The Goods and Services Tax (GST), aimed at replacing all indirect taxes such as VAT, entertainment tax, service tax, customs duty, central sales tax, etc, and making India one unified common market, is indeed a landmark tax reform in India.
However, ever since it was introduced on July 1 this year, businesses have been facing problems, which is understandable given the scale of the exercise. Here, we will deal with some of the problematic areas.
For consumers, it may just seem like new tax slabs of 0%, 5%, 12%, 18% and 28%, but for businesses GST has brought in 13 types of return filing forms – GSTR-1, GSTR 2, GSTR 3, GSTR 3B, GSTR 4, GSTR 5, GSTR 6, GSTR 7, GSTR 8, GSTR 9, GSTR 9A, GSTR 10, and GSTR-11.
However, one is not required to file all the forms, but file forms relevant to one’s nature of the business.
What is cumbersome for companies having a turnover of more than Rs 1.5 crore is the filing of 3 forms every month, besides an annual returns form. That makes it a total of 37 forms in a year – a lot of pressure on time and resources of businesses, particularly mid-small scale.
SME companies struggling to file GST
It has been six months since GST was rolled out, and most companies have not been able to file their returns in time.
Since most companies were lagging behind the schedule, the government has waived off the late fee of INR 50 per day for the month of July, August, and September – definitely some consideration from the government, but not good enough to tackle the basic problem.
The problem is that businesses have to match each and every invoice that is generated by them or their suppliers every month, and that puts a lot of pressure on the medium and small businesses.
The big companies do not suffer much as they have resources to handle such pressures.
The problem, several business owners have complained, is compounded because the GST portal, which has not been able to cope with the sudden pressure, hangs very often, leading to anxiety among small company owners as they are liable to be charged Rs 200 per day for the delay.
Cos hiring people just to handle GST compliance
Well, besides the time constraints, the companies also have to depute additional resources to tackle the increased workload, and that has financial implications.
This is because each and every invoice has to be uploaded on the GST portal and it must match with the returns filed by vendors. Moreover, rigorous follow-ups are required to close the data.
The problem becomes all the more difficult for e-commerce companies where tax is deducted at source as they supply the products and need to fill a special GSTR-8 form which is mandatory.
The task becomes gigantic for startups as they have a limited budget and cannot afford to have staff which is fully deputed to do the GST work.
According to a report by the Internet and Mobile Association of India, India’s e-commerce market is estimated to have crossed Rs. 211,005 crore in December 2016, and it is expected to generate $100 billion online retail revenue by the year 2020.
The government needs to see that this growth is not affected by policies such as GST.
Does GST promote ease of doing business?
There is no doubt that a unified tax system is a great step forward towards standardizing the tax collection across the nation.
But the need to match tax credits on each invoice makes things rather tedious and it, in a way, defeats the aim of achieving ease of doing business.
From the above, it is clear that businesses have been put to great strain due to GST procedures, but both the central and state governments seem to be alive to the situation and are trying to find a solution.
In my view, what will definitely help is the quarterly filing of returns, instead of monthly, as this will give a breathing space to companies to depute their resources more judiciously and comply with the GST norms.