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GST Let Down by GSTN

TIOL - COB(WEB) - 570
SEPTEMBER 07, 2017

By Shailendra Kumar, Founder Editor

THE feel-good factors which were generated by undertaking well-orchestrated campaigns prior to implementation of the GST, seem to be on the wane post-rollout. The GST Council is scheduled to hold its next meeting at Hyderabad coming Saturday and, one of its agenda items should be to make unbiased assessment about the number of technical glitches the taxpayers have been subjected to in the past 60 days, and what have been the responses of the various arms created to deal with them. One of the arms is the GST Implementation Committee (GIC), which has indeed shown tangible signs of quickness, efficiency and sensitivity towards the ground-level problems. And that is how we have seen extensions of due dates for filing GST returns or even early availability of TRANS-01 for claiming carried forward credit from the previous tax regime. Another arm is the GSTN which I would like to talk about at length.

But before that, the GST Council is all set to review the tax rates for many sectors which have represented such as Plywood, handicrafts, textile and many more. I am sure since the GST Law Committee has goofed up in terms of not doing proper study of implications of various slab rates on different sectors of the economy and stuck to some random formula to place goods and services under different brackets to realise the revenue-neutral targets of tax collections, the Council would remain under pressure at its meetings in the next one year. But, besides tinkering with the tax rates which may appear to be ludicrous in some cases, the Council should also take a positive decision to ALLOW the facility of REVISION of TRANS-01 which has somehow been filed by a good number of assessees which had huge opening credit in their books. Since it was prepared and the data was fed furiously at the 11th hour, too many errors have been made by the taxpayers who deserve the facility of correcting such errors.

In this context, let me bring it to the notice of the GST Council that so much harassed are the tax practitioners that the Rajasthan Tax Consultants have filed a writ in the High Court raising both substantive as well as procedural issues. Issues range from compliance, ITC, late fee waiver, interest and penalty to TRANS-01 problems. A notice has been issued to the Union of India and the State Government and the next hearing is on September 13. The petitioners have alleged that when the GSTN was not ready and the Govt was also not ready with everything, why did it impose a new system on the businesses at the cost of the Exchequer's interests. There are merits in many of the charges alleged. The charge against the GSTN is well substantiated. And when the GSTN itself is not able to cope with the load of the traffic, how can the Government demand interest on late payment of tax? Waiver of late fee is fine but collecting interest on late payment which resulted largely from the inefficient support of the GSTN which did not allow the taxpayers to submit their FORM 3B is certainly not fair. This is where the GST Council needs to take the moral responsibility and grant waiver of even interest till the time the most crucial CHAIN in the GST Design, the GSTN, starts functioning well.

Although the GIC responded in time and extended the due date from August 20 to August 25 for tax payment but the GSTN failed to cope up with the load and failed to provide the services for which it has been set up and that is how a good number of taxpayers who managed to file TRANS-01 but could not file GSTR-3B as the TRANS-01 details were not reflected in time and since the credit was not available one was not able to pay the remaining liability in cash. And, thus, the Revenue failed to collect what it would have done in its very first month. Had the GSTN worked well, the taxpayers would have managed to file their returns and also pay taxes which would have been more than Rs 1.3 lakh crore but for the glitches!

And since the very basic technical glitches continue to hound the taxpayers, the next bout of compliance requirements starting with Sept 1 to Sept 5 for filing GSTR-1 naturally looked Everest-esque. And even before one could hear some hue and cry for extension of the due date, the GIC on its own extended it to September 25. Was it indeed a kind and generous reaction from the GIC? Probably NOT! Had the GSTN been fully prepared, the GIC would not have delayed the GSTR filing. Since it had internal inputs that the GSTN is not yet ready to cope with GSTR-1, GSTR-2A & GSTR-2 and then GSTR-3, it did not take chance of witnessing chaos of the highest order. And quick came the tweet that the GIC has decided to extend the due dates for July and August.

It is now evident that the GSTN was never prepared for the July 1 roll-out. And since it was a political decision to go ahead with July 1, the GSTN has been caught on the wrong foot. Undoubtedly, it has been doing its best by pushing hard its vendor the Infosys but it is a great challenge to meet the short deadlines of a complicated compliance driven tax system. In hindsight, it appears that the GST Committee mandated with the task to finalise the Business Processes had not done proper homework with respect to introduction of a new tax system for a differentially educated layer of taxpayers. Making a robust compliance matrix is one thing and facilitating taxpayers to comply with them is another thing. Here, I find a huge gap in their understanding.

In place of putting all their compliance dreams in one bowl - GSTR-1, GSTR-2 & GSTR-3, this committee should have initially aimed at only getting returns with credit details and tax payments. Invoice-matching should have been a goal to be achieved in a phased manner. It was more pertinent to plan so as such an effort had failed in case of two large economies - China and Brazil. Not to risk India's reputation right in the beginning of a new tax system should have been one of the words of caution. But it did not happen. And what I find today is that the GSTN is simply not ready with the gigantic task of matching invoices before input tax credit is allowed. Any half-effort made would certainly result in more mess and I do fear, India's bold experiment with tax technology may collapse. And, more than impacting the revenue collections, it would hurt the political capital of the Modi Government which has staked claim to a new chapter in the book of Cooperative Federalism. States may not take any failure kindly.

With a large number of small traders and businesses failing to file their 3B returns, the Traders Body has already demanded immediate Technology Audit of the GST Network. And there is merit in such a demand. Thankfully, the North Block paid attention to the suggestions given in the previous Cob(Web) and has not granted extension to the retiring Chairman of the GSTN who had specialised in making only tall statements. Its charge has been taken over by the Revenue Secretary himself who is undoubtedly the prime mover for the smooth roll-out of the GST system. But, he needs to keep a close eye on the GSTN CEO who appears to be quite good at making presentations but certainly not at other things which matter to the taxpayers.

It is high time the GST Council takes a hard look at the ground reality before the GSTN does long-term damage to the new tax experiment. If one goes by various studies, the GST has already done some amount of damage to the economy, particularly the Services Sector which happens to be key driver of growth and job creation. As per latest Nikkei India Services PMI Business Activity Index, the services sector activities remained weak for the second month and the economy has contracted. Though the manufacturing index has picked up but the services stand shrunk. Hospitality is one of the sub-sectors which has taken a serious blow. Worse, some of the MNCs which were waiting for the GST to set up manufacturing plants in India, have begun to review their decisions. One latest case is that of HP Inc. All such early warnings must be paid heed to before the good the GST is capable of doing to the economy, is lost forever!



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Sub: Error in Trans-1 and its omission

Dear Sir,
Trans-1 is for availing credit for Transition Period, i.e., credit related to period prior to 30/06/2017. Following situations are not covered under this one:
Under Service Tax, reverse charge was applicable on various services i.e., Goods Transport Agency, Legal Services, and Ocean freight on which receiver of services pay service tax on reverse charge basis. There are other error and omissions under which service tax liability is discharged after 30/06/2017. In all such situations credit were taken based on TR6 which is a valid document for availing credit. The liability for June 2017 is discharge in July 2017, which cannot be entered in the Trans-1 form as date after 30/06/2017 is not eligible to submit in system.
There is Rule that Commissioner can allow credit for those not accounted for in the month of July, for example an assesses found that there is mistake in calculations and deposited Service tax and discharged liability as per act in the month of Aug. 2017 and accounted for in books of accounts for which he is eligible for credit, but this situation is also not covered under Trans-1,

Sub: GST let down by GSTN


Fully agree with concerns expressed in your article. In June 17 I had responded by e-mail from US to Shri Sunil Achutan of your group when he wanted to know when I am sending new article. I am reproducing the said e-mail message wherein similar concerns have been shown by me

//Quote- copy of my e-mail dated 13.06.2017 //

Dear Sunil

Nice to see your warm message. Yes there are many issues which needs to be highlighted from operations and implementation point of view as can be seen by me since I was in operations many years at ground level. But I may not be able to contribute immediately as I am out of India on my two months visit to my son's place in US. 

Although I am in touch with GST development on day to day basis and getting more worried about SME, Traders, small businessman as to how they will able to follow the complex provisions and enormous compliances from day one. Taking speed of 100 km per hour  from the word  go is difficult even for high-tech car engines whereas Govt expects all taxabe persons to run at the speed of 1000 km per hour from the day one without having even basic infrastructure like Computers /PC and Internet access with more than 90% of traders situated in villages. Even big corporate are struggling to get themselves ready for 1st July forget about others. Hope Govt wisdom will prevail over many such things. 

No doubt reforms are essential for India  as I am witnessing in US how the tax and other systems are transparent efficient fully automated and  high  level of law abiding attitude of each one here and we must learn from them. 

Launching GST from 1.7.2017 will be disastrous for current Govt and there will be definite mess across India unless IT network is fully tested and made live at least for  six months prior to launch of GST and certain provisions are made simple. 

I am a small person and I wish I am proved wrong. 

Thanks and regards 


Posted by jaimini_khurjekar jaimini_khurjekar

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