The post-GST era has so far witnessed exporter numerous strikes, errors and mismatches in returns filed as well as the World Bank calling GST a very complex Taxation system. But, several months ago, on July 1st, 2017, India as a nation had taken a giant leap towards a new order in its taxation History. GST was touted as India’s second tryst with destiny.
However, more than 4 years down the line and after multiple policy updates, it seems that not everything has unfolded as planned. This was, however, a possibility and the Government was prepared to incur short-term losses in exchange for large future gains. GST in India not only boasts one of the highest tax rates but also consists of the largest number of tax slabs. Add to this the growing compliance burdens, technical as well as compliance issues.
Latest Update in GST Issue
- 02nd September 2022: The Confederation of All India Traders MP and Bhopal Chamber of Commerce and Industry organized an event for traders. The topics were GST issues, new tax provisions and their suggestions.
- 31st August 2022: The Delhi High Court admitted the complaint of the Sales Tax Bar Association against GST system glitches and requested responses from the government, Infosys, and Tech Mahindra. Read More
- 28th April 2022: Shri Ananth Rakh additional State commissioner has been appointed to resolve the GST (Goods and Services Tax) issues leniently by Nagpur Vidarbha Commerce Chamber.
- 23rd March 2022: On Tuesday, Puducherry CGST & Central Excise Commissionerate met to resolve the systemic glitches or GST-related issues.
- 01st March 2022: Maharashtra SGST department has showcased the guidelines via internal circular related to the GST legal issues with clarification for the taxpayers. Read PDF
- 17th February 2022: The GST tax practitioners association of Maharashtra has written a letter to the Chief Commissioner of CGST, Mumbai Commissionerate. The letter has raised some GST issues that have been faced by taxpayers.
- 14th December 2021: The GST commissioner and Excise department of Puducherry and Tamil Nadu arranged a meeting to the resolution of Goods and Services Tax (GST) problems for manufacturers of auto parts & cars.
- 13th November 2021: The Kerala Minister of Finance K. N. Balagopal said at the Gulati Institute of Finance and Taxation (GIFT) international seminar that GST compensation shortfall of INR 13,000 crores to state and approx INR 10,000 crores will be having lesser in the next year. “We are witnessing a worst-case scenario where the revenues of the States are plummeting,” he said.
- 20th September 2021: “Clarification in respect of certain GST related issues” Read PDF
- 22nd July 2021: All India Federation of Tax Practitioners has prepared a presentation related to 39 GST issues. It has submitted the presentation to the finance minister of India and wants an immediate solution as businesses are facing difficulties due to these technical issues. Check PDF
- 15th July 2021: Kerala FM KN Balagopal has suggested some structural changes for GST ACT. He is an educated person and postgraduate in commerce & law. He demanded that the GST compensation period should be prolonged by additional 5 years. Furthermore, there is a need to revise the GST structure. The minister wants to discuss this topic in the next meeting. The upcoming 45th GST council meeting is to be expected in the month of August 2021. Continuous state tax revenue collection affected on reduced GST rate. An important consideration on this matter is to be needed.
- 11th July 2021: CG CAIT National Meeting: Discussions on common problems related to GST (Goods and Services Tax), Income Tax, bank, ROC rules
Among Asian countries, India has the highest standard GST rate. On the planet, it is second only to Chile. The non-zero rated products ( 0, 0.1, 0.25, 1, 1.5, 3, 5, 7.5, 12, 18 and 28 per cent) combined with the remaining zero-rated products and the 3 percent GST-rated Gold are a sharp deviation from the one Nation one GST Tax dream. Petroleum products, power, and real estate are still outside the GST ambit.
In this blog, we try to throw light on the issues that currently plague the newly levied GST taxation system in India as well as the taxpayer’s grievances.
Technical GST Issues for Indian Taxpayers
Goods and services tax is currently going under tremendous pressure to go through some of the burnings and solution-seeking problems of the year-old implemented indirect tax regime. The finance ministry, as well as the GST council, needs to take care of the GST return filing issues and forms-related consequences that have to be faced by the taxpayers alike.
Let us discuss and find those priority topics of GST on which the GST council and the finance ministry must work immediately:
September Return Due Dates
It might be wrong to the taxpayers as they cannot claim the ITC before matching the invoice, for the date being shortened to October 20th. Also, the credit of ITC claimed or unclaimed is to be claimed or reversed according to the filing dates, so the dates must be extended.
Credit Reversal
The credit claimed on the purchases in which the payment has not been given to the suppliers within the 180 days must be reversed. And to keep a note of these things may indulge an extra burden on the organization.
GSTR 2A Availability
As the annual GSTR 2A can’t be downloaded and has to be viewed monthly, this has created difficulties to match the returns with the books of accounts with 2A returns. Comply of Rule 36(4) on a mandatory basis also creates now a problem.
Agricultural Commission Agent & Joint Development Agreement Agreement Issues
The tax liability has to be paid on the commission according to the taxable goods but when the goods are rated NIL and the commission is not taxable therefore making it an issue for builders and landlord taxation liability.
GSTR 3B Issues
Under this return type, there is no modification or amendment facility available and in case the changes are to be made then there is a lengthy one month period time for the amendment making it an interest liability issue.
Issues in TRAN 1 form
There will be issues in the Trans 1 notice in Form 603 as it is now sent by the department to everyone making it troublesome for the real taxpayers. As the notice requires all the previous records to be available making it a tiresome issue for the taxpayer to provide the details again.
Some Other Important GST Issues
Below is the list of other important issues that have been continuously facing by small traders and businesses such as e waybill, technical glitches and much more.
Some Pertinent Issues for Small Traders
GST implies additional operational costs for Small businesses. In a developing country like ours, not all SMEs will be able to afford the cost of computers and accountants required to implement GST (make bills and file tax returns). 28% GST rate on some products like plywood, automobile parts, and electronic items forces potential buyers to opt for unregistered dealers.
It is too difficult to assign MRP to handmade products like local shoes, Banarasi Sarees, etc. Most small artisans are illiterate and therefore unable to write MRP on their products and/or do any paperwork. Dealers are confused about how to rate such products.
Small businesses that have a small turnover and need not pay GST face trust issues. Buyers demand bills from even those sellers who are exempted from GST. Without proof of a certificate of GST exemption, small shop owners find themselves stranded and immobile.
Issues for E-commerce Companies
E-commerce giants like Flipkart, Amazon also have not escaped the aftereffects of GST rollout. TCS has to be collected by the e-commerce companies from the sellers at the time of payment.
The capital blockage will hamper day to day operational costs due to TCS provisions. The GST council has fixed the 1 per cent TCS over the deduction made while payment to the sellers.
E-way Bill and Interstate Trade
The E-way bill had the potential to liberate interstate trade from all sorts of obstructions. The excitement could be felt among the slightly nervous business community. But on the day when the Finance Budget 2018 was being introduced to the Lower House, the lethargic GST network turned to be a major spoilsport and February 1 turned out to be a watershed moment for the upbeat government. The inability of the network to handle large volume e-way bill requests was at the forefront of public jokes and disappointment. Immediately e-way bill was rolled back. In the aftermath of the failure, goods carrying vehicles were left stranded and highways enjoyed pin drop silence for a few hours. The crumbling GST network has been in the spotlight from the very beginning and it continues to garner unwanted criticism and public grievances.
The GST Council need to find permanent scalable solutions rather than interim ones like the GSTR-3B. The sloppy GSTN Network raises serious concerns over the Government’s claim of a digital powered economy. GSTN is managed by Infosys, a premier IT services company. The e-way bill network was managed by the venerated NIC.
The GST E-way bill is a major concern for most of the companies which are regularly into the business of transporting goods and sending material over the locations, the transport company is also trying to figure out how it would deal with the GST E-way bill provisions. As soon the bill expires the transport company or the trucker himself has to generate the GST E-way bill on his own. The GST Council must have taken all these concerns into strict consideration and ensured easy and simple e-way bill generation procedure which has been effective from April 1, 2018
Evaders Bonanza
The consistent policy rollbacks and amendments, powered by the glitchy GSTN Network, have enabled massive tax evasion. The benevolent composition scheme, as well as windows for filing quarterly returns, raise concerns about the intention and execution prowess of the government at the centre. The increased pool of registered taxpayers has had little but no impact on Revenue generation. Only 70% of taxpayers file returns regularly. A major headache is, however, the mismatch between initial and final returns filed by taxpayers. There is an estimated mismatch of Rs 34,000 crore tax liabilities reported in GSTR-1 and GSTR-3B. The present GST structure has no mechanism for checking discrepancies found between GST Returns for July-Dec and Final Returns. About 84 % of the taxpayers were unable to correctly report revenue statements. The discrepancies and e-way bill failure demand that the GST Council now needs to take rigorous measures to tackle the menace of tax evasion through under-invoicing.
GST and Fiscal Fractures
The GST revenue shortfall promises large dents in the Centre and states’ fiscal applecart. The Center and State budgets will be pegged down by the gap in Tax revenue. The common man will find himself on the receiving end if such a gap in revenue continues. To bring states on the same wavelength and approve GST, the government had offered state compensations to the tune of Rs 60,000 crore for July to March in FY18. In order to stay true to its pre-GST promises, it is estimated the Central Government will have to make payment to the tune of Rs 90,000 crore further in FY19.
Understandably, the Budget 2018 unleashed record taxation of over Rs 90,000 crore in the form of capital gains tax, increase in customs duty, cess and surcharge. The fall in revenue has further made states apprehensive about bringing petroleum products and real estate under the GST ambit.
Adapting to The IT Ecosystem is Hard
Indian economy is majorly driven by small business units i.e SMEs. It will be unfair to expect small-scale business firms to make the transition to an online IT platform and expect no errors in return filing. It is an uphill task for the majority of our working population which has little hands-on experience with IT solutions. The cost of SRP deployment is a major concern for micro-small-medium scale enterprises.
The Confusion
For a frictionless and less burdened GST, the government is looking to shore up revenues to the tune of Rs 1 lakh crore per month. It would be interesting to see if the Government still has the courage to take stern measures against tax evaders and other business firms involved in anti-profiteering activities. The GST was projected as India’s second tryst with destiny. However, the financial budget of 2018 has thrown a wide plethora of taxes at the Indians to gobble up. Increased taxation is the only way of generating operational revenues for a complex system like GST in the nonlinear Indian Demographics.
Read Also: How to Fill Anti-Profiteering Complaint Form Under GST?
In conclusion, the present GST appears to deliver little promises. The GST rollout it seems was done with very little homework both at operational and technical ends. For the time being, the GST Council needs to pay heed to grow public as well as taxpayer grievances. It must take note of the fact that policy must be designed to reduce the compliance burden on the taxpayers. Compliance strategies must include compulsory education and assistance programs and risk-based audit programs. It must also run a communications campaign that enlightens the various effects as well as benefits of GST amidst businesses, consumers and important intermediaries.
Challenges CA is Facing Under GST
The roll-out of the Goods and Services Tax Act (GST) in India is followed by the beginning of online GST Registration and e-filing of GST Return filing. Among regular amendments & digitalization of tax-related tasks, Chartered Accountants are constantly coming across various challenges that vary from using the online GST mechanism to the alignment of their books & records to meet the new GST requirements. This led to the investment of increased efforts and time by CA due to incorporation of details such as customer’s address & GST Number, HSN Code (Harmonized System of Nomenclature) for products & SAC Code (Services Accounting Code) for services in the invoices and issuance of documents such as a Debit note, Credit note, Receipt Vouchers, Bill of Supply & E-Way Bill under the various circumstance.
The administrative work of CA has also increased due to mandatorily filing of several returns, based on the constitution & the sales turnover of the business. Besides a CA has to manually furnish details & enter all invoices & bills into different tools or company’s software or spreadsheet to adhere to the GST mechanism, followed by the creation of GST reports, cross-verification of company’s purchases, sales & ITC details, correction of mismatches and finally upload of information to Government’s GST portal. Under GST, a CA has to ensure the reconciliation of data between the seller and his supplier to claim full ITC and avert unnecessary payment of taxes. Reconciliation is a tiresome & a time-consuming job that has to be executed on a monthly or quarterly basis, depending on the company’s turnover.
