Today we are on 3rd date with GST, however, we are still struggling to convert it into committed relationship though we all intent to do so.
On 1st July 2017, we all welcomed overwhelmingly new taxation regime with the hope of entering into new era mainly on following premise:
1. Simplified and hassle-free compliance: Law maker called it in initial days as “Good and simple tax”. Though it has reduced compliance from multiple tax return, hassle in collecting various forms for movement of goods, and provided single compliance platform for multi-location base taxpayers, however incompleteness in development of procedural aspects has dumped many taxpayers. However, major set-back was to small taxpayers, who could not overcome burden of increased compliance & payment of large amount of late fees.
2. Technology base transparent law: Use of technology supposed to be the USP in the introduction of GST and expected to bring transparency and time bound actions for taxpayers as well as for department. But technology turned out as a biggest reason for large hue and cry in last three year and mainly on account of no time was given to trade to prepare both with technology and law. Even the GSTN technology solution provider are struggling till date to deliver what was promised by law makers.
Enthusiasm of governing bodies in providing redressal mechanism got hammered due to act of few black sheep engaged into manipulating technology to gain from false refund claim, wrong input tax credit, etc.
3. Seamless flow of Credit: ITC was the driving force for trade to demand implementation of GST, though to the major extent cascading effect has been removed with GST implementation, but the issues like Blocked credit, invoice matching and rule like 36(4) has dented the hopes. Mainly, short term revenue augmentation goal lead to mismatch between object of GST and its actual implementation.
4. Growth Opportunity: Despite expected initial set-back for initial few months, it was estimated that GST will lead to GDP growth in a big way, however, neither the Central government has achieved tax collection target nor state government could get committed revenue.
Further, trade and specifically Export had faced huge cash flow issues due to blocking of refund, denial of ITC, issues in transitional ITC, multiple tax rate structure, issues in classification and frequent changes in tax rate. It also hampered overall business growth for longer period than expected, in-spite of various measures taken by Government.
5. One nation One Tax: This was the mantra on which government relied for promotion of GST, though to some extent it has paved the way for harmonized market. However, in effect it is not 1 tax but different tax enactment in each state. Administrative effect of this has been experienced in jurisdictional & monitoring issues as well as contradictory rulings of Authority for Advance ruling.
The concept and idea is still promising, though GST council, the co-operative federalism between central and state, has tried to remove the difficulties, but implementation strategies, incompleteness in law & procedure and insensitiveness in recognizing technical glitches has led to disappointment.
Prior to Covid-19 pandemic, government has announced measures like “E-Invoicing”, “New- Return”, etc. for simplification of GST administration, which is expected to be implemented from 1st Oct 2020, however, if it is not implemented in holistic manner, the overhaul may not serve the purpose of simplifying procedural and compliance system.
Turning dating into relationship is all about finding the right balance, with good intent we just feel right, however, good intent with right balancing and ensuring compatibility with each other could lead to committed relationship with taxpayers. In following case if desired balancing could be aligned, it will lead to change in mindset:
1. Technology glitches resolution mechanism: Along with technology glitches, another major issue is non-compatibility of GSTN portal with law & procedure. GSTN portal’s procedures are either not in accordance with formulated rules or not at all implemented despite provision are enacted in law, which is not intended by law makers. In both situation, trade and profession is suffering and affecting business environments. Taxpayers has experienced it with filing periodical returns, settlement of Refund claim, procedures of Composition scheme, registration hurdle etc., help desk center was complete failure, which could never meet the taxpayer’s expectation. For relief either taxpayer has to wait for longer time or need to approach the judicial authority, which is certainly not the intent of law.
This is leading to overriding of formulated law by GSTN common portal and to avoid this situation, formal mechanism need to be introduced for time bound redressal of technology glitches, further this forum should be made accountable for the resolution. Separate agency like Tribunal is need of hours to make GSTN portal accountable for implementation of formulated law.
2. Implementation Score Card mechanism: Availability of Working capital is backbone for any business entity, blockage could hamper the existence of business. Mechanism like invoice matching and Rule 36(4) undertaken for revenue augmentation has not only broken the seamless credit flow but has also affected business viability for small taxpayers. These measures are mainly taken to overcome bogus refund claim and fake invoicing.
Instead of resorting these kind of traditional approach for controlling tax evasion and revenue augmentation, technology control like Score card mechanism need to be implemented which not only will act as monitoring mechanism for department but also helpful to trade for deciding supply chain.
3. Rationalization of Periodical Compliance and Late fees: GST law expect all taxpayer at par in terms of resources including financial resources, which is causing non-compliance but giving additional financial burden for payment of late fees. Non-compliance are mainly on account of technology glitches, law and procedural issues and in some cases non-realization of sales and working capital gap. Non-compliance is not only affecting ITC Chain, but also affecting business as it lead to blocking of e-way bill generation and thereafter automatic cancellation of registration. Though GST council has announced various measures for rationalization of late fees and opportunity for restoration of registration, but these measures are part of post-mortem effect rather than relief to taxpayers.
In this regard, innovative mechanism should be introduced for small taxpayers to avoid the burden of compliance and late fees.
On the outset, dating is to evaluate one another’s suitability as a long term companion, the more the time spent, the level of uncertainty gets resolved to build foundation for strong relationship. Accordingly to make GST a serious affair, even trade and profession has to walk step forward and build trust worthy relationship to allow government to change the glasses.