Note from Editor:

Thought Leadership

The following chapter has been authored by Nishant Shah (Partner)

Budget 2022 brought in another set of significant modifications be it extending time limit for certain compliances in the GST laws or change of definition of 'Proper Officer' under the Customs Act. It is expected that India's tax policies should align with the long-term goals in the coming time so as to aspire exponential growth which shall lead to gain investors' confidence. India has recorded highest ever GST Collections despite the pandemic, thus, the Country has been on the greener side of development and down the line, we can expect unparalleled development in manifold sectors.

We are ecstatic to share the 13th issue of our GST Newsletter which revolves around the recent developments in the territory of indirect taxation, and deciphers the changes in policy, budget discussions, landmark judgments, Circulars, Notifications and much more. In the Thought Leadership chapter, ELP Partner Nishant Shah accentuates that GST audit of periodical returns is endeavored to avoid the divergence in tax position and surmises how COVID relaxations granted for filing returns has restricted the authorities from undertaking GST audits. The author recommends "Mutual understanding between the businesses and the GST audit party" hoping that same would address the concern of businesses and tax authorities.

Banking sector is the backbone of any economy, and now with the advent of technology, the said domain has grasped the pace and emerged as one of the most developed sectors. In the Cover Story chapter titled "Litigation issues faced by the Banking Sector", the authors elucidate that the gamut of activities which banks account for in their financial statements have drawn the attention of tax authorities, however, there are many matters of the erstwhile IDT regime, which are pending litigation and the resolution before the judicial and quasi-judicial forums became slow due to the onset of the pandemic.

The Chapter From the Bench - Key Judicial Pronouncements focuses on the recent remarkable verdicts, orders, rulings and decisions of the Hon'ble Supreme Court, High Courts, AARs, Tribunals and the Appellate Authorities. The Expert Speak Segment encompasses the excerpts from the interview of Ms. Lata Daswani, (Chief Executive Officer for Everest Fleet Pvt Ltd.) who enlightens that Government should focus on simplifying the law to the extent possible so that there is no ambiguity, also, it will save a lot of time of litigation and time cost on trivial issues. The Expert further cues that, "reduction in rate of applicable interest on account of wrong availment and utilisation being clarified retrospectively of ITC is a welcome move which set aside the long pending irregularity in the interpretation of law".

In the Module Legislature at work - Recent Amendments, the Newsletter enumerates all the amendments, updates, clarifications and modifications to the provisions of the indirect tax laws by the Government. Moving ahead, The Allied Laws section traverses across the noteworthy Customs Notifications and the Heading Legal Classics dwells on a phenomenal judgment of pre-GST era which can be made applicable in the GST regime as well. We wrap up the Newsletter with some noteworthy quotes from GST experts.

We wish to apprise you that, while Taxsutra has been updating the readers with regards to all updates on a real-time basis, going forward we shall put forth a crisp quarterly edition of Newsletter which shall cover critical updates. We hope you have an engrossing read of the 13th issue of 'Navigating GST'.

Advent of the GST audit

All taxing statutes carry provisions relating to submission of data, in the form of periodical returns, to the concerned authority, based on which tax is calculated and deposited with the Government treasury. As the world has moved towards trust-based compliances, most of these returns are self-assessed by the tax payer. The tax authority, however, maintains a team of individuals that would on selective basis undertake a review or audit of such self-assessed returns filed by businesses. Ideally such audit should be undertaken at a time as early as possible post filing of the final return by businesses. This would facilitate businesses to understand divergence, if any, in the tax position adopted by them as against that accepted by the authorities, thereby enabling businesses to decide whether they intend to modify the tax position adopted or litigate the position directed by the authorities.

Post the introduction of GST on 1st July 2017, businesses filed their tax returns on periodic basis, subject to relaxations granted on timelines for filing of initial annual returns to compensate for teething issues. Preferably, audit of GST returns filed by businesses should have been undertaken and carried out immediately post the filing of annual returns for the initial period of July 2017 - March 2018. However, the extended relaxations granted for filing of such annual returns for the initial period followed by the national and global lockdown due to the COVID-19 pandemic, restricted the authorities from undertaking GST audits in the manner as they would have ideally preferred.

Recently, the Hon'ble Chairman - Central Board of Indirect Taxes and Customs (CBIC), Mr. Vivek Johri made a statement in relation to GST Audits, "Apart from verifying that those who come into the tax base file their returns and pay their taxes, what we need to also look at now-and we have already started because it is very much part of any tax administration-is the need to scrutinize the returns properly to see that the data that has been turned in is valid and compares well with the financials which the business has reported. We will deal with this with scrutiny and audit ". This clearly indicates the Department's intention to pick-up pace and catch-up on the lost time in relation to undertaking audits. This consequently is expected to result in enhanced inquiry and scrutiny being faced by businesses. This clearly indicates the intent of the GST authorities to increase the audit activity and the number of businesses covered under such audits.

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