GST Circulars issued by State Tax authorities, not in line with Central Tax authorities

by | Feb 1, 2021 | Outlook

Recently, the Maharashtra GST Department (‘MGSTD’) issued Trade Circular No. 1T of 2021 dated January 12, 2021 (‘Circular 2021’) withdrawing its earlier Circular 39T of 2019 dated July 5, 2019 (‘Circular 2019’). Vide Circular 2019, MGSTD adopted Circulars issued by Central Board of Indirect Taxes and Customs (‘CBIC’) for uniform implementation of GST law in State of Maharashtra. Under Circular 2021, MGSTD has stated that it will examine each Circular issued by CBIC and issue separate Circular on the subject matter under the Maharashtra Goods and Services Tax Act, 2017 (‘MGST Act’).

Background

Circular 2021 raises a pertinent question as to whether Circulars issued by CBIC are applicable to State officers or State Tax authorities need to separately issue / adopt them. More specifically, if State Tax authorities do not issue or adopt Circulars issued by CBIC, will such Circulars apply only in context of Central GST Laws viz. the Central Goods and Services Tax Act, 2017 (‘CGST Act’) and the Integrated Goods and Services Tax Act, 2017 (‘IGST Act’) or will they apply to respective State GST laws as well.

Legal Position

  • Section 168 of the CGST Act empowers CBIC to issue orders, instructions or directions to the Central Tax Officers for ensuring uniform implementation of the CGST Act. Corresponding provision is also contained in the respective State Acts. Like Section 168 of the MGST Act empowers the Commissioner of State Tax to issue orders, instructions or directions to State Tax officers for ensuring uniform implementation of the MGST Act.
  • On a combined reading of aforesaid provisions, it is apparent that orders, instructions or directions issued by CBIC or Commissioner of State Tax under respective State GST laws only binds Officers operating under the aegis of Issuing Authority.
  • It is further notable that there is no statutory provision for mandatory adoption of Circulars issued by CBIC to State laws or vice-versa. It is upto State to adopt CBIC Circulars by issuing Circular to this effect (like Maharashtra did this vide Circular 2019 which has now been rescinded).
  • Basis above, once Circular is issued by CBIC under Section 168, it will apply only to Central officers. The State Authorities need to issue Circular on same subject matter for uniform implementation of GST laws.
  • The large disparity in number of Circulars issued by CBIC and State Authorities of some illustrative States for the period July 2017 to December 2020 is tabulated below: 

CBIC

Uttar Pradesh

Maharashtra

Gujarat

Uttarakhand

144

126

155

460

18

Note:

1.    The data is fetched from website of CBIC and respective State Tax authorities.

2.    CBIC data only contains number of Circulars and not orders or removal of difficulty orders.

NITYA Comments:

The aforesaid Table gives an insight that there is no uniformity in GST Laws regarding issuance of Circulars and implementation of GST law between Centre and States. Further, there is no established practice to ensure that Circulars issued by CBIC are either adopted or Circular on same subject matter is also issued by the respective State Authorities.

 Here, it is also relevant to note that Section 6(2)(b) of the CGST Act and respective State GST Acts stipulate that once Proper Officer has initiated proceedings under Central or State GST laws respectively, proceedings cannot be initiated on same subject matter by other department. However, basis above, Proper Officer undertaking proceedings (Central or State) will only follow Circulars issued by respective authority (CBIC or State Department). Given this, taxpayers need to track Circulars issued by CBIC as well as respective State Tax authorities.

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