CA Amit Lath
Indirect Tax regime of the country with the implementation of GST is expected to see the drastic change. There are numerous grounds supporting such change and few of them are unified market Place , Reduced litigation , Better compliance management, Reduced operational cost, Seamless flow of credit etc. Impact of GST on manufacturers, Traders, Service providers would be altogether different.
There are 12, 76,861 service tax assesse as on 31st March 2014. Out of these 12, 76,861 assesse, Top 50 assesse pays more than 15% of total service tax collection of the country. A major portion of current service tax revenue is paid by these big corporate houses providing services such as telecommunication services, IT services, Business support services, General Insurance premium, Banking and Financial services etc. These big corporates are having presence in almost all the states of the country
What will be the impact of GST on these big corporate service providers is a matter of time however it appears that GST would not favour these organized service providers and they may not reap the benefits of GST implementation in greater way. These Service providers already have an access to the unified market. Even the territory of the countries doesn’t obstruct them in providing the services. A person sitting in Delhi can provide the service to a person in Nagaland without any trouble.
Presently Most of the big players has one centralized registration of service tax and several VAT registration in states. The amount of VAT liability is minicule as their revenue doesn’t suffer VAT. The charging of SGST would introduce the contentious issues with the state government and in turn litigation in the different states. The media report suggests that the assesses will need to take separate registration in each state even for CGST. Presently single Show cause notice is issued for a contentious issue by the service tax authorities and with the separate registration of CGST, there would be seperate SCN in all the states for the same issue. The situation may become unmanageable.GST will surely add to their Litigation in place of reduction.
In absence of a single adjudicating authority, different state authorities may take different view on the same issue. The contrary decision will prolong the adjudication process. If the report of separate registration of CGST in all the states is to be believed then it will have a far reaching impact on the adjudication process . Presently one adjudicating authority is forming an opinion on the issue involved and in the proposed scenario, different adjudicating authority may take different view on the same issue. Resolving the difference of opinion between different adjudicating authority under the same board (CBEC) will again become a uphill task.
Seamless flow of credit and cost of services
VAT in the current mechanism becomes a cost to the service providers as no VAT credit is available to them. Under the proposed scheme, SGST credit would be available to the service providers. However the amount of VAT paid by these service providers is minicule when compared with SGST amount they are liable to pay under the proposed scheme. The service providers would be paying CGST and SGST on the entire revenue and availing the Credit of CGST and SGST paid on the Input or Input services. The additional SGST liability after offsetting the available credit would make the services costlier. Increased cost (including taxes) may also reduce the demand of their product.
Cost of compliance and litigation
These service providers are generally making single payment of service tax from their centralised address and with respect to VAT they pay the taxes wherever required. Many of the service providers need not pay VAT due to their nature of business. In the proposed scheme, Payment need to be made in all the states on all the services and the periodical returns also need to be filled in all the states . with this increased no. of return filling , payment and increased litigation, cost of compliance and litigation will become higher.
Human Resource Management
Presently these service providers have dedicated human resource at their centralised billing address dealing with service tax compliance and litigation . with scattered compliance and litigation , it won’t be possible to manage the compliance and litigation centrally and accordingly a team of tax professional would have to be created in the state level in addition to the corporate team.
Each of the stakeholders would have different impact of implementation of GST in the country. A beneficial piece of legislation for one can be detrimental to other. Adoption of balanced approach is the only solution and such approach could be adopted only when all the stakeholders has been given the opportunity to keep their views.
There are three main parties to the GST implementation i.e Centre, State & Trade. Central govt. and State government has been discussing the GST model and its implementation for quiet a long time and have reached to a broad consesous before introduction of constitutional amendment Bill however a important stakeholder i.e trade has not been taken on board till date to represent their views. A smooth and successful implementation of GST necessarily requires trade to be made a partner in GST introduction and implementation.
A centralised authority adjudicating the disputes in the CGST would necessarily make GST more attractive.
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