To make an initiative in preventing tax evasion by small businesses and traders, the government will introduce the Reverse Charge Mechanism under GST. In this reverse system, it is the responsibility of recipient utilizing goods and services to furnish GST liability rather than the suppliers, as per a report.
As per the Financial Chronicle report, the introduction of the RCM will favour more transactions to scale up the GST coverage to the unorganized division. The report says, “We will soon implement reverse charge mechanism.”
This contrary attribute of GST will surely assist the government’s revenue collection from the small firms, and keep away the firms in respect of hiding the original benefits and turnover in business. With this system, all kind of company’s spendings will be covered under the digital system of the GSTN.
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Referring the tax experts, although the introduction of reverse charge mechanism will create a better compliance, a load of document processing can be another issue for companies.
Amit Bhagat, tax partner at PwC said, “Implementation of reverse charge mechanism could increase difficulties for businesses. The government may, therefore, reconsider its decision. It should first allow the basic thing to settle down and then bring this also.”
In order to avoid increasing compliance burden, the small businesses have been opposing the implementation of reverse charge mechanism.
Furthermore, a business advisory panel, incorporated by the government consisting six-member in order to recommend certain measures in the improvement of GST to be pro-taxpayer, had suggested a few weeks ago that this introduction of the reverse charge mechanism would need to be slashed by all businesses together.
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The six-member panel was inclusive of Praveen Khandelwal ( Confederation of All India Traders), Ajay Sahai (director general and CEO of Federation of Indian Exporters Organisation), and Gautam Ray {former DG (audit), customs and central excise} as its members.
