Posts Tagged ‘taxation’

GST – Implementation from July 1, 2017 – How to tackle the reality of situation with the dealers with limited facilities?

June 11, 2017

GST – Implementation from July 1, 2017 – How to tackle the reality of situation with the dealers with limited facilities?

GST - Ideal, but what is implemented

The Government may have to be soft with the dealers, as they are bound to commit mistakes and violate provisions of GST Act and Rules[1]: In the implementation of GST covering crores of dealers of various transactions, many assumptions and presumptions have been made, as if, all would be sitting at computers and handling with their commercial dealings only on-line always. The Government has not perhaps, realized the digital gap existing between the big and small taxpayers under the GST regime.

  1. The powerful federal indirect tax body, the Goods and Services Tax (GST) Council, would instruct field officers at the central and state levels to be lenient with traders for procedural lapses in the first year of implementation of the new indirect tax regime from 1 July, 2017[2].
  2. There is a confusion about the jurisdiction of the dealers and as well as the law-implementing officers. This confusion prevails between the Central and the State and also amomh themselves internally.
  3. In the first year they have to handhold them rather than penalize them for procedural infractions. Everyone in the council is sensitive about it. Major offences such as clearing of goods without invoices, however, is a different matter.
  4. The decision comes in the wake of apprehensions of the trade and business community about an anti-profiteering provision in the GST law intended to be a deterrent against not passing on the benefits of any reduced indirect tax liability to the ultimate consumer.
  5. The Confederation of All India Traders, a traders’ body with 60 million members, said in a representation to PM on 8 June, 2017 that a period of nine months beginning 1 July should be declared a transition period [up to 31-03-2018] during which traders will be given immunity from prosecution for procedural lapses.
  6. While businesses and large traders will be prepared for the GST roll-out with their IT systems, small traders, especially those in villages and remote areas, may take time to become part of the GST network on account of lack of awareness and infrastructure constraints.
  7. As everyone imagines, the internet connection and related issues are going to create many practical probles, coupled with frequent power cuts at rural and village areas.
  8. Another official in the government, who also spoke on condition of anonymity, said that the last point of sale—trader to consumer—in villages has always been the weakest link in the state-level value-added tax system.
  9. Important issues – addressing concerns relating to tax rates brought up by the industry and finalizing how the anti-profiteering mechanism, “advance ruling” and search and arrests, etc. Advance ruling is a facility available for taxpayers to get an idea of what the tax liability on certain transactions will be in advance.

GST - SSI has to file 37 instead of 13 returns

SSI has to file 37 returns instead of 13; if they have units in more than one state, the returns increase accordingly[3]: A small­scale manufacturing company with operations in only one state will have to file a minimum of 37 returns instead of the current 13 once the goods and services tax (GST) goes live from July 1, 2017 increasing work for industry, accountants and banks, according to an IndiaSpend analysis. With the deadline for the GST less than a month away, finance professionals, banks and industry seem unprepared for the challenges of implementing the one nation­one tax idea, work towards which began 13 years ago. “The entire ecosystem needs to be changed to accept GST,” K. Raghu, former president, Institute of Chartered Accountants of India, told IndiaSpend. “An ideal date for implementation would be September 1.” The Indian Banks Association has informed a parliamentary panel that their members were unprepared to implement the new indirect tax regime. “Everything will now be online and will need to be updated regularly. A business will have to file 37 returns in a year (three returns per month and one annual return) per state,” the Economic Times reported on June 5, 2017.

GSTN - portal in demand

Business in three states means, he has to file 3 x 37 = 111 returns per annum[4]: “If it does business from offices in more than one state, the number of returns will go up accordingly. A business with offices in three states will have to file 111 tax returns in a year.” With the government announcing GST for four tax rates ­­ 5, 12, 18 and 28 per cent ­­ industry will face implementation challenges that include system upgrades, manpower training and understanding new taxes. Every transaction ­­ sale or purchase ­­ will now have to be recorded online to benefit from the tax paid earlier India is implementing a dual GST with the Centre and states together levying it on a common tax base. “The GST to be levied by the centre on intra­state supply of goods and/or services would be called the Central GST (CGST) and that to be levied by the states would be called the State GST (SGST),” according to the FAQs published by the Central Board of Excise and Customs (CBEC), the central body of indirect taxes. “Similarly, Integrated GST (IGST) will be levied and administered by centre on every inter­state supply of goods and services.” A dual GST adheres to the constitutional requirement of fiscal federalism, since both the Centre and states have the powers to levy and collect taxes. “The central GST and the state GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits,” the CBEC FAQ noted.

GST opposed or supported

Meghalaya, Punjab, Tamil Nadu, Kerala, Karnataka, Jammu and Kashmir and West Bengal – have not passed GST[5]: While 24 states have passed state GST acts, seven have not ­ as yet. They are: Meghalaya, Punjab, Tamil Nadu, Kerala, Karnataka, Jammu and Kashmir and West Bengal. While the location of the supplier and the customer within the country is immaterial for the purpose of CGST, SGST would be charged only when the supplier and the customer are within the state. An illustration from the FAQ published by the government: Suppose the CGST rate is 10 per cent and the SGST is 10 per cent. When a wholesale steel dealer in Uttar Pradesh supplies bars and rods to a construction company within the state for, say, Rs 100, the dealer would charge CGST of Rs 10 and SGST of Rs 10, in addition to the basic price of the goods. The wholesaler would be required to deposit the CGST into a central government account and the SGST into the account of the state government. “Of course, he need not actually pay Rs 20 (Rs 10 + Rs 10) in cash, as he would be entitled to set­off this liability against CGST or SGST paid on his purchases (say, inputs),” said the FAQ This is where implementation challenges arise, as former ICWAI president Raghu explained. Every invoice from buyers and sellers must be entered in the GST system correctly to ensure that benefits accrue down the chain. “We have a system today across a majority of small units where an accountant comes (in) once a month, makes vouchers and inputs details for taxes,” said Raghu. “That will have to end now because we are moving to an online, almost real­time system that will need a lot of manpower.” The finance industry is ready by training its professionals, said Raghu, who predicted many job opportunities over the next 5­6 years. But, as he added, it would take at least 12 to 18 months for the system to “settle down”. “I do see a lot of CAs and other finance professionals being trained for indirect taxes in the coming years,” he said.

GST - Ideal, but what is implemented-NDA-UPA

Industry and Banks are not ready for GST implementation[6]: India’s industry and its banking system will have to change systems, train personnel and accept the extra workload for the new taxation system. The banking system has clearly said it is not yet ready. Industry is ambivalent. “Nearly 50 per cent of Indian businesses are not aware of the changes that GST will usher in,” Bharat Goenka, Managing Director, Tally Solutions, was quoted as saying in the Economic Times on June 5. Tally accounting software is widely used by Indian companies. The company is waiting for the GST rules to be finalised, so that it can roll out its GST software for Indian companies. A senior official of Federation of the Indian Chambers of Commerce and Industry (FICCI), requesting anonymity because the launch date was close, said GST was “now a fact”, and industry was trying to adapt. FICCI has been conducting awareness sessions among industry verticals to help understand the new structure, he added The industrial sector, especially the services sector, is waiting for more clarity on tax rates, processes and the time frame for the systems to settle down. “What we still don’t know is which tax slab we fall in,” a marine service provider operating in Goa told IndiaSpend, on condition of anonymity. “While it is good that the taxation system will be streamlined and we will not have to deal with multiple tax payments like excise, service tax and value added tax, we still don’t know how much time it will take for everybody to be on board.” (In arrangement with IndiaSpend.org, a data­driven, non­profit, public interest journalism platform. The views expressed are those of IndiaSpend. Feedback at respond@indiaspend.org).

© Vedaprakash

11-06-2017

GST ready for launch - 03_08_2016_001_060

[1] Livemint.com, Govt may be lenient with traders on procedural lapses in GST’s first year, Last Modified: Sat, Jun 10 2017. 12 51 AM IST.

[2] http://www.livemint.com/Politics/PMFLgTOxEezhEPIt9FEqgL/Govt-may-be-lenient-with-traders-on-procedural-lapses-in-GST.html

[3] http://www.hindustantimes.com/business-news/businessman-or-professional-you-may-need-to-fill-37-forms-to-be-gst-compliant/story-DI8IOTQi5qS0c20PkDoTNO.html

[4] http://navbharattimes.indiatimes.com/business/business-news/37-returns-instead-of-13-one-of-the-many-challenges-threatening-gst-rollout/articleshow/59085127.cms

[5] http://economictimes.indiatimes.com/news/economy/policy/37-returns-instead-of-13-one-of-the-many-challenges-threatening-gst-rollout/articleshow/59082648.cms

[6] Economics Times, 37 returns instead of 13: One of the many challenges threatening GST rollout, BY IANS | JUN 10, 2017, 02.33 PM IST.