Senior advocate and former Additional Solicitor General (ASG) Balbir Singh says the government should review whether commercial laws such as GST and amendments to the income tax act have achieved their objectives.
“I think it is going to be very important that senior people in the government conduct a review of whether laws and amendments introduced by them have achieved the final objective,” he said, sharing suggestions for the new NDA government in a conversation with Moneycontrol.
The senior lawyer cited the example of income tax notices sent under section 148 A of the Act and noted that the government must evaluate if the objective of the amendment had been achieved. The government introduced Section 148A in the Income Tax Act in the 2021 budget. If an income tax officer has information that a taxpayer has undisclosed income for a specific assessment year, the officer must give the taxpayer a chance to provide an explanation before issuing a notice. The department reopened many income tax assessments after the amendment was passed, leading to an increase in litigation.
According to Singh, such amendments must be reviewed to ascertain whether they have achieved their objectives. “Once a law is made, and assuming it is not functioning well, the citizens will have limited remedy,” he said. Singh noted that the government’s review must evaluate the execution of the laws and functioning of executives. The laws/amendments should be evaluated to see if they have promoted transparency, ease of doing business and whether they have benefited businesses, he opined.
Singh stated that the a review must be conducted under aegis of a senior minister of the government. Elaborating, he noted that while lawmaking power lies with the legislature (parliament) the responsibility to ensure that a law functions properly lies with the executive. “The Executive needs to understand the role that been given to it to implement the law and carry out the role honestly,” he said.
The former ASG opined that more often than not litigation in courts is a direct result of improper execution of a law. “As a result of this, we see huge amounts of litigation in the courts,” he said.
Among the union ministries, the Finance Ministry is fighting the highest number of cases in court. As of July 2023, the ministry was fighting over 1.5 lakh cases. Time and again, budgetary announcements are made to reduce tax disputes pending in court.
Rationality needed in policymaking
Singh called for more rationality in policymaking, especially when it comes to taxation. He noted that policies such as fixing tax rates must be more aligned to business realities.
“Fixation of rates is a very critical aspect because if you fix rates very high without knowing what the profit margins of businesses are, it will lead to further complications. There has to be some rationality to it.”
Citing the example of the 28 percent Goods and Services Tax (GST) on real money gaming companies, Singh noted, “Once you've taken a policy decision to permit online gaming companies to operate, then the rate of tax has to be commensurate to the earnings of these companies. There has to be some business reality when the government says that GST is leviable at 28 percent of the gross value.”
From October 1, 2023, 28 percent GST was imposed on the full face value of online gaming bets by the GST Council, which promised to review the levy after six months. The industry has been seeking to have the 28 percent GST calculated on the gross gaming revenue instead of the face value of bets.
The biggest blow to the gaming companies came when the GST Council imposed the tax retrospectively (with effect from the past). Further, as per the Council’s interpretation of retrospectivity, all online games involving bets played between August 2017 and 1 October 2023, irrespective of skill or chance, needed to pay a GST rate of 28 percent on the full value of the bets placed, as they fell under the category of gambling.
As of December 2023, these online gaming companies have been slapped with 71 showcause notices involving alleged evasion of GST of Rs 1.12 lakh crore in 2022-23 and the first seven months of 2023-24, excluding interest and penalty. Since the notices were issued under section 74, which empowers the department to impose a penalty of up to 100 percent of the tax demand, it may take the amount to over Rs 2.3 lakh crore, including interest.
These notices have been challenged in the Supreme Cour through a bunch of petitions. The court is likely to hear the pleas in July.
Implementation of criminal laws unlikely to be postponed
The former ASG noted that it is unlikely that the implementation of three new criminal laws will be halted despite the BJP not getting a majority in the just concluded general election.
“The criminal laws have already been passed by Parliament. It is not likely that they will be kept on hold because the new Parliament is in place. The government will not undo the legislations passed by Parliament,” he said.
According to Singh, undoing laws already passed by Parliament will require an elaborate exercise. “Putting the law on hold will required a massive Parliamentary decision and approval. I don't think the coalition coming in place will have any impact on the new criminal laws,” said Singh.
The three new criminal laws were passed by Parliament during the last winter session and received the president's assent on December 25. These laws, Bharatiya Nyaya (Second) Sanhita, 2023; Bharatiya Nagarik Suraksha (Second) Sanhita, 2023; and Bharatiya Sakshya (Second) Bill, 2023, will replace the Indian Penal Code (IPC, which dates back to 1860), the Criminal Procedure Code (CrPC), and the Indian Evidence Act.
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