GST administration

This comments is on Draft proposal on Administration of GST.


Prepared By:
CA Pradeep Jain,
CA Preeti Parihar and
Sukhvinder Kaur, LLB [FYIC]


“Too many cooks spoil the broth” perhaps this would have been in the
thoughts of Group on Implementation of GST while analyzing the
organizational structure for GST. This group is a committee
constituted by the Government that has been framed to analyze all the
aspects which will be affected by implementation of GST. On
12.07.2010, the Group has given their report. In this article, we are
discussing the administrative changes proposed by the Group under GST

     Organizational Structure proposed under GST: -

The Group has recommended that the organizational structure under the
GST regime should be on functional basis rather than on territorial
jurisdiction basis. The present organizational structure is based on
territorial jurisdiction and one office i.e. Range handles all the
different functions pertaining to units falling under their
jurisdiction. Thus, one office handles the various functions of
registration, audit, refund, adjudication, legal, recovery, taxpayer
services etc.

Under GST, the Group has recommended functional division of work. It
is proposed that different divisions of an office should handle
different functions of registration, audit, refund, adjudication,
legal, recovery, taxpayer services etc. This has been done to
encourage specialization as well as better organizational structure.

It has been proposed that the new structure would be having (i) GST
Commissionerates having a functional or combination of functional &
territorial jurisdiction and (ii) Separate Commissionerates for Audit
& Anti-evasion. Thus, exclusive Audit and Anti-evasion
Commissionerates have been proposed.

     Audit Commissionerates: -

Present scenario:

At present, the Audit work in Central Excise Commissionerate is done
by the Audit teams which work under the direct supervision of an AC
level officer who reports to the Commissioner. This is the case where
units are located at one place. In the case of Multi Locational units
(MLU) belonging to same assessee is co-ordinated by the office of ADG

Proposal for GST:-

Looking to the success and achievements of DGCEI, it is being accepted
that an entity entrusted with a specialized function snatch a better
result. As such, it is proposed that separate and exclusive
Commissionerates should be set up for audit and anti-evasion work. For
the taxpayers having Multi-locational units (MLU) in a state, for high
revenue-paying units and for some of the complex business sectors, it
is recommended that the Audit must be conducted by Audit
Commissionerates. And for other assessees, it is proposed that the
jurisdictional GST Commissionerates should do the Audit work.

Within the Audit Commissionerates, it is proposed that there should be
specialized Cells for specific industry or sector. For example,
specialized audit groups for banking and financial services in Mumbai,
for Mining Industry in Chhattisgarh, or for Petrochemical Industry in
Gujarat. This is being proposed under a thought that this will enhance
the domain knowledge of the audit officers and will develop a
professional approach. It has also been suggested that these
specialized groups may provide policy inputs to the Board also.

However, the group has not clarified what will be the status of the
audit paras raised by the audit Commissionerates. Whether these will
be replied directly to these Commissionerates only as regards present
scene where these are routed through the range and division. While
analyzing the need of formation of audit Commissionerates, the Group
has perhaps not thought over the staff-recruitments. Since one audit
Commissionerate will be holding watch-over on a no. of assessees what
will be the status of frequency of audits. The Commissionerate will
surely need adequacy of staff to accomplish its tasks. But what will
be the consequences of the audit paras so raised. By whom the
resulting show cause notice will be issued? To whom they will be
replied and the consequences of these notices will be followed up by
whom? If the Audit Commissionerate is itself going to accomplish all
these tasks, one can presume of a day when the audit Commissionerate
will be indulged in routine matters like follow up which in present
system is carried on by the officers of lower rank.

Anti-Evasion Commissionerates: -

Present Scenario:

Anti-evasion work is done by three types of teams – (i) Anti-evasion
wing of the Commissionerate Headquarters; (ii) Preventive units of the
Divisions; and (iii) Directorate General of Central Excise
Intelligence (DGCEI). Out of the three, the DGCEI is carrying out the
work of intelligence and investigation at national level. It is top-
ranked of three as regards quality of cases booked, value of goods and
amount of duty involved in offence cases. The reason is being analyzed
as this is an independent and specialized entity devoting its 100% in
this particular task only.

Proposal for GST:-

It is proposed that the anti-evasion work should be handled by a more
specialized and exclusive Anti-evasion Commissionerate. Proposal for
set up of one exclusive Anti-evasion Commissionerate in one state is
forwarded. However, in case of certain states where there are smaller
numbers of taxpayers like in North-eastern states, Uttarakhand etc.,
one anti-evasion Commissionerate may have jurisdiction over more than
one State. Case may be vice versa in the States like Maharashtra and
Gujarat where one state may require more than one Anti-evasion
Commissionerate. Just like audit Commissionerate, anti-evasion
Commissionerate will also face a lot of similar problems like follow
up of the cases made by the anti-evasion team. If no proper follow up
is there, the efforts/aim of setting up separate Commissionerate will
be senseless.

     Staff of Audit/Anti-evasion Commissionerates:  -

The Group has proposed that the entire staff of Audit/Anti-evasion
Commissionerates is not required to be centralized at the
headquarters. They can be placed at different places within the state
which will be as per the administrative requirements. However, whether
all the staff will be fit for every location? The Group itself has
proposed the establishment of specialized cells for specific industry
or sector. Working there for certain time will adversely affect their
competency in a different sector. It is also proposed to divide the
Commissionerates on functional basis which will also affect the
movability of the staff and their services. It will also be limited to
that particular function. If they are moved to another sector/
department, it will reduce the quality of work. Further, if it is
decided to transfer the staff on a frequent basis, it will increase
the related costs to government and will reduce the sense of
responsibility amongst them.

     Supervision of Work: -

The Group has recommended that Audit/Anti-evasion work at
Commissionerates should be supervised by officers of the rank of Chief
Commissioners. One Commissioner can be made in-charge of 3-4 such
Commissionerates. At the apex level, the Group proposed that DG
(Audit) and DG (Anti-evasion) should be made Nodal Officers to ensure
proper co-ordination of work of Chief Commissioners of Audit and Anti-
evasion. As such, in the hierarchy, the audit/anti-evasion
Commissionerates alongwith jurisdictional Commissionerates will report
to Chief Commissioners who in turn will report to DG (Audit)/DG(Anti-
evasion) (also known as nodal officers). The nodal officers will be
accountable to the Board.

     GST Commissionerates: -

The Group has recommended three types of GST Commissionerates to be
set up. This has been done keeping in mind the fact that taxpayers
within a state and amongst the states are not uniformly located. Also,
some assessees have more than one premises in a state. It has also
been considered that now CBEC will be administering manufacturers,
types of dealers, service providers and inter-State dealers.

Thus, it has been provided that a uniform organizational structure for
the entire country would not work and different types of
organizational structure is required depending upon dispersal/
diversity of assessees in an area.

The Group has recommended following types of Commissionerates which
will have a clearly defined geographical jurisdiction:

(a)     One-tier functional Commissionerate
(b)     Two-tier functional Commissionerate
(c)     Three-tier territorial Commissionerate

One-Tier functional Commissionerate: -


•     It is proposed for cities having large concentration of assessees.
•     It will be formed on functional basis.
•     It will comprise of different divisions wherein specific functions
like registration, processing of returns, refund, adjudication,
administration, appeal, recovery of arrears etc. will be performed.
•     Each division may further have sub-divisions.

This type of Commissionerate will promote specialization and improve
efficiency. It would also avoid movement of files from Range to
Division and from Division to Commissionerate Headquarters as is being
done presently. Duplicity of work will also be minimized.

Two-Tier functional Commissionerate: -


•     It is proposed for cities where taxpayers are spread over a
relatively large area i.e. within 50-100 Kms from the Commissionerate
•     Under this type of Commissionerate, there will be territorial
•     The divisions will work on functional basis. It means each division
will perform specific function like registration, processing of
returns, refund, adjudication, administration, appeal, recovery of
arrears etc.

Three-tier territorial Commissionerate: -


•     It is proposed where the assessees are spread over a large area like
in present Central Excise Commissionerates of Belgaum, Meerut-II,
Guwahati, etc.
•     This is designed on the present structure of Commissionerates with
Divisions and Ranges based upon the territorial jurisdictions.

Combination of One-tier, Two-tier and Three-tier Commissionerates: -

The Group also proposed that the Commissionerates can also organized
based upon combination of more than one type. For example: A
Commissionerate has 3 Divisions in the city and 2 divisions outside
the city. For the 3 divisions in the city, one-tier form can be
adopted and for the other two divisions, two-tier organization can be

There may be cases where an assessee is having more than one premises
which fall under the jurisdiction of other Commissionerates within the
same state. In such cases, it is proposed that assessee should be
given the choice to register under any of the Commissionerates within
the State. For this it has been proposed that all the Commissionerates
located within a State should have concurrent jurisdiction over the
entire State. Thus, one Commissionerate will have the legal backing to
conduct checks, verifications, audit and anti-evasion functions of an
assessee in the entire state.

     Other Recommendations: -

The present ACES work on a C-D-R (Commissionerate-Division-Range)
mapping. It is proposed to modify the same to suit the new
organizational structure. Since the entire proposal of GST is based on
online submissions – whether it is registration, return filing or
processing of return. As such, modification of the ACES is must for
proper implementation of GST.

     Number of Commissionerates in GST: -

Under GST regime, the Group has proposed that there should be 150 GST
Commissionerates, 45 Audit Commissionerates (To audit Customs Post-
clearance Audit also) and 20 Anti-evasion Commissionerates.

This has been proposed on the estimate that there will be about 35,000
to 50,000 assessees per Commissionerate depending upon the dispersal
of the assessees. And it was also felt that the number of taxpayers in
one Commissionerate may be more than in the other Commissionerate.

This estimation is also said to be in line with the cadre review
proposal. This cadre review proposal has been approved by the Board
and the Group has recommended that it should be pursued vigorously.
This would enable smooth switch-over.

     Stronger IT Structure: -

The Group has felt that the success of GST would be achieved only if
we have a strong IT infrastructure. For this procurement of hardware
is required for running the system and also a lot of skilled officials
for the DG (Systems). Thus, the Group has concluded that office of DG
(Systems) needs to be strengthened substantially and at the earliest.

     Large Taxpaying Unit (LTU): -

The Large Tax payer unit is the one which is manufacturer or a service
provider which has paid excise duty of more than Rs. 500 Lakhs or
service tax of more than Rs. 500 lakhs or is paying advance tax of
more than Rs. 10, 000 lakhs under the Income Tax Act, 1961 and is
assessee under the jurisdiction of specified Income Tax
Commissionerates of Bangalore, Chennai Mumbai or Delhi.

The LTUs have been given the benefit of transfer of credit from one
LTU to another and the removal of goods from one unit to another
without payment of duty.

A point was raised during the discussion as to whether the LTU should
be continued. The Group was satisfied with the encouraging results of
LTU functioning at the four places and has proposed that the LTUs
should continue at the State level for CGST, SGST and IGST.

However, the Group has felt that whether the present benefits or
special dispensation given to LTU should be continued is a policy
issued and the Board has to decide the same. It has been said in the
report that the benefits given to the LTU would not be relevant under

Thus, it is required to be decided to continue the LTU concept or not.
If the LTU concept is continued then the entire legal provision of
giving option to the unit to join LTU is to be re-looked. It is also
suggested that certain major assessees would be compulsorily asked to
join LTU.

Before Parting: -

From the perusal of the report of the Group, it is clear that a
complete change in the existing administrative structure is required
for ushering in GST Regime. The changes are so vital that without
them, the GST would not be implemented successfully. But anyhow, it is
not ascertainable from the Board report whether the organizational
structure so proposed will be separate for CGST and SGST or will it be
only for CGST. If it is only for CGST there is no need of going to
break up into two parts. The government may implement it at Central
level only and sharing can be done between Centre and State. Further,
if the structure is separate for CGST and SGST, it will require
additional man power, thus resulting into increase in cost and
decrease in revenue. As compared to present structure, the concept of
one-tier, two-tier, three-tier or combination of all, will perhaps
take more time to be adopted. Even if adopted, its transitional period
will be comparatively longer…

Kind Regards,
CA PRADEEP JAIN, (B. Com Hons., F. C. A.)
H - 29, Shastri Nagar, Jodhpur (Raj.)
Mobile :  +91-9928111481
Phone No. : 0291-2439496, 2611496, 3258496
Fax No. : 0291-2439496
Branch Office: -
1008, 10th Floor, Sukh Sagar Complex,
Usmanpura, Ashram Road,
Phone No. :  079-32999496, 27560043
Mobile No. : 093777659496, 09377649496

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