Draft GST rules seek detailed paperwork


Mumbai: The government is leaving no stone unturned to prevent GST leakage and to ensure complete cross-check of records. Detailed records are required to be kept not only by suppliers of goods or services (manufacturers or service providers), but also by intermediaries such as warehouse owners, transporters and agents. In addition to the goods sold, they have to also track stocks given as free samples or gifts.

“Even as concepts of manufacture or trading are no longer relevant under GST, the record-keeping requirements continue to be based on these lines. Rule 1(2), covering general record keeping, provides that accounts or records shall be maintained separately for each activity, including manufacturing, trading or provision of service. Therefore, the classification of these activities will continue even in the new regime though not relevant for the concept of supply which underlines GST,” points out Badri Narayanan, partner at law firm Lakshmikumaran and Sridharan.

No deletion or overwriting of entries are allowed in registers, accounts and documents maintained for GST purposes. Incorrect entries, whether made erroneously or otherwise, need to be scored out under attestation and the correct entry is to be recorded. Where the records are electronically maintained, a log book of every edited entry is to be maintained, the draft rules state. Taxpayers can be asked to produce the trail of entries, such as during an investigation. “Justifying the reasons for deletion or editing of entries, for something as innocent as punching errors, could be cumbersome,” states a CFO of an FMCG. “The main purpose appears to be to ensure there is no GST leakage or misuse of law,” adds Narayanan.

The draft rule on maintenance of accounts and records was one of the three drafts released into the public domain late on April 19. Public comments are invited on this draft and the drafts relating to advance rulings and appeals and revision by April 27.

The concept of obtaining an advance ruling, which continues under the GST regime, has been welcomed by India Inc and GST experts. A ruling can be obtained not just for a proposed supply of goods or services but also for a transaction that has already been undertaken. Advance rulings, which determine tax implications, enable taxpayers to take appropriate business decisions. However, the GST Act doesn’t specifically provide for obtaining an advance ruling for determining the ‘place of supply’, which may be a litigation-prone arena.

“Under the GST Act, an advance ruling can be obtained for determination of various issues, such as classification of goods or services, determination of the time and value of supply of goods or services, and admissibility of input tax credit. However, it appears that the Advance Ruling Authority cannot be approached outrightly for determination of the place of supply,” says Narayanan.
GST is a destination-based tax — the ‘place of supply’ determines whether a particular supply of goods or services will be liable for Integrated GST (IGST), State GST or Central GST. While, the place of supply is clear in case of physical delivery of goods, a host of litigation is expected when it comes to delivery of intangibles or even services.

Narayanan illustrates some grey areas. In case of a tour operator providing a South India package with accommodation, local sightseeing and travel — what would be the place of supply? Or for a money changer, which has agents in India for remitting money to residents in India — would their services be treated as being local in India or not?

For the first time, in the realm of indirect taxation, appeals before the appellate tribunal can be e-filed on the GSTN portal and a provisional acknowledgement will be issued immediately. However, the use of hard copies has not been absolved as copies have to be filed with the registrar in physical form.

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