Jai Prakash Pandey
Goods and services tax (GST) which talks about ‘One nation, one Market and a Single Tax’ initially was promoted with tempting offers. However Modi Government itself has come on back foot on this issue. Prime Minister Narendra Modi is taking up back to back meetings with economic experts and has indicated further modifications. Within no time implementation has also started. All together this stand is entirely different from what government did on the midnight of July 1, 2017 which was followed by financial mess across the country. Post GST officials are confused and it had left the renowned economic experts baffled. Even they do not have any clarity about its implementation. Small traders are in crisis and capitalist are getting benefitted from the loopholes. Unending meetings of GST Council continues. With every single sitting it comes out with a new formula. Series of additions and subtractions has now become a basic principle of the present GST. Uncertainty and cluelessness is resulting in tax evasion. Large number of traders is befooling customers by telling them as they are not registered under GST. They selling products without bill which is peaking the problems for tax department.
Indian Tax System
- Indian Tax System is an age old system. It continues since the Mauryan Era
- After Independence it was constituted under the three list of the constitution
- 100 items constitute the first list of federal, 61 items come under the state list and concurrent list consist of 52 items.
- Details of the tax are in first two lists while there isn’t any information about concurrent list.
- States have different list that’s why their rates also differ. There is a separate list for Centre and different rates as well.
- Except excise duty, customs and excise duty (except alcohol) were under centre’s list.
- Entertainment tax, street tax, stamp duty and luxury tax were imposed by States.
- The tax were divided between State and Centre as per the finance commission’s formula under the article 280 of constitution.
- A single tax attracted every tax. It included custom duty, excise, entry tax, cess, vat and service tax.
- Different rate of excise and service tax created problem.
GST is said to be an ambitious plan of Prime Minister Narendra Modi but unfortunately neither the government nor the machinery has any clarity about the tax. Apparently GST is seen nowhere even after four months of its implementation. Right from the Government to trader everyone is visionless on the issue. Prime Minister along with finance minister Arun Jaitley claimed that the biggest benefit under GST regime will be witnessed in the form of relief to common man. Subsequently it will transform the Indian market. Simultaneously ease of taxation will follow. It was declared, post GST prices of few items can soar-up on the other hand it will also reduce the cost of various necessary items. On the whole, it is all set to simplify the complex tax structure.Traders will get rid of highest 18 percent tax slab. Only GST will be filed all across the country. In order to get prepared for the tax various organizations and states initially requested for postponing the date of its implementation. West Bengal was one such state but their plea remained unheard.
Bengal called the present structure of GST impractical and difficult to implement. Hence it called for shifting its implementation for at least a month. Different trade institutions also raised concerns about the technical glitches. They stated, despite nearing the implementation date technical issues are on peak. Though facing problem during GST registrations is obvious, its online network was not working since a month before the implementation. This was creating problem while generating E-way bill. The prominence of this delivery note can be judged by the fact that transportation of goods would have become impossible without it. Regardless of what was expected, government did not consider this problem. It permitted the bill without registration. This relaxation ended up in huge forgery by the mid level traders. Those who had turnover of around Rs one crore opened four-five accounts and befooled the government.
Glitches in GST
- It is not a single tax. Basically it’s a dual tax system based on Centre and State
- GST has amplified the burden of work on traders, banks and accountants.
- Every transaction under GST is online and needs to be regularly updated.
- There are four tax slabs under GST. It includes 5%, 12%, 18% and 28%
- As per the system every business needs to file 37 returns/state.
- If a company trades in more than one state the number of returns it files will increase accordingly.
- Complications of GST are difficult to understand.
- Integrated GST includes Central Goods and Services Tax and State Goods and Services Tax.
- If a Company has offices in three States then it needs to file 111 returns yearly.
- In order to claim the paid tax under GST maintaining the record of every transaction is important.
- In most of the small units accountant visits once in a month and prepares vouches.
- Simultaneously files the details regarding the tax.
- Training Trade and Bank workers for the tax
- Increased work burden for the new tax system.
It is said due to technical glitches GST network had to be shut down on May 1, 2017. It was restarted on June but proved to be of no help. Hardly any improvement was seen. This issue was also highlighted by President of Karnataka Chamber of Commerce and Industry (transaction committee) BT Manohar. As per Manohar whenever a trader tried to file his details during registration last page displayed portal error. Traders were unable to generate Application Registration Number (ARN) which is vital to establish GST identity. On top of that, Tax invoice and sales bill could not get generated without ARN. If Government was serious regarding implementation it would have ensured ARN to most of the trader by June 30. It was significant to avert exploitation of traders from Tax department officials.
World Bank and IMF warns
Viewing the current economic scenario World Bank has kept the Gross Domestic Product (GDP) estimates low. It has added to the fears. In its by-yearly Economic Focus Report for South Asia, World Bank has disclosed that due to demonetization India’s economic growth was hampered and uncertainty due to GST had added to the woes. As a result India’s economic growth is forecasted to rest at 7% in 2017. While in 2015 India’s growth rate was 8.6%. With the help of clear policies to balance public expenditure and private investment it can rise up to 7.3% in 2018. This is to be noted; in June this year World Bank forecasted GDP growth of 7.2% for India which was 6.8% in 2016. As per the Organisation India is recovering from the side effects of Demonetization though it has revised the growth estimate by 0.4%. Concurrently, it kept the forecast for China to 6.5% for the current year. For 2018 and 2019 China’s GDP growth is estimated to rest at 6.3%. In June this year World Bank issued an economic forecast report. It estimated India’s GDP growth 7.5% in 2018 while for 2019 it stood up to 7.7% . While it later revised its estimate by 0.3% and 0.1% respectively. On the other hand International Monetary Fund (IMF) also reduced India’s growth forecast to 6.77%. This number is 0.5% lesser than the earlier estimates. For China it forecasted 6.87% growth rate. Its report says India’s growth has slowed. IMF and World Bank has issued this report in their Annual Meetings.
On behalf of Institute of Chartered Accountants of India K. Raghu warned about the unpreparedness on Gst. He suggested its implementation not before September 1, 2017. Accordingg to him in order to impose the new tax the whole environment has to be changed. Along with the Raghu Indian Banking Association which represents 237 banks informed Parliamentary Panel about its members non-readiness to adopt the new system. Inspite of that new tax came into existance on predetermined date. Committee headed by finance Minister Arun Jaitley initially picked 1,200 goods and 500 services for imposing the tender tax. All these were put into tax slab of 5, 12, 18 and 28 percent. Goods on which 28% GST was imposed became costlier. Considering the upcoming election of Gujarat and Himachal Pradesh tax rate on these goods was modified to 18% recently. Likewise GST on non- Branded products which are sold locally was reduced to 5% from 12% earlier. Now the funniest question, why the whole drama was created if this was to be done?
Amid slowing economic growth of the country now government accepts its mistake in the implementation of new indirect tax regime. It agrees to the fact that despite reforms loopholes do exist. Government said it is all set to refine GST in days to come. The limit of Rs 1.5 crore for filing the quarterly return could have been increased. In other countries this limit is around half million to million dollar. If we calculate this amount in our currency it reaches becomes Rs 3-4 crores. It is being estimated that Rs 5 crore limit would have provided greater relief to small businesses.
In the recent meeting of GST council few vital moves were made. For small businesses having turnover of around Rs 1.5 crores, it was decided that they need to file the return once in every three months. Despite that it is hard to implement. Reason being after council’s decision there will be three categories for traders. First category involve traders whose annual turnover is less than Rs 1.5 crores while second category includes those whose turnover is more than Rs 1.5 crore. A separate chunk is needed for composition scheme traders. It will also include two categories of traders having annual income of less than Rs 1.5 crore. First category involve traders which file their return monthly, while others who file return once in every three months. As far as their turnover is concerned this has to be declared by the traders only. However it will be government’s duty to verify the figures. With Tax department already facing manpower crunch this is no less than a Herculean Task.
Problem does not ends here. It is also a major challenge that traders who file monthly return had to arrange for the data from the ones who will be filing return in three months. They require this data to prepare and file GSTR-2. Verfication of GSTR-2 will also be difficult task. With all these issues cropping inflation is rising incessantly. Government’s One Country, One tax formula is exposed. While promoting GST government published ads showing various delicacies in one plate. Along with that, it was advertising for consumer protection and “Jago Grahak Jago” ads. According to our suggestion as government has every record about common man’s income, it can claim tax depending on thier income. At least this would help in averting havoc created by GST.