Goods and service tax is a very ambitious tax scheme which will be subsuming almost every indirect taxes currently prevailing in India. The Indian government and presumably all the business sectors are ready to implement GST into their structure. The apex governing body of this new tax scheme i.e. GST council has finalised almost all the tax rates and laws concerned but there is still some bone of contention and shortcomings into the pipeline. There are a number of GST issues for which Government is facing stiff opposition from the business class.Let’s understand the GST issues regarding the returns, tax category and develop some improvement over them.
Highly concerned GST Issues for Businessman:
Issues Related to Monthly Returns:
- According to the new GST scheme, every taxpayer will have to file 3 returns in a single month which is a steep hike against the presently followed quarterly return filing system. Along with this, an annual return is also stipulated, to sum up, all the yearly transactions making a total number of 37 returns per year. The business community is already under the pressure of transition towards this new tax scheme and is forced to become a part of this strained task. Taxpayers will have to invest heavily by the means of time and compliance cost into this overloaded returns procedure.
- Three monthly returns are already a matter of concern and to add more pressure, the GST council has given a minuscule time to the registered taxpayer for the purpose of return, reconcile and monthly return. According to the timetable, three forms namely GSTR 1, GSTR 2 and GSTR 3 are introduced which will be used for Sales return on 10th, Purchase Return on 15th & Monthly returns on 20th of every month respectively. Taxpayers will have to be alert all month long with eyes open on every entry made as the reconciliation window will be just available for 5-10 days only & after which penalty will be applied, making it more hectic.
- To sum up the issue of monthly returns, it is very well known that instead of making taxation simple, it has been made more stringent. A lot of complex data demanding all sorts of information like HSN codes and properly sequenced sales/purchase forms has added another bridge away from the simplicity. Further, detailed procedural requirements have been introduced in which each and every invoice bill has to be attested requiring a lot of time and computer knowledge, ultimately raising an overall compliance cost to the organisation.
- The improvement which is sought by businessmen in this regard is that returns should be required to submit on a quarterly basis only. The current procedure of submitting sales, purchases and the return in a single time can be followed and matching of Input Tax Credit (ITC) can be done afterwards. A mild penalty should be levied on persons not submitting their sales data as they are making hardships for the purchaser.
CGST, SGST & IGST with its shortcoming:
- As known, SGST will be levied every time an intrastate transaction happens along with the CGST while IGST will be levied for interstate transactions, but, that doesn’t help the cause of GST. The new tax scheme has been established to simplify the taxation, however, introducing multiple categories of taxes will only divert the cause. Taxpayers will have to classify each and every transaction according to the nature of boundary thus creating an extra effort and diligence from the sides of business units.
- Also, the newly incorporated taxes has brought a tedious method of availing the input tax credit through a long list of procedures namely invoice matching concept, credit matching with supplier along with the HSN code wise matching per item. This new course of action to provide the credit is, however, taking a toll on the business community which is ultimately blocking a larger sum of capital into the tax credits. GST Law says that a receiver of services will still be in queue & cannot avail credit till the supplier pays the taxes even if the receiver had paid his part of taxes.
- A slight probability arises due to the structure of central, states and integrated taxes is that in case, a return which is originally sanctioned for IGST may get submitted into CGST by any means whether human or conceptual error. But the penalty provisions associated with this error may harm the business unit as the reconciliation window is scattered within a limited time period i.e. 10 to 15 days giving a mere time to a large business house for correcting this petty error.
- In lieu of using 3 GST types, the government can use only one type of tax and bifurcate the amount of taxes between the state and central governments by themselves. In a B2B transaction the GSTN will come to know the seller GSTIN and purchaser’s GSTIN, so the incidence of tax can be easily ascertained by the government itself by ascertaining the states by GSTINs. A large percentage of businessmen are those who make a purchase within state and also makes sales within state. For example, Departmental Stores, Readymade Garments and Company stores with distributor or company depot. So, they are forced to use two taxes CGST and SGST without any need. For special cases, a coding system can be adopted, this way all small and medium businessmen get out of the complex structure.
Input Tax Credit
- The purchaser of Goods/service will get the Input tax credit only if the seller files form GSTR-1 and also make payment of tax. In such a case, the purchase has to borne the amount of tax. Such a case denies the natural justice. The person who is at default (i.e the seller) can make payment and file return after 2-3 months and face nominal penalty and interest but the purchaser will face accounting and return filing difficulty and blockage of amount. But it should be made clear what will happen if the seller will not make payment of tax for a long period of time, the purchasers should be given some relaxation.
- GST compliance rating is introduced and it will reduce the risk for purchaser’s to some extent. The compliance rating should also consider the time period in which a registered person clears the purchaser’s input tax credit.
Transition Provisions and Time
- A transition provision is another nightmare for the businessmen. The provisions are not yet cleared and businessmen are only in confusion.
- A businessman has to print bill books, registration certificate copy (for displaying at office, shop and factory). The GST is going to be applicable from 1st July 2017 and the GSTIN are proposed to be allotted on 27th of July 2017. A good percentage of assessees had already enrolled in January 2017. They should be allotted GSTIN at an early stage. An early allotment of GSTIN will provide time to them for smooth transition.
- The accounting software and return filing utilities should be ready at least one month before the applicable date. A demo of these will enhance the confidence of persons that gst will not be typical and they will be able to shift easily from the current tax regime.
Most possible points for the improvement:
- Development of IT infrastructure should be considered as an important part of improvement. The usage and significance of IT development are considered to the point that the GST will solely depend on the foundation based upon IT. An updated system and internet connectivity are the basic need of GST and will be known as its two legs giving it a firm support. There must be a facilitation of IT infrastructure from the government side with subsidies on desktop’s and other online connectivity packages while from the businessman’s perspective, he must be keen in observing the computer proficiency and must take part in the development of his awareness within this new area of modernization.
- The government should also develop facilitation centers across the nation in which, they must provide professional help to the traders and large business units. A kind of government franchisee where in the business community can submit there all invoice data in the hands of trained professionals who will do the returns on behalf of the community. The centers must be government authorized and very well secured from the viewpoint of any cyber attack due to the confidentiality of tax data. While an improvement from the behalf of traders community is that, they must leverage these government authorised facilitation centers to support their development.
- The government should also raise extended awareness programs regarding the GST. The agenda of these programmes must be sharing of proficiency over detailed procedures of operating under the GST to the business community. It should impart every possible knowledge with category wise session upon each and every topic. The trader’s community should be given a thorough insight of the GST and continuously approach them for any extra help regarding the tax scheme. The business circle should also take active participation into these awareness programs and should help themselves.
The government is facing a lot of criticism from the businessmen even when the new tax laws are going to make a single nationwide tax system. The criticism is not for the application of GST, the criticism is for the way in which GST is going to apply and ignorance of difficulties and practicality while casting the new tax law. ( Author credit: Article is contributed by CA Prateek Agarwal. He blogs regularly at taxadda.com and also answers about tax and investment on quora)