GST still has some way to go before it becomes a genuinely uncomplicated tax
ET CONTRIBUTORS|
Oct 08, 2017, 06.24 AM IST
By Pratik Jain
Implementation of GST was perhaps the first time when any tax reform was celebrated in Parliament. At midnight on June 30, while it was the ‘event’ that people were happy about, there is now a growing realisation that the journey of GST is perhaps more important than the event itself. Seen from this perspective, while 100 days is a good milestone to reflect back, it is still not enough to give any verdict on GST’s success.
Industry has been largely supportive of GST and, with a notable exception of textile sector, there was little or no resistance across the country. From a consumer’s standpoint, there were no shortages in supplies and increases in prices, barring few cases where the effective rate of tax has gone up significantly.
There have been reports of transportation of products becoming easier and efficient, which means that accessibility for consumers has improved. Deferment of e-way bills till April 2018 at the GST Council’s 22nd meeting is a welcome step.
While relatively smooth, there have been few challenges and concerns as well. Small and medium enterprises (SMEs) have been struggling to come to grips with the complexity of GST laws and compliances. Perhaps, most of them did not expect that GST would indeed see the light of the day so soon and left the preparations it for the last moment. Some of the legislative provisions, such as application of reverse charge on purchasers in case of purchase from unregistered vendors and invoice matching for availability of input credit, meant that large customers were reluctant to deal with unregistered and smaller vendors. The GST Council has deferred the applicability of reverse charge mechanism on purchases from unregistered suppliers, which is another step in the right direction.
However rather than deferring, such provisions should be withdrawn. The export industry also felt the pinch of GST, with quantum of export incentives getting reduced in certain cases and lack of clarity in terms of procedure/ timelines for getting refunds of input taxes. A major relief has been provided to the exporters by extension of upfront GST exemptions on their purchases till March 2018. Also the concept of e-wallet seems to be an interesting proposal for granting refunds to the exporters.
Minimising Confusion
There has been considerable confusion on ‘anti-profiteering’ provisions with few states starting to make random enquiries and asking companies to provide details of pre-GST and post-GST prices of their products. Unless the GST Council quickly takes note of this and comes up with suitable clarification to deter overzealous authorities, this could lead to avoidable litigation. The first few months of GST have already witnessed a fair amount of litigation, with many companies approaching respective high courts on issues ranging from levy of compensation cess to technical glitches in filing GST returns. Since GST is supposed to be a simple and rational tax regime, the GST Council needs to find ways to minimise ligation.
As GST finds its feet, there has been a debate as to whether the aspect of ‘ease of doing business’, an important objective of GST, got the attention it deserved. There are multiple new documentation and procedural requirements. The requirement of executing a bond or letter of undertaking for service exporters is one such requirement, which was hitherto not needed.
The biggest bone of contention has been the technological challenges and readiness of GSTN to process large volume of data and transactions. This kind of IT infrastructure is unprecedented across the globe and definitely required a bit more time for test runs before implementation.
Recognising this, the GST Council came up with summary return filings for the first few months and deferred the filing of detailed GST returns. The success of GST is dependent on a strong technological backbone and the GST Council may need to be more flexible to respond to these challenges, as we go along.
It is encouraging the way GST Council has been monitoring the on-ground situation and is cognizant of issues faced by the industry. However, there is a long way to go to make it a ‘simple’ tax — much more than what it is now.
(The author is Leader, Indirect Tax, PwC)
Implementation of GST was perhaps the first time when any tax reform was celebrated in Parliament. At midnight on June 30, while it was the ‘event’ that people were happy about, there is now a growing realisation that the journey of GST is perhaps more important than the event itself. Seen from this perspective, while 100 days is a good milestone to reflect back, it is still not enough to give any verdict on GST’s success.
Industry has been largely supportive of GST and, with a notable exception of textile sector, there was little or no resistance across the country. From a consumer’s standpoint, there were no shortages in supplies and increases in prices, barring few cases where the effective rate of tax has gone up significantly.
There have been reports of transportation of products becoming easier and efficient, which means that accessibility for consumers has improved. Deferment of e-way bills till April 2018 at the GST Council’s 22nd meeting is a welcome step.
While relatively smooth, there have been few challenges and concerns as well. Small and medium enterprises (SMEs) have been struggling to come to grips with the complexity of GST laws and compliances. Perhaps, most of them did not expect that GST would indeed see the light of the day so soon and left the preparations it for the last moment. Some of the legislative provisions, such as application of reverse charge on purchasers in case of purchase from unregistered vendors and invoice matching for availability of input credit, meant that large customers were reluctant to deal with unregistered and smaller vendors. The GST Council has deferred the applicability of reverse charge mechanism on purchases from unregistered suppliers, which is another step in the right direction.
However rather than deferring, such provisions should be withdrawn. The export industry also felt the pinch of GST, with quantum of export incentives getting reduced in certain cases and lack of clarity in terms of procedure/ timelines for getting refunds of input taxes. A major relief has been provided to the exporters by extension of upfront GST exemptions on their purchases till March 2018. Also the concept of e-wallet seems to be an interesting proposal for granting refunds to the exporters.
Minimising Confusion
There has been considerable confusion on ‘anti-profiteering’ provisions with few states starting to make random enquiries and asking companies to provide details of pre-GST and post-GST prices of their products. Unless the GST Council quickly takes note of this and comes up with suitable clarification to deter overzealous authorities, this could lead to avoidable litigation. The first few months of GST have already witnessed a fair amount of litigation, with many companies approaching respective high courts on issues ranging from levy of compensation cess to technical glitches in filing GST returns. Since GST is supposed to be a simple and rational tax regime, the GST Council needs to find ways to minimise ligation.
As GST finds its feet, there has been a debate as to whether the aspect of ‘ease of doing business’, an important objective of GST, got the attention it deserved. There are multiple new documentation and procedural requirements. The requirement of executing a bond or letter of undertaking for service exporters is one such requirement, which was hitherto not needed.
The biggest bone of contention has been the technological challenges and readiness of GSTN to process large volume of data and transactions. This kind of IT infrastructure is unprecedented across the globe and definitely required a bit more time for test runs before implementation.
Recognising this, the GST Council came up with summary return filings for the first few months and deferred the filing of detailed GST returns. The success of GST is dependent on a strong technological backbone and the GST Council may need to be more flexible to respond to these challenges, as we go along.
It is encouraging the way GST Council has been monitoring the on-ground situation and is cognizant of issues faced by the industry. However, there is a long way to go to make it a ‘simple’ tax — much more than what it is now.
(The author is Leader, Indirect Tax, PwC)
