News Analysis: Procedural concerns in focus as GST enters third year

An illuminated Parliament ahead of midinight launch of 'Goods and Services Tax (GST)' in New Delhi on July 1, 2017.   | Photo Credit: PTI

As the Goods and Services Tax (GST) enters its third year, tax consultants and industry groups point to the imperative need to ease the complexity surrounding procedures, especially with regard to registration and return filing, in order to build on the gains of the past two years.

“In the third year of the GST regime, addressing procedural complexities of the GST portal system, implementation concerns and making compliance easier will further accelerate ease of doing business for industry in India,” said Mahendra Singhi, president of the Cement Manufacturers Association (CMA). “GST has been one of the proactive steps by the government and the way the concerns are addressed by the Council makes it one of the most effective mechanisms,” he added.

A key highlight of the new indirect tax system, according to trade bodies, has been the way the GST Council, the nodal body deciding rates and procedures, has addressed industry’s concerns and modified rules to make the system easier. This, they say, has given Indian business confidence that even in a regularly changing tax system, their difficulties would be eased by the council.

“Both Central and State governments have taken industry’s concerns into consideration and resolved the same in a timely manner, which gives immense confidence to the business fraternity that we are on the right path,” said Sandip Somany, president of the Federation of Indian Chambers of Commerce & Industry (FICCI).

While revenue collections in the first two years were underwhelming, with receipts coming in lower than budgeted and slumping periodically in response to the various rate cuts announced by the GST Council, the trend in the past few months may signal a turnaround.

News Analysis: Procedural concerns in focus as GST enters third year

The months of March, April, and May have each seen GST revenue crossing ₹1 lakh crore, an elusive milestone that was achieved only rarely earlier. Average annual collections have also steadied, coming in at a little more than ₹89,000 crore in 2017-18 (August-March), touching about ₹98,000 crore for the full year of 2018-19, and averaging ₹1.07 lakh crore in the first two months of 2019-20.

While the proactive manner in which the GST Council has addressed concerns has put industry at ease, there are still several procedural issues that need resolution. Tax consultants opine that the council’s very willingness to make changes to rules and procedures has rendered the current GST quite different from what was originally envisioned.

‘Significant departures’

“Looking at it broadly, the initial plan in place for return filing gave way to something else and the reverse charge mechanism took off, then was put on hold, and then came back in different avatars,” Archit Gupta, founder and CEO of Cleartax, said. “There have been significant departures from what the original plan was.”

One big departure, Mr. Gupta said, was to do with GST registrations and the rules regarding who should register and who need not.

“Originally, it was very simplistic and was based on the threshold limit of ₹20 lakh turnover a year,” Mr. Gupta said. “But now, the thresholds have changed, and it also depends on whether you are a goods business or a services business, where you are based, whether you are based online. It is not as easy for freelancers or businesses to quickly assess whether they need a GST registration or not.”

FICCI too stressed the need to simplify the registration process. “To ease the compliance burden for services sector, there is a need to have centralised GST registration similar to the erstwhile service tax law,” FICCI said. “The State-wise registration has increased the cost of compliance... manifold.”

And the CMA’s Mr. Singhi said tax administrators also needed to consolidate on steps aimed at simplification.

“We are glad that the government has also partially addressed, recently, amongst our primary concerns relating to credit notes for post-sale discounts to dealers and we would hope that some of the ambiguity that remains is also looked into soon,” he said.

Traders’ bodies such as the Confederation of All India Traders, however, said that the announcement made after the latest GST Council meeting that only Aadhaar would be required for registration was a welcome move as it would ease the process for small traders.

“The Indian model of dual GST is unique in the world and represents a paradigm of partnership between Central and State governments and between Government and industry,” Vikram Kirloskar, President of the Confederation of Indian Industry (CII) said.

“In just two years, GST has consolidated and is delivering notable outcomes for smoother business, lower logistics costs, and easier payment of taxes in digital mode,” Adi Godrej, former president of the CII, said.

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Printable version | May 8, 2021 10:38:27 AM |

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