Compliance of GST Regulations in India: Challenges and Solutions

The implementation of Goods and Services Tax, popularly known as GST, has emerged as a prominent reform in the field of taxes. It has transformed the tax structure for the businesses worldwide. It has simplified the taxation systems, enhanced transparency, and boosted economic growth. However, as they say, with every silver lining comes the shadow. Therefore, adhering to GST regulations, can be challenging for the businesses, policymakers, and consumers. It can be because of the varying rates, and procedural requirements across different jurisdictions. Thus, this article aims to provide insights into the complexities in complying with same. Also, it seeks to offer practical strategies to ensure adherence to regulatory requirements.

Understanding the Basics of GST

GST is a form of indirect tax which is levied on the supply of goods and services. It is paid by the consumers. It has been introduced on 1^st July, 2017 and has replaced many of the then existing taxes. It is different from the traditional form of taxes. They were charged at each stage of the product, that is, from its manufacturing till it reaches the final consumer. But GST is levied only at the point of consumption. Thus, this has eliminated the overlapping effect of taxes and has also promoted the efficiency in the marketplace.

It includes,

1. CGST – It is the Central GST and is charged by the central government;
2. SGST – It is the State GST and is charged by the state governments, and
3. IGST – It is the Integrated GST and is charged on interstate supplies.

Legal Framework on GST

There are numerous sets of laws, rules, and regulations that govern the GST system in India. It provides necessary requirements which should be complied with.

It encompasses the following:

a. Laws Governing GST: It includes –

1. Central Goods and Services Tax Act, 2017 which provides the guidelines regarding the collection of tax by the Central Government,
2. State Goods and Services Tax Act, 2017 which regulates the intra-state transactions of goods and services and each state has its own SGST Acts,
3. Integrated Goods and Services Tax Act, 2017 which regulates the levying of tax on inter-state supplies of goods and services, as well as imports.

b. GST Council:  It is a constitutional body which has been introduced in order to regulate the issues related to GST. It was established under Article 279A. It is headed by the Finance Minister of India. Also, it includes the Finance Ministers of the States and Union Territories as its members. Its functions include providing for the recommendation of rates, classification of goods and services, mechanism for registration, filing of returns, dispute resolution, etc.

C. GST Network (GSTN): It stands for Goods and Services Tax Network. It is a non-profit organisation. It has been established with an aim to provide for IT infrastructure facilities for the effective administration of GST in India.

Significance of GST

GST has created a huge impact on both the businesses, as well as the consumers. It has made a significant shift in requirements which should be fulfilled by the businesses. For example, it is now necessary to adopt strong accounting systems, and to regularly file the returns. Further, it has also put forth the opportunities for simplifying procedures and enhancing competitiveness in the global marketplace. For consumers, it provides more transparent tax system, whereby taxes are levied based on consumption rather than production. It has both short-term and long-term benefits. In short-term, it provides for price adjustments for certain goods and services. In the long-run, it has given a simplified and uniform tax policy.

Challenges Faced in GST Compliance

Although, the implementation of GST has brought many beneficial changes. However, still it presents a multifaceted range of difficulties. Thus, it has imposed some of the below given challenges in the effective functioning of the taxation system:

1. Diversified Jurisdictions – One of the primary challenges businesses encounters is with respect of the jurisdictions. The regulations vary across various jurisdictions. Different countries impose different tax rates, and provide different set of exemptions. They have varied compliance requirements. It poses a burden, particularly on the MNCs that operate in multiple markets.
2. Tax Rate Variations – It creates difficulties in the calculation of taxes and their classification. It is so because sometimes, there are multiple tax rates for different categories of goods and services.
3. Input Tax Credit (ITC) Reconciliation – Businesses often need to adjust input tax credits and keep a track of the same to claim deductions for taxes paid on inputs used in the production of goods and services.
4. Meeting the Deadlines – The deadlines pose challenges to the businesses that have complex and extensive supply chains and transactions.
5. Technological Integration – Adopting and integrating compliant accounting and Enterprise Resource Planning (ERP) systems can be very time-consuming.
6. Tackling the Changes  – It is difficult to implement the changes in business processes and to train the employees, and educate the stakeholders about GST compliance requirements.

In addition to these, there are other complexities involved as well. For example, filing procedures, administrative loopholes, resistance from stakeholders, etc.

Solutions to issues faced by Taxpayer in GST Compliance

Despite the challenges, one can adopt several best practices to overcome the loopholes successfully. These are given below:

1. Robust Accounting Systems and Processes – It is very crucial for accurate GST compliance. Businesses should invest in compliant software solutions. These should provide automated tax calculations, invoice generation, return filing, reconciliation, reporting functions., etc.
2. Regular Training and Education – There should be an arrangement of continuous training and education programs for employees. It is essential to ensure awareness of the regulations and compliance obligations. Training sessions should cover key aspects of GST compliance, including tax rates, invoicing requirements, input tax credits, filing procedures, etc.
3. Leveraging Technology Solutions–  Businesses can provide technological solutions. Like there can be GST software, or electronic invoicing systems to enhance accuracy, and improve efficiency.
4. Engaging Professional Advisors – The businesses should try to engage professional tax advisors or consultants who are expertise in this field. They can provide valuable insights and guidance. It can help in solving complex issues, interpreting regulations, and mitigating risks.
5. Regular Compliance Audits – Conducting regular reviews can help businesses to identify gaps and errors in their working. There should be frequent and timely check-up of the tax calculations, documentation, filing, and record-keeping practices.

Conclusion

In a nutshell, it can be concluded that in the era of the GST, a proactive approach should be followed. Moreover, the employees should be provided continuous training and education in this field. It will empower them to understand and comply with the obligations effectively. Further, it is equally essential to learn from the diverse experiences of the different nations that have successfully implemented GST. It will help to deal with mitigating risks and maximize tax outcomes. It will ensure sustainable growth and competitiveness in the global marketplace.