take this opportunity to commend the Herculean efforts made by the officials of both Central and State Governments. I also heard criticism from different quarters on multiple rates and that the trade would be happy with the single rate for GST to avoid complications and disputes. Many examples of developed countries like Canada, Australia, etc. can be cited. As and when, Indian economy develops and the living conditions of people below poverty line improves, India may progressively reduce the number of slabs and ultimately implement a single rate of tax. Attempting to do it, at this point of time, may not be justifiable given our socio-economic situation. Having set different rates of tax for supply of goods and services, we cannot lose sight of the problems and opportunities that are given by such differential rates. I am aware that difference in rates would encourage the assessee to classify the goods/services under the

3 category which attracts least tax while the revenue would like to fix highest rate of tax on supply of goods and services. I have seen this scenario for the last four decades. We are perpetuating this scenario for the next few decades or till such time, India can adopt the single rate of tax for goods and services across the board. The GST legislations, have adopteda new method of determining the rate in respect of bundled goods and services.these legislations have categorized the prices of bundled goods and services under the category of composite or mixed supply. The applicable rate, in both these situations will be drastically different. The rules of interpretation can, in many circumstances, categorize the goods and services in a category different from the category where composite supply/mixed supply of goods and services would be categorized. I foresee a dichotomy in this scenario. The Government, while fixing the rate must, therefore, prioritize as to whether composite supply/mixed supply Rule will apply over the Interpretative Rules or vice versa especially when there is a conflict. It is imperative to resolve such conflicts for proper compliance by the tax payers to avoid disputes. The ultimate quantum of tax required to be paid by a tax payer under the GST law depends not only on the applicable rate as mentioned in the GST law but also on arriving at the correct value and ensuring availment of input tax credit. Thus, the quantum of tax paid by a tax payer is a function of three variables namely, rate, value and input tax credit; and each one of them will play a major and pivotal role. I also envisage that many industries will rush to the Government for leniency. In a democracy, we cannot avoid it and ultimately, the Government will correct the anomalies, if any, pointed out by the trade to reduce the hardship or correct the unintended errors. I strongly recommend to the trade that Compliance, Compliance and Compliance should be their mantra. Every tax payer must discharge his/her duties to enrich the Treasury to the extent of its mandate and any shortfall in the contribution will only place higher burden on others and therefore, should be scrupulously avoided/prevented. At the same time to ensure this, it is also important that the scope and ambit of Advance Ruling should be sufficiently widened and the mechanism be made more robust aiming towards faster disposals. GST being an indirect tax, some tax payers may take a decision that even if theypay higher tax to the Government to avoid dispute, they can always recover the same from their distributors/dealers/customers which may work in the short term. But when competitors apply their mind and pay the appropriate tax to the Government, the tax payers who pay higher tax will be out of the competition. It is therefore, necessary that the trade must adopt a principle not to pay a rupee less and not to pay a rupee more as the guiding principle while paying taxes. In addition, the trade community should also be conscious of the anti-profiteering measures wherein any reduction in the rate of tax or the benefit of input tax credit should be passed on to the recipient by way of commensurate reduction in prices. I understand and, indeed, envisage humongous task on the part of the tax payers and equally of the Tax Department to make the working of GST smooth& amicable. There are many provisions in the GST Legislations that appear to contradict each other. Further, the Central and State Governments have tried to gather as many situations as possible as transition provisions for the migration to GST regime. In spite of doing their best, there are still some gaps and also interpretational problems. I understand that it may not be possible for the Government to foresee all tax situations occurring in the field. I am sure, the provision for Removal of Difficulties in the Central GST Act shall be liberally used to redress this sort of enforcement task. Both tax payers and tax collectors have to work together to embark upon the long journey in the manner as a comrade to make working of the GST a grand success.

4 Sr. No. MONTH OF NOVEMBER 2018 ACTIVITIES Date Programme Topic Faculty Guest Venue CPE Fees 1 Thursday Live Webcast Capacity Building Measures of CA. Sunil Kumar Jain ICAI Bhawan Practitioners with special focus on Common Mistakes in GST Returns & Audit 2 Friday National Conference National Conference on GST CA. Kirti Joshi ICAI Bhawan & Organised by : CA. Sunil Garg +GST Committee for Capacity CA. Krishan Garg Building of Members in Practice 3 Monday Laxmi Puja ICAI Bhawan Friday Joint Study Circle Financial frauds & Shri Jitendra Singh, TPA Hall Meeting Cyber Crime SP-Cyber Crime, Indore 5 Saturday Certificate Course Certificate Course IND AS IND - AS to Saturday National Conference National Conference CA. Rajesh Sanghvi ICAI Bhawan & Organised by : on Allied laws Mumbai +GST Central India Regional CA. Ashish Goyal Council CA. Devendra Jain Adv. Pankaj Wadhwani CA. Vijay Bhutada CA. Rakesh Mittal CA. Rajiv Singh

5 Indore Branch of CIRC of ICAI Plot No.19-B, SchemeNo.78,Part-II, INDORE (M.P.)Tel.: , Registered with the Registrar of Newspaper for India under No. MPBIL 01231/12/1/2008-TC Printed & Published by CA. Abhay Sharma Chairman on behalf of the Indore Branch of Central India Regional Council of The Institute of Chartered Accountants of India, Plot No.19-B, SchemeNo.78,Part-II, INDORE (M.P.)