GST may be new to us but it is not new to globe, France adopted GST in 1954 and become the first nation who adopted GST to curb the tax evasion. After that Italy, Japan, Canada, Australia, South Korea, UK and China took a forward step in GST implementation in their economy.
GST was adopted in our economy on 1st July 2017 and the rationale behind this was to overcome the issues in existed tax system. In pre GST regime there were multiple taxes at Central and State level and even in state level there were a no of taxes and the consumer was unaware of these taxes and was able to see only one state level tax on price label of the product.
Further due to a no of indirect taxes in India the taxpayer has to follow multiple procedures and there were different rate of taxes in different state and the result was multiple registrations, multiple authorities to whom tax was paid, no control on corruption because most of the thing was through manual procedure.
To overcome these issues GST bill was proposed in Loksabha in 2014 and become an Act and was finally implemented in India on 1st July 2017.
GST has widen the tax base leading to a large no of taxpayers, although the government assuring that a turnover cap has been defined below which enterprises do not required to obtain registration under GST regime but as we go through the schemes and condition imposed by the government it does not seems that it is providing any relief from GST registration.
The most important aspect in GST is the availement of Input Tax Credit which would make the business at ease but condition imposed u/s 16, 17, 18 and Rule 36(4) of the CGST Act it seems that government has tried it best to snatch these relief granted to the SMEs.
We will discuss these complexities one by one:
1. Condition imposed by Sec 16 is such that if not adhered the taxpayer shall not be eligible for ITC and would adversely affect the working capital of the entity by blocking the fund.
2. Condition imposed by Rule 36 (4) is that if the supplier has not uploaded the sales invoices within prescribed time limit ITC would not be available to the recipient and can only claim up to 5% of the invoices reflecting in GSTR-2B in respect of invoices that has not been uploaded by the supplier resulting blocking of fund (now a days for quarter 1 of FY 2021-22 the provision of Rule 36(4) has been relaxed and it can be reconciled cumulatively for April, May and June 2021), but the majority of the taxpayers ignoring the provision of Rule 36(4) and claiming the ITC as reflected in GSTR-2A being the contravention of the provision and would lead to fall the entity in litigation.
This Rule leave no option to the taxpayer to avoid these contravention because it is resulting in huge amount of fund blocking and the entity, who made the payment on time and just because of non filing GST return by the supplier on due date, cannot be denied for availement of full ITC.
3. Implementation of QRMP Scheme is also created a more adverse situation to the smoothness of the business because under this scheme if the buyer who availed the supply from QRMP opted supplier it cannot take the ITC until the supplier file its GST return at the end of quarter and receiver’s GSTR-2B would reflect no invoice before the end of quarter and render buyer ineligible to take ITC requiring more working capital.
However the government has taken a step to overcome this problem by implementing Invoice Furnishing Facility (IFF) but this is resulting in multiple reconciliations.
4. has created the situation before enterprises that if the registered supplier obtain any supply from unregistered person then it shall not be eligible for ITC and the result is that registered person would not prefer to make business connection with unregistered person this would lead the small business to obtain GST registration, this situation prove that the turnover limit granted by the govt. is just an illusion.
5. No revision in GST return is also a problem before the taxpayers because no entry can be modify in GSTR-1 or 3B after it is submitted and can only be done in Annual Return only.
6. Non reconciling GSTR-1 with 3B would render the Assessing Officer to issue notices to the taxpayer. If the sales shown in GSTR-1 do not match with that of GSTR-3B in a particular period then the AO can issue notice to the taxpayer and it is to be replied within prescribed period if not replied then AO can cancel the GST registration.
7. By considering the above mentioned difficulties it correct to say that a small businessman would require accountant and tax expert to save itself from legal consequences which would increase the cost of business and the idea behind GST ease of doing business does not seem to be happen.
8. E-Way Billing and HSN system also created a problem to specific industry like FMCG where there is daily transportation of a large variety of product for which E-Way Billing is not an easy task to maintain and regulate. Further for HSN compliances in FMCG there a large no of Product for which HSN management is a headache.