GST: Lots of ground to be covered before implementation

1. All of us should appreciate the effort put in by the Governments at Centre and States, in coming to a common understanding after lot of deliberations and passing of GST bills, which should usher a new era of indirect taxation.

2. CGST, IGST and UTGST Bills have been passed by the Parliament and got the assent of the President and became Acts. State Governments are in the process of passing SGST Acts. Draft rules on input tax credit, returns, invoices, compounding schemes etc., are issued by Centre. Admirable work has been done so far by the bureaucracy in framing the rules, formats etc.

3. However, still lot of ground is required to be covered, to ensure that the long awaited indirect tax reform is implemented in a systematic way. Any hurry in implementing the GST, without giving proper time to the trade and industry, would result in lot of litigation and chaos.

4. Some of the issues which are not yet settled in the Acts, draft rules are listed hereunder, which hamper the preparation at the end of taxable person and implementation of GST from 01.07.2017 would be difficult, without early resolution to these issues.

a. Rate of GST are not yet finalized. Unless and until, rates are finalized the systems of the taxable persons cannot be configured. On getting rates notified, the systems have to be updated and trail runs are to be carried out, before putting the system in operation.

b. The categories of supplies on which reverse charge is applicable is not yet notified. There may be some categories of services, where a portion of tax is to be paid by the supplier and balance to be paid by recipient. Configuration of all these types of reverse charge required time and cannot be done overnight.

c. TDS provisions are also not yet notified. Whether it is applicable on supplies of goods or services or only on specified classes of goods/services is not clear. Again whether it is applicable to all recipients of goods or services is not final. This also needs to be configured in the systems.

d. State GST Acts are yet to be passed by the respective State Governments. Taxable persons are required to go through the State GSTs to find out whether there are any additional provisions which require preparation and configuration.

e. Return formats are yet to be notified. This is also one of the major work. Once the returns formats are finalized, taxable persons are required to configure the systems to extract the data as per the returns format.

f. Further, there are many issues, doubts, practical problems envisaged by the taxable persons in the CGST, IGST and UT GST Acts passed so far. Necessary attendance is required to be given to these issues and appropriate amendments to be carried out, to avoid confusion and future litigation.

g. Another important issue to be clarified is – whether small taxable persons can upload the data of returns on their own or every taxable person is required to avail the services of “GSP (GST Suvidha Provider). A window should be provided to taxable person who wish to upload the data on their own, instead of making it compulsory to engage the services of GSP, which will be a costly affair to small taxable persons.

h. One of the herculean task for the taxable person, so far as it relates to configuration of systems, is issue of invoices against supplies from un-registered persons and reverse charge. Lot of configuration in the systems is required for smooth implementation of these two requirements, which needs time.

i. On configuration of systems, lot of testing and trail runs are to be carried out, since the data to be uploaded and reconciliation to be carried out with the data provided by GSTN is a herculean task, as number of line items in consumer industries run into lakhs and crores.

j. Further, GSTN should provide for trail run for minimum two months on its platform, so that taxable persons can upload the test data, download the auto updated data, prepare reconciliation, delete/modify and accept the data finally on test basis. Unless and until few rounds of uploading and checking is done by the taxable persons and bring out the problems relating to network, it is not practicable to start GST implementation. Uploading of data for the first time, within a month of appointed day, would result in lot of chaos, if the system throws errors and taxable persons are not conversant with the process.

k. Generation of receipts against advances received, adjustment of the same against invoices and uploading of the data relating to advances and invoices on the GST Network is also a herculean task from data point of view and also from configuration point of view. This requires lot of time for configuration. Even though, advances and invoices are at present posted in the financial accounts of the taxable person, extracting data and uploading the same as per the requirement of GST network requires configuration which takes time.

l. In general, debit and credit notes are prepared manually and financial entries are posted in the books of accounts. This cannot be continued under GST, as data is to be uploaded. Therefore, debit and credit notes modules to be developed in the systems and data to be extracted and uploaded on to GST Network. This also requires sufficient time.

m. Few days back, E draft -way bill rules are released. This is another major work to the taxable persons. They have to examine whether the data relating to invoices, delivery challans can be uploaded for generation of e-way bills. Manual feeding of data for generation of way bills is not feasible in case of taxable persons where the numbers of invoices, delivery challans generated runs into thousands and lakhs.

5. Only few points of concern are brought out above, which need to addressed, before notifying appointed day. Implementation of GST from 01.07.2017 is too early, as there are so many issues to be resolved by the revenue and to be taken care of by the trade and industry. Trade and Industry has already brought out their concerns about anticipated problems, in implementation of GST from 01.07.2017. Government should consider the same and implement GST from 01.09.2017, so that trade and industry will have breathing time to make changes to their systems at most possible pace. Revenue departments will also have time to address the various practicable problems raised by the trade and industry in the provisions of GST Acts.