GST Answers: The Goods and Services Tax (GST) was one of India’s largest independent economic reforms, implemented in July 2017. Since then, multiple changes, including legal ones, have been made to the GST Act to facilitate business operations and ease the compliance burden.

However, there are several evolving areas where further action and development can be expected. Three important but vital topics regarding pricing, disputes and disputes, as well as the new Invoice Management System (IMS) which will be in the spotlight in 2025, are discussed here.

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First, there is a school of thought that the current GST rate structure needs to be revamped to incentivize business, resolve classification disputes, simplify the architecture and eliminate multiple rates, as well as to eliminate an inverted fee structure.

The GST Council is scheduled to meet on December 21, 2024 to discuss the rationalization of the GST rate and decide on the recommendations made by the Group of Ministers (GoM) on changes in the GST rate.

The Adjustment Committee is reviewing the current four-tier GST rate structure and assessing the consolidation of GST rate slabs. Separately, the Mauritius government on rate rationalization (led by Bihar Deputy Chief Minister Sudhir Chawdhary) discussed adjustments in tax rates on several products including textiles, fertilizers, handlooms , pruning the current GST cap of 12% and some of the rate rationalization recommendations including a health insurance premium waiver with a cover of Rs 5 lakhs for individuals, reduction in the GST rate on certain goods like packaged drinking water (20 liters and above), bicycles (costing less than 10,000), laptops to 5% and increase in the rate on certain luxury products , notably wristwatches and high-end shoes, at 28%.

Another committee headed by Dr Pramod Sawant is evaluating various GST-related issues for the real estate sector. Businesses will need to track these tariffs and legal changes in addition to assessing the impact on their operations.

Second, GST authorities have intensified audits, assessments and investigations for several financial years, resulting in demand orders and litigation.

According to a response from the Parliament of India, over 14,000 GST appeals were pending to be filed with the GST Appellate Tribunal (GSTAT) as of August 2023. While the government had started the process of forming the GST Tribunal almost a year ago, the Tribunal seats are not yet operational. The Revenue Secretary very recently said that activities in this direction are underway (the Chairman has been appointed) and that the government hopes to have GSTAT functional by the end of this financial year. Companies must ensure that they file their appeals on time and adopt interim measures so that hasty recovery measures are not adopted by the tax authorities.

Interestingly, the GST Council has announced an amnesty scheme, which provides for conditional waiver of interest and penalties provided that applications for exemption are filed within the specified deadlines, i.e. say June 30, 2025 – businesses need to evaluate their options and whether this will be appropriate. , for a given case, request exemptions from the amnesty regime or take legal action.
The GST Council, in its September 2024 meeting, recommended pilot testing of B2C e-invoicing and implementation of IMS.

IMS is a feature of the GST portal, effective from October 1, 2024. Under this system, the recipient of the supply is required to accept or reject an invoice and credit note and has the possibility of keeping an invoice or credit note on hold. If no action is taken by the recipient on a document, it will be deemed accepted.

In IMS, if the recipient refuses the credit note, the tax amount indicated in the credit note is added to the supplier’s tax payable.

Based on the actions taken by the recipient, the GSTN portal will generate Form GSTR 2B, which contains the key data set for taxpayers to reconcile the input tax credit, check the final tax payable in cash and file GST returns.

Businesses (on the supply side) need to streamline the process of issuing credit notes to customers, with the aim of minimizing credit note rejection. Although IMS aims to streamline the ITC process and reduce discrepancies in GST returns, its legal position and challenges can be observed. Previously, the GST Act had provisions regarding acceptance or rejection of invoices and credit notes, with corresponding impact on the tax liability of taxpayers, but these have been omitted from October 2022 and there is therefore no specific legal provision on this subject.

The new system presented challenges, particularly in integrating IMS with companies’ ERP systems. Although the system has recently been put into use, its functionality has some limitations. Through 2025, IMS will continue to evolve and keep taxpayers and professionals on their toes.

The authors work with Dhruva Advisors LLP