Is GST really a GIFT?
JULY 10, 2018
By Pritam Mahure, CA
Yesterday is history, tomorrow is a mystery, today is a gift of God, which is why we call it the 'present' – Bil Keane
IN the GST scenario, can we put behind the history and look forward to themystery while considering the present GST as gift!
In this article, I have taken the liberty to abbreviate Governance, Inclusion, Formalization and Technology as GIFT.
Thanks to GST, rules of business have changed for better. In GST, compliance is the king! After 1st July 2017, businesses started discovering that the entire business eco-system i.e. their vendors and customers are also part of their business for GST purposes.
Underlying reason for this tectonic shift is the fact that, in GST, businesses cannot take unilateral decisions but bilaterally, as buyer can claim credit based on the supplier invoice only. Effectively, GST has stitched the entire supply chain with each other and made the businesses realise that every supplier is a cog in the wheel!In the coming months, this dependency between the supply chains will further intensify, particularly,due to credit availability due to invoice matching.
However, in few cases, in absence of specific clarification, the inter-dependency has also led to difference of opinion between supplier and buyer. For e.g. how should a stockist return the expired pharma products to manufacturer, whether against manufacturer's credit note (against multiple invoices) or on a tax invoice by stockist (though the expired goods have no underlying value). Clarity on these procedural aspects will certainly bring ease of doing business!
GST has subsumed numerous taxes (more than 17 taxes and 23 cesses!) and brought uniformity in taxation. Still, uniformity is not achieved fully as petroleum, electricity, alcohol, stamp duty etc. are outside the ambit of GST. On a positive note, effective rate of tax on most of the products is reduced as these goods used to attract more than 35% (combined excise and State VAT).
In November 2017, by reducing the GST rate from 28% to 18% for more than 170 products, the Government has to some extent (not completely!) addressed the issue of classification. As per the new reports, already 95% of the items fall in or below 18% GST slab. Still, there remains a slight possibility of pruning the list of 28% further, for B2C (business to consumer) segment at least (for example toasters, vehicle brake pads, cement etc.).
There are recent discussions of imposing sugar cess (even rubber cess), however, the taxpayers are certainly wary about it, as it may initiate the process of bringing taxes and cesses all over again leading to distortion of GST structure.
Thanks to GST, now the entire Indian economy is moving towards the culture of compliance, as out of GST net means out of business as many business entities have stopped procuring from un-registered vendors! This aspect is evident from the fact that approx. 4.75 million new taxpayers sought registration in GST regime in addition to existing 6.6 million taxpayers. Interestingly, these new taxpayers will not only pay GST but also effectively report their downstream and upstream supply chain.
In case there are any business entities still un-registered, it may not be a big concern as the Government is collecting all the sale data from taxpayers (through GSTR-1 return) and details of transportation of goods (through e-way bill mechanism). In days to come, all this captured data will certainly be put to use (i.e. for unearthing GST evasion), particularly after introduction of invoice matching,to further boost GST revenues.
Initially, technology was perceived as curse by the taxpayers thanks to the non-responsive GSTN portal and technical glitches, however, now it is seen as cure, as till now, it has enabled filing of more than 120 million GST returns!
Thus, in GST regime, it is and will be all about e-governance whether it is filing of GST returns, applying refunds, uploading e-way details or invoice matching (upcoming). At present, there is huge scope for bringing simplicity in online compliance (such as uploading of job work details or transitional credits or e-way bill etc.) and improving the taxpayers experience.
Herein, based on the last year experience, it is strongly advisable that the Government should not rush into bringing invoice matching and the compliances (including annual returns, GST audit) should be introduced only after detailed testing.
In pre-GST regime, stagnancy in tax laws was the norm and changes were an exception (as changes used to take place annually at the time of Union/State Budget). However, in GST regime, change has become the norm as GST has witnessed numerous changes, almost everyday, in each and every aspect. Since its introduction, almost everything in GST has changed be it rates, rules (amended 19 times), notifications, exemptions, return process, due dates, e-way bill mechanism etc. Moreover, court cases/writ petitions, Advance Rulings (more than eighty) are pouring in with unfailing regularity.
In the second year, changes in GST law are likely to continue as the Government is relooking at reverse charge mechanism (RCM), tax deduction/collection at source (TDS/TCS), invoice matching, annual return, GST audit (like erstwhile VAT audits), simplification of GST returns, anti-profiteering provisions, tax evasion etc. Herein, I feel, it would be advantageous if the Government shares a detailed roadmap and initiate public consultation of likely changes to provide an environment of certainty for businesses.
It is pertinent to note that in GST there are many junctures wherein the paths of Central Government, State Government, National Anti-Profiteering Authority (NAPA), Advance Ruling Authority etc.are expected to criss-cross and thus a better co-ordination and proactive dialogue between them could be helpful.
Now, after the GST anniversary celebrations are over, the taxpayers should once again roll-up their sleeves to align their business processes, configure ERPs (to incorporate TDS/TCS, RCM, e-way bill mechanism, new return formats etc.) and seek clarifications through advance ruling, reconcile GST returns with financials and be ready for GST annual returns and audits.
(The Author is a Chartered Accountant and has authored books on GST and Gulf VAT.)
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