Open Letter to the Honorable Prime Minster of India PART-II
My Experience with GSTN- Workable suggestion to Make GSTN a success
As an addendum to my earlier open letter (My Experience with GSTN- An Open letter by a CA to PM of India- Part I ) to Honorable Prime Minister of India, I thought to pen down suggestion based on my experiences; input from various professional colleagues and taxpayers -how the GSTN network should work to really term it as user friendly. The successful implementation of GST Law heavily depends on technology, as government plans to make it front end and done way with all kinds of manual intervention.
It is worthwhile to note that GSTN system has been designed by one of the most valued software company of India Infosys Limited (Company is also managing MCA and other Government portal) which is going to be cost 1380 Crores to the Government. The development cost incurred by the government on GSTN is not a big issue, but whether the system delivered what was originally perceived is a big question- as reported in media the system was required to handle 60000 transactions per second.
Also, Question arises While designing the system why not existing online filing system and their acceptability at grassroot level was reviewed so as deliver best in class system. Before adopting any system for compliance of one of the biggest Tax system of the country, government should have assessed ground realities of the taxpayers in terms of Internet connectivity, awareness of new tax laws amongst the business community, accounting system in place; prevailing trade practices and geographical bottlenecks persisting in different parts of our country.
The ways and means should have been put in place to overcome such bottleneck in form of Facilitation centers at each Taluka level or existing TIN-FC network can be utilized at least to plug the connectivity issues. The Income Tax TDS system TRACES is finest example, which has overcome such bottleneck over the period and matured enough to be replicated for new tax system like GST.
Real bottleneck is Numbers & time line of Filing:
In view of large numbers of user which is estimated at 70-80 lacs which will be soon exceed the 8-digit figure, the present online system will not work as return filing process is time bound and it is most likely that 80% of user will log in last 2-3 days to file their return, ultimately queuing theory will fail as µ > λ (Service Time is Greater than Arrival Rate).
WHAT IS THE SOLUTIONS TO LARGER PROBLEM:
- A Robust Offline Utility – The Solution to present day situation can be only providing fast & robust offline utility with all validation checks; sensitive help and troubleshooting for generating Offline Return file to be uploaded on GSTN portal.
- Replacement of existing un-workable Three Tier system -The system of filing Outward return(GSTR1), followed by matching (GSTR2/2A/1A) and finally generating consolidated return (GSTR3) is not a workable preposition. The system will be a big failure as every return is dependent not only on of earlier return of same taxpayer but also reruns to be filed by corresponding sellers. Every Default & delay in filing return will have impact on other returns making the whole filing process a redundant system. The primary question arises why such real-time system is required, which is forcing sleepless nights for users of the system.
- Single Consolidated Quarterly Return – A single return for reasonable time like most of the State VAT / IT and ACES system was allowing. Instead of providing slices of period for filing GSTR 1, 2 & 3 a single consolidated return should be allowed in month time after completion of Return period which should be ideally minimum a quarter if not Six monthly. Once the return is uploaded, matching system can be initiated and defaults and mismatch can be generated, to be correct within another month time by way of correction return before finalizing the liability of taxpayer and converting it to demand or refund to be carried forward in next quarter returns.
- Reduce return Frequency – The most important and burning issue amongst all the taxpayer is monthly frequency of compliance. Every taxpayer must go through same process every month which requires lot of resources in terms of Time & money, which every taxpayer cannot afford.
- One Time longer frequency to adjust to new system – Beside Initially when every taxpayer and consultant are struggling to understand new Law, concepts and reporting standards, the frequency should be of six months to nine months for the current financial year 2017-18 and which can be subsequently settled down to ideal period of quarter.
- Monthly Summary return to assure Tax collection – The government concern for revenue collection can be taken care by imposing a single page summary monthly return as presently termed as GSTR-3B to be filed within 15-21 days of completion of month along with Tax payment. Delay in filing 3B and payment thereon should be compensating by way of interest only for one more filing period after which a reasonable penalty can be levied.
- Ease of Payment and Adjustment –The payment of taxes should be allowed on consolidated basis under single head to be credit to taxpayer cash ledger, which can be utilized to set of liability under any heads of tax. The faster reflection of taxes paid into cash ledger should be ensured in all modes of payment.
- Ease of HSN code Usage – The Taxpayer one of biggest confusion is finding out a correct HSN code for their goods. Existing HSN code list is very complex for common taxpayer or even a consultant to settle down on single & precise HSN code. The GSTN should provide a list of common tradable items based on feedback of different trade association and link the same with the HSN list so that taxpayer can provide HSN code in Invoices, also it will help to decide correct Tax rate for the goods. Moreover in view of vide acceptance of smart phones, preferably mobile applications should be provided for locating correct HSN code and corresponding tax rate applicable.
- Submission of other Forms – Other necessary Submission need to be made available online immediately and alternatively through manual system initially which can be done away once online system gets smooth and workable. The issue under Composition scheme (Opt-In/ Opt-Out); registration cancellations; need to be sorted out immediately.
- Ensure speedy resolution at Local Department Level – The local department offices should be armed with interface for speedy disposal of issue arising, which cannot be resolved under available system.
- Making law Simpler to reduce the system complexity- The taxability under reverse charge being a totally new to business specially in SME sectors is making un-workable at grass root level. Instead of that all business and service provider should be Invariably asked to register and should be kept out of tax net by providing basic exemption limit and providing compliance waiver to such business till they exceed the limit. Similarly, various intricacies of law should be removed resulting in difficulty in compliances.
- Reduce TAT for Registration- On registration front, the system akin to erstwhile ACES system should be adopted wherein PAN should be linked to the IT database so that PAN validation error due to name mismatch is done away. Presently the system tests you to provide your name as per PAN which in most of cases slightly differ from name printed on PAN card.
As a first step a simple single page form should be asked and registration number should be generated immediately to be used by the dealer with Provisional status, and once the application is pre-scanned the document requirement should be populated with option to submit electronically (with reasonable size) or locally with registration cell set up at district level offices.
- KYC Check of Registered Dealer – The GSTN portal should provide updated details of Dealers so that proper status (Regular/Composition) can be known before entering into transaction.
- Verification (EVC /DSC) – Presently the system requires OTP for various services, there is no provision to change the contact details (email ID and or Mobile number) given at the time of registration, which need to be implemented with proper security check before change the contact details. The verification with DSC option should be made workable in line with ITD site.
- Effective Redressal System – A Well-equipped redressal system should be established in form of online portal manned with resourceful and skilled staff to resolve all sorts of issue of taxpayers. The queries raised to GSTN should be replied in specified time as per Service Level Agreements (SLAs). Where such queries are not replied, the action of the taxpayer should be considered bonafide and no interest on penalty should be charged for any action or inaction resulting from system errors or issues.
- Synchronization of Law & System – A lot of inconsistencies is prevailing in systems vis-à-vis the coded law. A proper check to be done to ensure whether the GSTN system and the law are in complete sync and to ensure that the system does not override the law or puts additional conditions or controls not visualized by the law to the detriment of the taxpayer.
To sum up, to create a user friendly GSTN system following solutions need to be implemented:
- Discontinue monthly filing system (GSTR1, 2 & 3) instead continue with GSTR 3B to secure the revenue till March-18.
- Done away with system of online filing in slices and provide single utility to prepare a single consolidate return.
- Submission of various auxiliary forms like CMP, RFD, & TRANS either online by way of utility or through local department.
- Provide Trade parlance HSN code list.
- Tax Payment under single common head to be adjusted under to different heads of Tax.
- System akin to existing well tested system is desirable as they are user friendly and already adapted by the professional.
- Provide redressal portal for authoritative and timely solution
- Providing Taxpayer, a reasonable time preferably by the end of this fiscal year to adapt to new law and system and make them ready for proper compliances.
The government should also think on lines of consolidating compliances under various fiscal law for providing a common portal for submission of business information be it be Financial statement, Audit report or trade specific compliances. This will greatly help in reducing compliance time, duplication of data and interoperability of data.
Government need to be responsive and consultative to taxpayer demands, then only user friendly robust GSTN System can be implemented in real terms or it will remain like another government command to be followed under fear of enforcement system.
Taxpayer are keeping their fingers crossed and hopeful of getting needed relief. User friendliness should be given more importance over technology.
A humble request to the Honorable prime minister to intervene and do the needful in larger interest of Taxpaying citizens of India.
Long live our Nation… Jai hind….
CA Mohammed Lakkadsha
05th September ,2017