GST-A Journey of One Year

Goods and Services Tax is about to complete its first year in our Country. It is really a matter of proud that I belong to a State which has first passed /ratified the GST Constitutional Amendment Bill on 12.08.2016 in its State Legislative Assembly. Assam was the first in the Country to pass the GST Constitutional Amendment Bill. Finally, GST law was implemented in our Country w.e.f. 01.07.2017. Since its implementation we have seen many ups and down in this law. If we talk about our experience so far, it was a mixed bag. I believe that best of the GST is yet to come.

Implementation of GST law in the very next year of demonetization was in itself a big achievement of the Central Government. If we review this one year, then one thing is certain that GST law was really a boon for some people/sectors whereas a few people are still struggling to know and understand its Knitty gritty. There were various challenges before the Central Govt. to implement GST w.e.f.1^st July, 2017. Let us understand some key challenges which were obstacle in the path of GST implementation:

• Co-ordination between Centre and States and Co-operation from the State Finance/Taxation Departments.
• Getting ready GST Common portal within limited time frame.
• Making common mass aware of GST provisions and issuance ordinance /Gazette Notifications etc.
• Introduction of GST after the end of the first quarter of the financial year 2017-18 posed some questions.
• Proper training to the departmental/taxation officers with regard to law and GST Software/Common portal.
• Development and setting up of Infrastructure facilities at a rapid pace.
• Lack of electricity and Internet in the remote areas of the Country.
• Awareness and propaganda of GST at various levels.

If you treat your business like a long-term project, then you will want to be proactive by becoming aware of common mistakes that others are making and correct them early on, which will not only save your company time, money, and headaches but also give you a competitive advantage in the marketplace with more streamlined operations and better customer satisfaction. The following are common accounting mistakes every CPA has seen small business owners make. GST-A JOURNEY OF ONE YEAR If you treat your business like a long-term project, then you will want to be proactive by becoming aware of common mistakes that others are making and correct them early on, which will not only save your company time, money, and headaches but also give you a competitive advantage in the marketplace with more streamlined operations and better customer satisfaction. The following are common accounting mistakes every CPA has seen small business owners make.

But the Central Govt. had a dream of introduction of GST in the Country and its strong will has proved the saying correct–‘When there is a will there is a way’. All the challenges and difficulties were left aside and the Govt. announced 1^st July, 2017 as the date of introduction of GST in India. Now, this day has become a historic day in the Indian Economy. After implementation of GST, there were lots of initial difficulties faced by tax payers. The following were the key problems faced by the tax payers, tax practitioners and public at large in the Country:

• Non working and slow speed of GST portal
• High and non-rational tax rates
• Reverse Charge Tax on purchases from unregistered vendors
• Technical glitches and problems in filing tax returns
• Huge late fee in case of delay in filing of returns
• High Compliance burden on tax payers in view of  filing of four returns in a single month
• Keeping accounts of tax under three different heads
• Payment of tax by the exempted Industrial units and non- receipt of refunds of such tax.

But within a short span of time the Govt. has analyzed the situation and made genuine efforts to resolve those difficulties. This is a fact that whenever a new system is implemented it is only after its use or practice one can know the difficulties. GST was not an exception to this rule. But inspite of so many difficulties in the initial stage this law was able to bring some significant positive changes in our Country. It has really proved to be a boon. We have seen following positive changes in our Country:

• Complete abolishment of Check gates and free movements of goods which saved lots of time and energy.
• Absence of Human intervention in the GST online working also put a bar on corruption.
• Unwanted visit of Tax department’s officials in the business premises of tax payers was minimal.
• GST opened lakhs of job opportunities in the Country and demand for accountant is still high more than supply. It paved the way for our move to the ‘Skill India” mission.
• Tax payers now using computers to keep their accounts and thus Information technologies Companies grew leaps and bounds. Whether it is a computer manufacturer or accounting software developer or Internet Service provider everybody has got significant business. This encouraged our dream of ‘‘Digital India” and our digital literacy also improved.
• Various new accounting firms emerged and number of GST practitioners also increased. Those who were not dealing in Indirect Tax matters are also in the race of GST. It was a surprise that apart of new age youngsters the old and senior fellows also joined GST. This has somewhere helped Country in its ‘Start up India” program.
• GST has led to a financial discipline in the country because of the fact that tax payers are more compliant now and their accounts and records are upto date. It is a good sign for growing Country like India.
• Online system has made tax collection fast, easy and less costly from the Govt. ‘s point of view. As a result the figures of GST collection have gradually crossed a mark of one lakh Crore.
• Our tendency to claim input tax credit even on small-small purchases has encouraged receipt & issuance of sales bill on each and every transactions. So somewhere it curbed the bad practice of non accounting of transactions.
• Various Social, Business and Trade bodies joined hands together to bring GST consciousness and Public Awareness. As a result it directly or indirectly helped in development of nation.
• Professional bodies also contributed towards nation by doing training programs, making study materials and conducting seminars on GST.

With the passage of time the Govt. has left no stones unturned in making GST law simpler. GST Council in its every meeting has taken some bold and big decisions so as to make GST less complex. A summary of few important steps taken to simplify this law are as follows:

• The original concept of four Tax returns in a month (GSTR-3B, 1, 2 & 3) was gradually curtailed to two tax returns viz: GSTR-3B & 1. Further the Govt. has extended due dates for filing tax returns as and when felt necessary.
• Major changes in the Tax rates of various items whereby 28% items pulled to 18%, 18% items pulled to 12% & 12% items pulled to 5%. Further various essential goods were made tax free.
• Reverse Charge Mechanism (RCM) under section 9(4) was deferred/postponed till 01.07.2018 w.e.f.13.10.2017.
• Reduction in the late fee payable for delay in filing tax returns from Rs 100/- per day to Rs 50/- /Rs 20/- per day.
• GST on advance receipts against sale of goods is also kept in abeyance. It reduces burden of keeping a track and trail of advances.
• Inter-State service providers are relaxed from compulsory registration upto a turnover of Rs 20/10 Lakhs.
• Constitution of GST grievance redressal mechanism and GST Self –Service Portal whereby the tax payer’s problems are being resolved online.
• Enhancement of threshold limit for Composition dealers from Rs 50 lakhs/75 Lakhs to 75 lakhs / 1 Crore.
• Making GST refund mechanism simpler and further Govt. has observed a refund fortnight from 31.05.2018 to 16.06.2018.
• Exports are made possible on the basis of Bond/LUT and without payment of IGST tax.
• Transporters are freed from getting registered under GST. The same is kept optional.
• Introduction of E-way bill and further making various amendments in the E-way Bill rules to keep the same more practical and useful.

All the steps so far taken by the Govt. in making GST simpler are really a welcome move. We are thankful to the Govt. for understanding the problems of common mass and resolving the issues. But there is still a long way to go and GST law is yet to be made simpler. As on date traders, Tax payers and Tax practitioners are getting problems with the complexity of GST and now it is high time to do away with such complexity. If Govt. makes this law simpler and user friendly then it is really going to be a reform of the decade and will boost our economy. It is further seen that people don’t have problems with the GST law rather problems are coming in its compliance, tremendous increase in paper works, improper functioning of GST portal etc.   

In order to make GST law simpler the following are the few suggestions to the Govt. and I am not only sure but confident enough that the Govt. will take care of each and every issue in the coming period. The key points are:

1. Simplification of GST return and rectification/revision facility:

GST returns are posing a big problem since its implementation. Today there is a common question all around as how to rectify/revise GST returns of the earlier tax period? Though the Central Govt. has come out with a Circular No. 26/26/2017-GST dated: 29.12.2017 wherein detailed procedure of correction is specified. It has been explained that mistakes of the earlier tax returns can be cured by making addition /subtraction in the figures of the current tax period. But this circular has given birth to some new problems.

• First of all it is not clear whether the procedure stated in the said circular is applicable even to the cases which are falling in the next financial year i.e after March’2018. In other words whether the procedure specified in the circular covers cases where mistakes of last F.Y. 2017-18 are rectified in the next F.Y.2018-19?
• Secondly, if we go by the said circular then there will be a mismatch in our current period’s GSTR-3B and GSTR-1 because of the fact that the current period GSTR-3B is having earlier period’s adjustment too. Now, owing to everything online, the system of tax dept. does not know what adjustment has been made to current month’s GSTR-3B. So it simply matches data with GSTR-1 and start reporting mismatch.

So it is suggested that Govt. should either make provision of filing revised /rectified GSTR-3B else add a separate tile/column for prior period adjustments in the GSTR-3B so that mismatch can be avoided.

2. Facility of a Common Cash ledger to be introduced:

Presently, under GST law there is a concept of Cash Ledger wherein cash payments are being made by the tax payers under the three major heads viz: CGST, SGST & IGST. These major heads are further sub-divided into five different minor heads viz: Tax, Interest, Fee, and Penalty & Others. Now, a tax payer has to pay tax under one major head and under one minor combination. Further tax paid is credited to that particular major & minor heads and is adjustable with the liability under such heads only. Even if a tax payer has a surplus amount under one head and deficit under the other he can’t offset. He /She needs to pay the deficit amount and to claim the surplus amount either as refund or to carry forward it for future liability. Due to such a system the tax payer’s not only working capitals is blocked but also they are saddled with the burden of claiming refund.

Thus it is suggested that the Govt. should collect money under one common cash ledger and allow assessee to adjust the liability there from as per their need and requirement.

3. No further  interest liability once money is credited to the Cash Ledger:

The provisions of GST in respect of payment of tax and levy of interest are quite peculiar. The assessee has to pay interest till the time amount is debited to his Electronic Cash Ledger. It is immaterial how much balance lying to his Electronic Cash ledger but the interest liability will be triggered till the date amount is debited to Electronic Cash Ledger. Until and unless liability gets offset/debited the assessee need to pay interest from the due date of payment till the date of offsetting liability. For example, if I am having IGST tax liability of Rs 1000/- for the month of May’2018 and my cash ledger is already having balance of Rs 1100/- under IGST. Now, the due date for filing my tax return for the month of May’2018 is 20^th June 2018 and if I do offset my liability on 25^th June 2018 I have to pay interest on account of delay of 5 days. This is really a harsh provision and should be amended. An assessee who has already parted with the money and his cash ledger is also having balance he should not be called upon to pay interest. The difficulties become double where an assessee runs its affairs by means of bank finance /loan. In such cases on the one hand he/she needs to pay interest to bank and on the other hand due to not offsetting or late offsetting of liability the GST law demands interest.  

So it is suggested that Govt. should change/amend GST rules suitably and make sure that wherever the assessee has balance in cash ledger no interest will be collected even if offsetting of liability is done after the due date.

4. Definition of ‘Aggregate Turnover for the purpose of registration should be changed:

As per the provisions of section 22(1) of the CGST Act, 2017 if the aggregate turnover during a financial year exceeds Rs 10 lakhs/20 Lakhs then one has to obtain registration number under GST. Now, section 2(6) of the Act has laid down the meaning of ‘Aggregate Turnover’ which includes exempted and non-taxable turnover as well. This provision of law is causing some genuine hardship to the small assessees and they are very much affected by this provision of law. It can be understood with the help of an example. Suppose, if an assessee of Assam is having rental income of Rs 4.00 lakhs (which is taxable under GST) and Interest Income on Fixed Deposits worth Rs 7.00 lakhs (which is not subject to GST) during a particular year. Then by virtue of section 22(1) read with section 2(6) the aggregate turnover of the assessee is exceeded Rs 10.00 Lakhs and he needs to take GST registration and do other compliances. It is really surprising that inspite of having taxable turnover of rental income Rs 4.00 lakhs which is much below the threshold, the assessee has no option but to pay GST.

Such provisions of law are really disturbing and thus it is suggested to remove such an anomaly by amending the definition of ‘aggregate turnover’ suitably for the purpose of registration.

5.  Late Fee should not exceed Tax liability of an assessee:

Though the Govt. has already reduced the quantum of late fee but still there are some

issues involved with the levy of late fee under GST. The late fee on account of delay in filing tax returns is causing some disturbances in those cases where the figures of late fee exceeds the payable tax. In such a situation it is really harsh to demand late fee more than the tax payable. If we refer the Income Tax law also (which is a Central legislation) section 234E is having provisions for late fee payments for delay in submitting TDS statements. But under that section also the maximum amount of late fee payable is restricted to the quantum of tax payable.

Thus it is suggested to rationalize further the provisions of late fee payment under GST.

6. Provisions of Composition Scheme to be amended further:

Under present provisions an assessee is debarred from opting Composition Scheme if one has got stocks left out of the Inter-State purchases and Imports made.

Further if an assessee is having more than one business then he has to either opt composition for all such businesses or to opt regular /normal provision for all those businesses. He has no option to opt composition scheme for one business and normal to others. We understand that such provision of law was made to stop assessee from playing with the tax rates. But the situation become worst in a scenario where an assessee is having various businesses and one of them is relating to providing of service (other than restaurant). In such cases he is completely debarred from entering into the composition scheme even though he is meeting threshold criteria etc. He has to take registration under regular /normal scheme and pay tax and file monthly return. It is immaterial how small his business is. His fault is only that he is rendering services other than restaurant. But in real the provision of law should debar from entering into composition in respect of that particular service rather not for all his businesses.

Further composition tax payers are also not allowed to make inter-state sales though the Govt. has made announcement in respect thereto.

Thus it is suggested to make the scheme more comprehensive and make suitable amendments in the light of above problems.

7. Settlement of  earlier taxation laws disputes through ‘Kar Samadhan Scheme’:

GST is going to complete its first year and now the assessment and appeal provisions are likely to play their respective roles. But until and unless old long pending disputes are settled tax officials will hardly find any time to deal with GST disputes. Therefore   Govt. should introduce a ‘Kar Samadhan Scheme’ whereby one time opportunity should be given to the assessees to settle their old pending disputes. Further such scheme should be made available only for a prescribed time frame. This will give an opportunity to the assessee to settle their disputed matter without any further litigation. Not only the time and money will be saved by this but early collection of taxes will also be ensured.

8.  Issues related to GST Registration should be resolved:

Though the registration provisions under GST are quite simple and easy and one can get registration certificate without visiting tax dept. Further GST law has provision for early issuance of registration within 3 days if documents submitted are found to be correct and complete. But practically the registration process is taking longer than prescribed time. Further Govt. should also think of Centralized registration of a few sectors like Banking, Insurance, Telecom, Govt. departments etc.

Presently, the registration certificate do not have date of actual liability and complete name, address and jurisdictional code of the issuing authority. Also if an assessee is having more than one trade then the trade name of all businesses should appear in the registration certificate issued. But present system lacks such facilities. Hence Govt. should take appropriate steps to resolve the matter.

9. Centralization of Advance Ruling Authority:

Advance ruling authority under GST is the first forum to get clarification on any disputed matter. Thus the ruling issued by the authority is of paramount importance. But since recent past it is seen that some of the rulings were not backed by the provisions of the law. Furthermore, being a State specific body, different authorities from different States are interpreting the same subject matter in their own individual manner. It has resulted in some discrepancies in the ruling issued which created chaos and confusion and more litigations. This has also somewhere disturbed the theme of ‘One Nation- One Tax –One Market. Hence the Govt. should seriously take note of this matter and would try to constitute a Centralized Advance Ruling Authority so that all the rulings can be issued from a common platform.

10. Provisions of Input Tax credit should be more comprehensive:

Section 17(5) of the CGST Act, 2017 has blocked input tax credit on certain goods and services which inter-alia includes input tax credit in relation to ‘Motor Vehicle’. There is a long debate with respect to the input tax credit available to the works contractor in respect of Plant and Machineries which are also covered under the definition of  ‘Motor vehicle’ under the Motor Vehicle Act 1988.

But till today there is no clarity in law whether input tax on such machines (motor vehicles) which though purchased for the furtherance of the business can be taken or not. ‘Works Contract’ business is mainly dependent on heavy machines. Major part of their fixed assets comprises of such machines. So if the input tax credit on such machines is denied then there will be a huge loss to the Industry which will result in high cost. Thus Govt. should come out with suitable clarification to put the matter at rest.

Conclusion:

GST will be the biggest Tax reform of this decade and in the coming days it will break all the records of revenue collection in the Country. It will surpass the age old Direct Taxation law of the Country. Agenda of Govt. to make law simpler is going to be a path breaking reform. The dream of One Nation-One Tax-One Market will sooner achieve its object in totality. Note: The views expresses above are the personal views of the author. Thus it is requested that before acting on the basis of same, please check and confirm relevant provisions of the laws/circulars/notifications etc.