The goods & services tax (GST) was implemented with great fervour by the government to usher in an effective indirect tax regime—by mitigating the cascading effect of myriad indirect taxes and to improve tax compliance. Befittingly, the implementation of this tax reform was eagerly followed by the industry as the new tax sought to create a homogenised market across India and aimed at aiding the trade to run businesses effectively.
GST, which was contrived with the idea of making a ‘good and simple tax’, has become a reality after more than a decade of push by the legislation. Given the size of the reform—with over 70 lakh taxpayers impacted—the government has done a commendable job in the roll-out of GST. The government, in its endeavour to implement GST, has taken a consultative approach and this is evident vide the following:
Multitude of meetings that the government has had with the industry in the run-up to GST;
Issuance of 27 FAQs on various sectors including key sectors such as e-commerce, IT/ITeS and issuance of clarifications such as on high sea sales;
Restoration of benefits to export-oriented units;
Course-correction in rates basis inputs from the industry; and
Addressing basic queries through the GST Twitter handle.
While the government has been largely successful in the implementation of GST and has taken constructive measures including training an impressive 52,000 central and state tax officers, GST has had its share of implementation challenges.
To begin with, the whole framework of GST has been based on the gigantic platform of the GST Network (GSTN), which has been expected to carry out the core functions under GST by way of capturing dynamic data on the output side, matching of the input tax credit, maintaining the electronic credit ledger and distribution of credit across registrations.
While the GSTN is intended to be a mammoth platform with `2,300 crore invested by the Central Board of Excise and Customs (CBEC) for IT enablement and is robust in its application, there have been considerable challenges faced by the industry vis-a-vis the network, such as delay in releasing utilities for transition of credit, thereby impacting the working capital of a company. Further, there have been challenges with uploading of the data or with the system not functioning effectively and, lastly, continuous extension of due dates for filing of returns, which has caused significant inconvenience to the industry at large.
While the government has proactively deferred filing of specific returns (relating to transaction-level details for inputs) till March 2018, to ease the burden on taxpayers, it is urged that the government simplify the process of filing of the returns itself. Hence, the need of the hour is that the GSTN be geared up to be robust and the returns be simplified, thereby staying true to the intention with which GST was rolled out in the first place.
Given that an amount of `65,000 crore has been claimed as transition credit by the industry, basis the transition provisions, the industry is expecting that the government be liberal in its interpretation of the provisions given that the provisions have been fraught with lacunae. For instance, there is little clarity in case of credit being available in respect of cesses, thereby adding costs to doing business. In addition, there is no mechanism for availing of credit with respect to leased capital goods, with an exception of cars.
With the implementation of GST, the concern of the government is to pass on the tax rate and credit benefits to the consumer. Although there is ambiguity with regard to anti-profiteering measures introduced by the legislation, it is commendable that the government has thought out the need to pass on the benefits of GST to end-consumers. However, the government is yet to release guidance on the mechanism for passing on the benefits. If standard guidelines are not issued at the earliest, it could have the adverse impact of increased litigation cost, with assessees adopting multiple methodologies.
At this juncture, it is also pertinent to examine the e-way bill, which is being considered as a tool to check leakage of tax. It has the potential to undo the free flow of goods across the nation as envisaged by GST. While it is to be appreciated that the government has postponed the implementation of the e-way bill, thereby allowing free flow of the market, it is highly recommended that the government re-look at its decision to introduce the e-way bill under GST per se, given that a consignment would cover the GST invoice and delivery challan.
Lastly, there has been no consistency in allocation of assesses between the central and state jurisdictions for the purpose of administration across states. This has resulted in a sense of restiveness among trade due to the fact that jurisdiction for the same business can be with state tax authorities in one state, and with central tax authorities in another, raising the possibility of divergent interpretation of the same issue across states.
To surmise, while the government has indeed achieved a gargantuan feat with the implementation of GST, changing the landscape of Indian economy for the better, it is also expected of the government to take immediate corrective actions to address the issues highlighted to provide much-needed respite to trade.( Deloitte India)