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Goods And Services Tax: Journey So Far And Road Ahead

The entire eco-system of compliances under GST needs to be simplified and made user-friendly especially for small and medium sector enterprises.

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The Goods and Services Tax (GST) was ushered to create a common national market.  As far-reaching fiscal reform, GST aimed to provide a simplified & single tax regime, reduce the overall tax burden and bring down the prices of goods & services.

Typically, GST was introduced to prune multiple tax levies and reduce compliance obligations.  Also, GST brought about uniformity in taxation of goods and services across the country thereby removing the trade barriers such as check-posts, octroi/entry tax/ LBT, etc.  This has reduced lead time and logistics cost, leaving a positive impact on the supply chain, from procurement/imports till ultimate delivery to end-consumer.  Implementation of e-waybill reduced potential tax leakages and facilitated ease of doing business to give further impetus to the logistics sector.  Albeit initial delay in process of export refunds, subsequent addressal was undertaken through remedial actions including ‘Special Fortnightly Refunds’. 

Another positive step was pruning tax rates by bracketing most commodities within 12% to 18%, to usher market confidence and lower prices of commodities.  The GST Council, with adequate representation of State and Union governments, has been at the forefront in addressing the concerns of the industry and provides regular updates/ clarifications.  Very recently the GST Council debated on bringing the petroleum sector into the GST net, thereby steering fresh confidence among the assesses.

However, the journey has not been easy.  IT infrastructure, the backbone of GST, has savoured many hiccups.  Further, the delay in resolving IT glitches resulted in overhauling the return process alongwith a need to infuse new formats for addressing the stakeholders.  Input tax credit (‘ITC’) matching mechanism, the foundation to regulate the credit-flow, did not take-off and left potential revenue leakages thereby causing non-compliance.  To add to the woes, the industry is wary of approaching the Authority for Advance Ruling as most of the rulings have been pro-revenue.  Further, the National Anti-Profiteering Authority has been slapping profiteering charges upon many sectors and its applicability is extended by two years, thereby causing further discontent.

The government stands firm on availment of ITC through the seller-buyer matching mechanism and accordingly proposes to implement a new system of return filing, which has also seen multiple deferrals owing to lack of IT infrastructure.  Though the new system boasts of ease of compliances, the industry is now settled with the present system and is anxious to adopt new formats, which seem to be coupled with uncertainty over technical glitches and possible mis-match issues, due to non-filing or delayed filing by suppliers.  

Albeit propagated as a simple tax regime, GST has significantly increased the compliance burden with challenges, inter-alia, issuance of regular notices by the tax department for minor mismatches.  In addition, the detailed formats rolled out for annual return and reconciliation under GSTR 9C makes it even more difficult for companies to disclose information, not reported in monthly returns in a financial year.  To sum up, the entire eco-system of compliances under GST needs to be simplified and made user-friendly especially for small and medium sector enterprises.

In lieu of above, although the operational readiness to roll-out this important reformative step appeared insufficient and tardy, a strong foundation has been laid thereby creating a room to accommodate changes and propagate the government’s agenda of ‘ease of doing business’. 

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Sohrab Bararia

The author is Associate Partner/ Indirect Tax, BDO India

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