GST: A flood of notices and the looming workload before tribunals

There are reports that GST authorities issued notices totalling Rs 1.45 lakh crore in the month of December 2023 alone. This could possibly be because of the time limit to issue these notices for the financial year 2017-18.

Insurance companies have received notices demanding large amounts of
GST. LIC has received a notice for Rs 37,000 crore, ICICI Lombard for Rs 3,000 crore, Reliance General Insurance for Rs 922.58 crore and New India Insurance for Rs 2,379 crore.

Taxes have been demanded on reinsurance premiums ceded, reinsurance premiums accepted as followers in co-insurance transactions, paying GST at the wrong
rate and availing input tax credit when it is not available.

About a year ago, gaming companies were in the news regarding GST on online gaming. The government decided to solve the problem by taxing them on a literal interpretation of the word transaction value.

For the past six months, the GST Department has been busy issuing notices to Indian companies to pay GST on reverse charge on the amount paid to foreign nationals.

An entity called Northern Operating Services approached the Supreme Court with this question. Once the decision of the Supreme Court was public, the GST department issued notices to almost 1,000 entities who had expats on deputation, so that they could extract their pound of flesh.

The Central Board of Indirect Taxes and Customs (CBIC) was forced to issue a circular to their officers to exercise some restraint in collecting taxes on these transactions. Some of these entities have approached their jurisdictional high courts/tribunals seeking relief from the tax.

Auto major BMW obtained relief from the Punjab and Haryana High Court. Nissan India approached CESTAT, Chennai, and obtained a split verdict: a member ruled that the Indian component paid was exempt while the consideration received from abroad was taxable as a manpower supply service.

Taxpayers can expect similar notices for the financial year 2018-19 and subsequent years, too. The CBIC has extended the date to complete assessments for these years. GST taxpayers would probably agree that if tax officers are given reasonable time and unreasonable powers to tax, the
result is not expected to be beneficial to the taxpayer.

GST Tribunals

Most of the notices that have been issued can be attributed to the department interpreting GST laws in a certain manner.

Prior to taxing cessation of reinsurance premiums and other such items, it would be necessary for the department to understand the nature of the insurance industry and their business model.

In the case of payments made to expats on deputation, one cannot ignore the fact that there is an underlying employer-employee nexus even if it is indirect. Online gaming companies did not dispute the levy of tax; they disputed only the valuation on which GST has to be paid.

There is no doubt that the absence of a fully working GST Tribunals across the country is unfair to the taxpayer, when notices and assessments are being passed
by trigger-happy officers only with an eye on GST revenues. 

A back-of-the-envelope calculation estimates that there could be around 100,000 appeals pending before GST Tribunals; even if this number is discounted by half, it leaves a large baggage of appeals.

Such a large baggage of opening balance could only delay justice for the subsequent assessment years. It is imperative that the CBIC sends out instructions to all the field officers that if the tribunal rules in favour of the taxpayer, the department should not appeal only for the purpose of going on appeal (there should be proper merits in the appeal).

This would be all the more important when another tribunal has ruled against the department on a similar matter.

Adjustments and settlements

The GST will be seven years old this year. Most of the technical issues with the portal have been resolved and the rates of tax can do with some reduction but are not too detrimental. Now, it is time for the CBIC to resolve some long-pending issues.

For instance, assessing officers need to be sensitised not to pass orders against the decision of the Supreme Court. They would need to take a final call on the valuation for taxable purposes for online gaming companies, technical analysis of the nature of the supply being made by insurance companies before bringing them to tax. As was promised at the times of its introduction, GST laws are not completely online yet.

Offline interactions with officers tend to lean towards “adjustments and settlements”. Filing GST returns today is still a triumph of luck over experience, patience and hope. This is because not all the
columns in GST returns are auto-populated – taxpayer intervention is needed at regular intervals.

On GST litigation, one is reminded of the famous one-liner uttered by actor Shah Rukh Khan in one of his movies, ‘Ye to bas trailer hai, picture abhi baki hai mere dost’.

(The writer is a Bengaluru- based tax expert)