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CA Pradeep Jain, CA Preeti Parihar


Report of The Joint Committee on Business Processes for GST’ has already been circulated and views have been sought from people at large for suggesting improvements thereupon. This report is divided into three parts namely GST Registration, GST payment process and GST refund process. In this article, some benefits of the proposed payment process under GST regime have been discussed alongwith some minor drawbacks of the proposal.

Proposed payment process: Merits over existing system:-

The report of the Joint Committee on the payment process has discussed in detail about the mechanism to be followed in respect of affecting the flow of funds in GST era. Some of the merits of proposed system of payment are discussed as below:-

1) Under present system, manual filing of challan is also accepted, thus, the chances of errors are more. In the proposed system, only electronic challan generated by GST network (GSTN) will be accepted, thus, the details therein will be more reliable.

2) The GSTN will provide a unique Id (CPIN) which will be used until payment has actually been received by the bank and CIN (CPIN plus bank code has been generated. Thereafter, the CIN will be used for all the later purposes like accounting, reconciliation, etc.

3) Three payment modes have been prescribed namely online payment through authorized banks, debit cards, credit cards, etc.; over the counter payment and RTGS/NEFT payment through all the banks including non-authorized banks. All the three modes will be using the electronic challan in which the data filed by the tax payer could not be redigitalized by any of the parties using the said challan data.

4) RBI will play the role of aggregator for fund flow and information flow, thereby making the flow as well as information more reliable.

5) Due to automation and transparency in flow of information and very few parties involved in the transaction, there would be nominal errors, therefore, reconciliation process will be easy.

6) E-scroll facility will be provided by RBI which will make the accounting, reconciliation and other ancillary activities easy and effective.

7) The two coloured challan is the special feature of GST payment process. Since only one challan shall be required to pay the taxes namely CGST, IGST, SGST, etc.; two colours have been assigned to the challan for easy demarcation.

Proposed payment process: Discussions and Downsides thereof:-

The proposed payment system in the report indicates some minor demerits which are discussed as follows:-

1) The Report indicates that that the GST regime will accept only payment of tax only via electronically generated challan whatever be the mode of payment. There will be no use of manually prepared challan. The report prescribes the following three modes of payment:-

  • Payment by tax payers through internet banking through authorized banks and through debit and credit cards.
  • Over the counter payment (OTC) through authorized banks.
  • Payment through NEFT/RTGS from any bank (including other than authorized banks).

Out of the above three, second mode of payment namely “over the counter” payment will be available for payments upto Rs. 10000/- per challan only. However, the report does not describe whether Rs. 10000/- per challan will be per challan per day or per challan per month or something else. No clarification has been given on the same. It further states that the outstation cheques will not be accepted. Only those cheques which are payable at par at all the branches of bank having presence at that location will be accepted. Thus, there is a constraint besides the ceiling limit of Rs. 10000/-. It is worthwhile to mention here that over the counter payment is the most popular mode of payment at small places where internet access and/or banking facilities are least. Also, as the GST will bring a no. of new tax payers in its net; this mode which is considered as the safest by the small town people; should be accompanied by facilities instead of restrictions at the beginning of GST era. However, gradually, this mode can be made stringent so as to shift towards automation.

2) The payment through NEFT/RTGS from any bank (including other than authorized banks) is the new mode of remittance to be implemented as from start of GST era. At present no payment can be accepted from any bank other than nationalized bank which has been duly authorized to collect the taxes. However, with implementation of GST, payment through NEFT/RTGS will be accepted from any bank, even other than authorized bank. In this system, the RBI will accept the money on behalf of Government and will generate a challan. The Common Portal Identification Number (CPIN) will be generated alongwith the challan which shall be valid for a period of seven days. If any tax payer uses this challan beyond the validity period of 7 days more than twice, he will be debarred from using this option by the GST network. Thus, to opt for this mode of payment, the tax payer has to be prompt, otherwise habitual late filer/ user shall be debarred from using this facility. According to RBI, this method was tested in Karnataka and this experience will be further used for developing this mode. It is to be noted that this is the totally new method. Though it has been accepted for the sake of benefit of tax payers, yet, since it is still under testing stage; it will take time to gain popularity. Also, the payment mechanism prescribed for availing this mode of payment is somewhat cumbersome when compared to other two modes of payment. Therefore, this mode will be accepted only by those people who are left with no option.

3) Under the new system of GST Era, RBI shall play the role of aggregator through its e-Kuber system. It will facilitate larger no. of banks in GST receipts enhancing convenience of tax payers. It will simplify the accounting and reconciliation tasks. In case any discrepancy is found, tax authorities will directly interact with RBI. Further, in case of RTGS/ NEFT payments through non-authorized bank also, RBI’s role will be crucial as it will be the only mediator between the tax payers and Government. Therefore, the role of RBI will increase drastically in the GST era and responsibilities of RBI people will enhance tremendously. In fact, the entire tax collection and remittance procedure will solely depend on the efficiency of RBI personnel.

4) At present, the Central excise as well as the service tax challans namely GAR-7 has the details of jurisdictional locations. However, the report states that under GST era, the Jurisdictional location (eg. Commissionerate, division and range) shall not be mentioned on the challan. However, the tax authorities will send the taxpayers updated master data to GST Network and accounting authorities. The accounting authorities shall be using the taxpayer mater data for mapping the challans with the jurisdictional location code. This will make the process of accounting bit lengthy and cumbersome. If the location details are there in the challan itself, there is no need of referring the taxpayer’s master data every now and then for accounting purpose.

5) The challan correction mechanism has been kept as nominal in the GST regime. Though not completely ruled out, the GST network will allow the tax payers to make corrections in the challan already filed only in very few exceptional cases. Thus, due care shall have to be exercised while filing the challan as once filed, the chances of making corrections will be very nominal.

6) One major drawback of the proposed payment process is that the other means of payment by book adjustments or payment by debit to export scrips while paying taxes would not be allowed. At present, payment of custom duty, CVD, etc. at the time of import is also allowed to be debited in duty credit scrip. The report proposes that this method of payment of tax will be scrapped in the GST regime. So, how the export promotion schemes will work in the time to come; has not been discussed in the report. Also, the payment of tax by way of book adjustment is also allowed in specified cases under Central Excise law which is also proposed to be done away with the GST era. The reasons in particular have not been given for scrapping these modes of payment, yet it is a fact on record, that it is going to decrease the liquidity of the tax payers.

While winding:-

The report of Joint Committee on the payment process is very detailed and responsive. The authors of this article appreciate the steps taken by the Committee to create awareness on the drafts of payment process under GST. However, the report is silent on some issues which constitute the demerits of the proposed payment process. After some improvements, the payment process will become flawless and more reliable, thereby making the path of GST as more smooth.

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May 2024