Impressive gains scored by India on the Ease of Doing Business Index for 2018, by broking into the top 100 in the World Bank’s latest rankings, notching up the biggest improvement among all countries on the back of big gains on a number of measures. The rise to the 100th position from 130th the previous year made India one of the top 10 best-improved countries, which the Modi government celebrated as an emphatic endorsement of its economic reforms. The ranking is made considering various factors like starting a business, dealing with construction permits, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
It is to be noted that in the 2018, Ease of Doing Business report by the World Bank, which was released in November’2017, did not take into account the implementation of the Goods and Services Tax (GST). The Goods and Services Tax (GST), India’s biggest tax reform since Independence, rolled out past midnight (30th June’2017) in the precincts of the hallowed Central Hall of Parliament to usher in a new indirect tax regime in an event that sought to evoke memories of the famous ‘Tryst with Destiny’ night the country got freedom in 1947. Conceived on the principle of ‘one nation, one tax, one market‘, the tax that subsumes 17 central and state levies and also 23 Cesses was implemented from 1st July’2017 across 29 states and seven Union Territories with a unified tax regime.
Referring to the eminent personalities like Jawaharlal Nehru, Sardar Patel, Maulana Abul Kalam Azad and Babu Rajendra Prasad who had adorned the Central Hall, prime Minister, Narendra Modi said like Patel had integrated the country, the GST would integrate the country economically.
He described the GST as ‘Good and Simple Tax‘ — good because there will be no tax on tax and simple because there will be only one form of tax. It will also help eliminate black money and corruption because of the transparency it seeks to bring in, he said. Modi further said whatever was lacking in growth and development of the country, GST will provide the opportunity to realize them. The rollout has rekindled hope that India’s reform program is regaining momentum and it will fast propel Indian economy.
Fast Fading out Euphoria & Excitement of GST Implementation with Problems Galore:
However, the bold beginning and its Euphoria, Excitement and optimism fast faded with problems galore – there are some apprehensions about hurried transition and its un-preparedness and system related technical glitches. These resulted into large scale fears of disruption, companies need for complete overhaul of IT / ERP systems and major re-engineering work; resistance for change and opposition of trade and business; wide range of confusions, lack of clarity on many issues; disputes about multiple taxes / higher rates and of course protests, representations against many of GST provisions and on and on. In response to these and with the good intention to resolve the issues and problems, frequent meetings of GST council and its prompt recommendations to resolve the issues lead to very frequent amendments, changes and alterations further complicating and confusing the tax provisions.
Dilution of Basics
Despite many conceivable benefits of GST, many believe there is some hype around the anticipated benefits since the current version of GST is a diluted form of what was originally considered ideal — a low, single tax rate with few exemptions. The current form has four rates for goods and services — 5%, 12%, 18% and 28% apart from Nil rate and special rates for precious metal, rough diamonds & Stones — and excludes five hydrocarbons — crude oil, petrol, diesel, jet fuel and natural gas—as well as liquor and electricity from the purview of GST. This dilution of basics derailing very objective of introduction of GST as One Nation – One Tax – One Market leaving it a mere slogan.
Missing Matching Concept
Invoice matching is a mechanism under which all the taxable supplies made under GST will be matched against all the taxable supplies received by the buyer. The matching concept rests on the premise of supplies made by supplier and furnished in GSTR -1 returns must match with the receipts of recipient and such details furnished in GSTR -2. This process shall ensure that the recipient can able to take Input Tax Credit (ITC) only when the supplier pays the tax and files returns.
GSTN which has been conferred to set up the IT infrastructure was burning the midnight oil to build the algorithm and put all the logic into the GST common portal. However, because of some technical glitches and non-satisfactory tested provisions the filling of GSTR -2 & 3 were differed to uncertain time, resulting in missing of this very good concept that plugs the misuse of credit availment and revenue leakage.
Seamless Credit is Not Seamless
GST facilitate seamless credit across the entire supply (value) chain under a common tax base however with riders and blockage of credits. Also seamless credit is not allowed in some situations like hotel stay in other state by employee (representing a company) who travels on official tour, event management, provision of services by consultants etc. Similarly, non availability of ITC in case of sale of immovable property (flats/complex) after receipt of completion certificate. Therefore, as perceived belief of seamless credit is not true.
Exporters Fuming over Export Refunds :
Refund to the exporters within seven days as promised in the GST law is a misnomer, illusionary and a myth. All the exporters are struggling for months together and clamoring for justice to get their genuine, righteous claim of refunds. Exporters are having a tough time since the roll-out of the new GST regime as the online facility to claim refunds is not yet available or not capturing data properly to process refund claims. Then after introduction of manual submission and processing also not ensuring timely refunds and the woes and their worries continuing unabated. Starving for working capital they are cursing the entire system of GST.
Merchant Exports & Deemed Exports at Mercy:
In the pre GST regime merchant exporters are fully exempted from excise duty through CT -1 and CST by providing H- form. But in GST they were forced to pay full GST on their domestic procurement for exports. Later of course some relaxation is provided to source on payment of 0.1% GST, however by which time major damage to export already happened.
Similarly deemed export status for supplies to EOUs, Advance Authorisation and EPCG holders is granted very lately, unwillingly out of pressure. As a result, it was witnessed drop in exports loosing precious foreign exchange and market opportunities apart from wounding pains for exporters.
Tedious System of Returns Filling
The benefits of automation and adoption of high technology thought to bring great relief by simplification to returns filling system, however to everyone’s utter surprise turn to be most complex, tedious and time-consuming exercise thanks to ill-conceived, half cooked, untested GSTN introduced hurriedly grieving every tax payer oozing out their sweat. Very frequent but short time deferment of dates of filling returns brought no relaxation but continuing pains.
Continuing Technical Glitches:
GST Network – the IT backbone of the new indirect tax system, failed miserably in implementing – drawing everyone’s irritation, frustration, annoyance, anger, impatience and horribly defeated defamed, denigrated, tarnished & maligned as a whole GST otherwise good system, thanks to developers of the GSTN platform for such irreparable damage done to the Nation as a whole as GST – revolutionary tax reform is now a Nation’s Pride.
Issues relating to technical glitches, system related hitches, snags and difficulties are continuing and even the proposed nation e-way bill implementation from 1st February also failed due technical glitches.
Help Line is Helpless
GSTN Portal provided Help Line provision. The estranged tax payer fed up with GSTN Portal and its related technical issues may seek some help from Help Line. But unfortunately almost in all the times it proved to be helpless. No solution is coming through the Help Line and turns to be a waste of time. Like any general call center, mostly un trained attendants attend calls unprofessionally as they even couldn’t understand the problem since they are untrained. Every time like parrot spelled words they ask us to note down a mail ID and asks us to write there. If we mail to them there ends story – for days together there will be no reply except auto generated reply with reference number or ticket number.
Frequent Changes – a Major Embarrassment
Though with good intension to smoothen or to resolve problems frequently from time to time amending, changing, altering, revising provisions in the law by issuing frequent notifications, circulars, trade notices, press notes etc ….etc….also proved to be a major irritant leading to lots of misperceptions, misunderstandings, confusions, muddling with lots of references and updates.
Awaiting GST April Fool:
The draconian reverse charge mechanism under sec 9.4 (receipts from un-registered supplier), tax exemptions under deemed exports etc which were provided relaxation or extension of benefits only up to 31st March’2018 crop up again like unsurprised April Fool from 1st of April. This type of flip-flop policy provisions damages a lot san any benefits.
Revenue Loss – an Invisible Scam
When any system finds to be complex and difficult to file routine type of returns, then tax payers in their natural convenience finds way out and evades tax. In case of GST also it has no exception. Some liberal provisions of removal of check posts, no immediate and proper e-way bill system in place and certain leniency in provisions specially in composition scheme, allowed uncontrolled leakage of revenue which can be termed as invisible scam seen as huge revenue fall.
Given this background, certainly it will not augur well to indicate any real improvement in Ease of Doing Business as expected after implementation of GST unless some major measures are taken as follows :
GST needs major Revamp to boost India’s ranking for the next year in the Ease of Doing Business.
Disclaimer : The views and opinions; thoughts and assumptions; analysis and conclusions expressed in this article are those of the authors and do not necessarily reflect any legal standing.
Author : SN Panigrahi, GST Consultant, Practitioner, Corporate Trainer & Author Can be reached @ [email protected]