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GST Mess - Why blame GSTN alone! It's time to review Business Processes!

TIOL - COB( WEB) - 571
SEPTEMBER 14, 2017

By Shailendra Kumar, Founder Editor

THE 21st Meeting of the GST Council at Hyderabad, last Saturday, was perhaps the most eventful and also tumultuous since the first two meetings when the skeletons of the broad design of the GST were fleshed out by deciding the legal provisions. In fact, some insiders say that the initial meetings of the Council were a seamless ride for all the stakeholders. Anyway, going by the growing din over the non-working of the GST Network, the background for an acrimonious or at least cacophonous meeting was almost well-cooked. And this is what happened when the proceedings of the Council commenced quite early at 11 AM. There were too many agenda items to review the tax rates of many goods which never deserved to be placed in the demerit category tax rate of 28%; amendment of a few legal provisions and then the exhaustive presentation on the working of the GSTN.

What gives a glimpse of what may have happened inside the conference room at International Convention Centre were the number of hours spent inside and also the number of decisions taken. The meeting stretched beyond 6 PM and that is why the Union Finance Minister, Mr Arun Jaitely, briefed the media after 7 PM. At first glance itself, he did not look too happy or elated to brief the media unlike the previous occasions. He also looked exhausted and a little pale. When he began talking about the decisions, he took time, perhaps, to overcome some shades of incoherence in his thought process. By the time he talked about the rates being proposed to be lowered for 40 commodities and the hike in the CESS on cars; he regained his sangfroid and also talked about the 5% rate on deemed registered brand name; date extension for return-filing; exemption from registration to certain goods even if there is inter-state trade and finally, the constitution of a Ministerial Committee to review the functioning of the GSTN. In fact, on Tuesday, the FM announced the constitution of this Committee headed by Bihar Dy CM Sushil Modi.

The biggest surprise was the exemption from registration granted to jobworker. It is not that the jobwork sector did not deserve it. It was the internal input to the Government that the prevailing regime was not conducive for the jobworkers and it had dampened particularly the manufacturing sector which depends hugely on the efficiency of this sector. That is why it was decided to exempt those job workers from obtaining registration who are making inter-State taxable supply of job work service to a registered person as long as the goods move under the cover of an e-way bill, irrespective of the value of the consignment. However, this exemption will not be available to job work in relation to jewellery, goldsmiths' and silversmiths' wares.

A sign of relief was also heaved by the Auto Sector which has been in a state of uncertainty for the past two months. Marginal hike in the CESS except for the small cars was a much-needed succour for them. The decision to lower tax rates from 28% to 12% and from 18% to 12% and 12% to 5% clearly indicates that the Fitment Committee had not done proper homework at the time of introduction of the GST in July. The Fitment Committee had perhaps no inkling about the ludicrous nature of a part of their exercise where they ended up placing items like custard powder, rubber bands, plastic raincoats, idols made of clay and metals, kitchen gas lighters, computer monitors upto 20", ceramic pots or jars and statues under 28% heading. Similarly, some of the most common items like roasted gram, tamarind dried, saree fall, dhoop batti, grass or leaf products were placed under 12% tax rate category. Thankfully, good sense prevailed over many of the Members of the Council and the rates have now been rationalised. I hope with this revision, most of such aberrations have been set right and in the next meeting, not much tinkering would be required.

The most important of all the decisions was to acknowledge the UTILITY of the interim Form 3B which has been extended up to December. I would not be surprised if it is again extended upto March, 2018. What was designed with a sunset clause for two months, has finally come to be treated as a saviour for the GST!! But why? Should one presume that the GSTR-1, GSTR-2 and GSTR-3 are not doable? What went wrong? For the first time, the media was told that there were problems with the GSTN Server and that is why the due dates are being extended. Though the GSTR-3B are to be filed upto December but it does not mean that the GSTR-1, 2 & 3 are being done away with. This clearly indicates that the top decision makers have not lost hope against the feasibility of getting these exhaustive forms returned every month.

The larger question here is - Should GSTN alone be blamed for all the mess? Was it given sufficient time and technical briefing? Did its CEO have any inkling about the gigantic nature of the workload! Did it study the taxing nature of 11th hour uploading by the large community of professionals in India? Perhaps NOT! It would be unfair to entirely blame the GSTN. The actual flaw perhaps lies in the DESIGN of the BUSINESS PROCESSES. It appears that its designers had fallen victim to Overconfidence Syndrome. Rather than making it simple for the taxpayers and also safeguarding the Government revenue, they were perhaps more moved by the global challenge that no country parallel to India's size has done the job of matching inward and outward invoices. Since they wanted to score over economies like Brazil and China, they did not spare any thought about doing it in a phased manner. And that is how they designed the GSTR-1, 2 & 3 - all three are very large containers of taxing information and then the matching business. The Committee responsible for designing the business processes ignored the ground realities and shifted the Himalayan burden on the GSTN with a tight time-frame. All such onus was almost a sure-shot recipe for a failure and this is what has happened (TIOL has been insisting on what is the Plan B for GSTN?). It is not that the GSTN cannot do it but it needed time to develop its applications and for successful pilot-run, multiple rounds of testing were required before throwing the portal open to millions of taxpayers.

Even now, there is not much delay to make the transition smoother and glitch-free. All that needs to be done is to comprehensively review the Business Processes and put the invoice matching business in a state of suspension till the time GSTN is ready for a pilot. Infact it would be ideal to introduce it first, for the large taxpayers, and then other layers of taxpayers. Secondly, the Revenue can do well with the GSTR-3B alone which can further be made easy by providing a staggered time schedule. Different dates can be provided for filing of GSTR-3B for assessees with Rs 200 Crore and above tax payments; different dates for between Rs 100 Crore & Rs 200 Crore and for less than Rs one crore. Such a staggered schedule would help the GSTN manage the traffic at a given day very well.

What forced the GST Council to set up a Ministerial Committee to look into GSTN functioning is not only the hardship of the taxpayers but also the settlement of the States' revenue. Netizens may recall that it is the GSTN whose efficiency is going to provide quick resources to the States by efficient settlement of CGST and SGST revenue. As rightly put by Mr Jaitley, IGST is nobody's revenue, it is to be utilised for payment of taxes - either CGST or SGST. Once it is done, then the money would come to one's kitty. Let's hope the Ministerial Committee takes a 360 degree view of the issues and do not indulge in blame game. Any protracted blame game would end up hurting none but the GST, a workable concept, if implemented with a tinge of realism and not idealism!


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