Migration from VAT-CENVAT to GST and pending issues of software problems!
GSTN has announced the launch of its Offline Tool: For the taxpayers’ convenience, the Goods and Services Tax Network (GSTN) has announced the launch of its Offline Tool, where data on invoices (business to business), exports and supplies to consumers that are required to create GSTR-1 (Outward Supply Return), can be entered in an excel sheet without being connected to the Internet[1]. Addressing a meeting with the GST Suvidha Providers (GSPs) on 10-06-2017, Saturday, the GSTN revealed that taxpayers using the Offline Tool will not require the services of any GSP[2]. Similarly, those having small number of business to business invoices, like retailers and small traders, can do the data entry on portal itself and will not require the services of GSPs[3]. At desired interval, the tool can be run to upload all such data on the portal[4]. Only while uploading the data on GST portal, Internet connectivity will be required. The Offline Tool will be provided free of cost and taxpayers will be able to download it from the GST portal from last week of June. GSTN will release the Excel format, in which businesses will start maintaining the data from July 1 for using the free offline tool for uploading the invoice and other return data.
Digital control of GST and its operations: Chaired in the presence of Arun Goyal, Additional Secretary, GST Security Council, the GSTN Chairman, during the meeting, presented the timelines of the release of updated specifications of APIs for the new GSTR forms that are to be applicable from July 1. The API specifications will be released in staggered manner for all the GSPs and their partner ASPs so that they can study and analyse the same for making changes in their software developed on old design of returns. The GSTN will also make available live APIs on the sandbox for testing of the codes that the GSPs will modify. The requirement of the GSPs being secure and ensuring security of the GST system was also stressed during the meeting. GSPs were advised to conduct system audits as per the prevailing ISO standard on security from one of the auditors on the panel of CERT-IN before they connect with and start pushing data into the GST System. The GSTN also highlighted the need for the GSPs to constantly monitor the GSP ecosystem webpage on the GSTN webpage for all relevant updates and guidelines.
Transitional provisions worry traders and businessmen: Almost every one believes that the Goods and Services Tax, all set to come into force nation-wide from July 1, is a welcome tax reform. But given the complexities involved, they are not sure how things will pan out. Most agree there is bound to be confusion, which they hope will get sorted out quickly, even as there are those who are vehemently opposed to the new tax regime[5]. BusinessLine puts together reports from its correspondents across the country on what various players think of the switch-over to a single, nation-wide tax system that will replace a myriad number of State-level taxes and levies[6]. With the GST Council announcing the new GST rate fitments, dealers and distributors have restricted new purchases of stocks from companies. For instance, the consumer durables industry, where retailers are running discounts and special promotional schemes to dispose their existing stocks. There is confusion about the transfer of VAT / CENVAT credit for GST registrants about its refund and utilization after 01-07-2017. Similar sales are doing the rounds for branded apparel and cars. Packaging companies anticipate there will be a complete stop in primary sales in the run-up to the GST kick-off deadline. There is likely to be delays in capital good purchases for manufacturing units especially excise exempted areas such as Assam, Himachal Pradesh and Uttarakhand as companies will want to claim input credit on such purchases, once GST is rolled out.
Out of 84 lakh entities, 60.5 lakh have registered with the GST Network (GSTN): Amid all the lobbying in fixing goods and services tax (GST) rates and with the 1 July implementation deadline fast approaching, businesses are busy completing the migration process. Businesses have to migrate from the present value-added tax (VAT), service tax and central excise registration to a GST registration[7]. Out of 84 lakh entities, 60.5 lakh have registered with the GST Network (GSTN), said a recent finance ministry statement. The enrolment window, which was suspended on 30 April, has been reopened on 1 June for 15 days[8]. However, it should be noted that those already registered under the GST portal can migrate. Fresh registrations are yet to begin. There have been practical problems in migration, particulaly, where, RCs were not cancelled, surrendred but kept pending, multi-locational RCs, shifting premises / business, but RCs kept alive and so on.
Dependence on the IT interface: The digital divide between big and very-very small players: Given the very large number of assessees and the plethora of details required to be furnished, migrating to a new tax regime was never going to be a cakewalk. As anticipated, there are a slew of challenges businesses are facing, the most common being of integration and upgradation of existing IT infrastructure to make it GST compliant, tax experts pointed out. Though there is a certain level of IT enablement even today in excise and service tax, GST will significantly enhance the dependence on the IT interface. While larger organizations are better equipped to overcome this hurdle, small and medium sized enterprises are struggling. Manual invoicing will soon be a thing of past and even completion of the migration process is an additional task requiring new manpower and costs. The not-so-user-friendly migration process and inability of the GSTN to bear the load of data at certain times is giving businesses a tough time, tax experts said.
With and without GST, how small traders, manufactures could deal with big traders and manufacturers?: The government is firm about GSTN being completely prepared to deal with the sea of data, but it would be interesting to see how things pan out post 1 July. The large businesses now have to ensure that not only them, but their vendors too are registered on the GST network. “This is a key challenge while migrating because dealing with non-registered vendors would increase the compliance burden, affect ability to claim input tax credit and impact compliance ratings,” M.S. Mani, senior director-indirect tax, Deloitte Haskins & Sells LLP, said. Further, many companies may have to rework long-term contracts with customers and standardize them while migrating to GST. “This may not be acceptable to their customers and hence an elongated negotiation cycle would begin. Re-framing a large number of contacts is certainly a difficult task,” he added.
Issues between Service providers and manufacturers: Also, between service providers and manufacturers, the former are likely to face larger migration challenges than the latter, mainly because manufacturers are used to a slew of indirect taxes and registrations, but service providers in the pre-GST era were not used to dealing with state authorities, with many of them having a centralized service tax registration. Registration at multiple locations comes as a bigger hurdle for them, tax experts said. To conclude, for a country of our size, migrating to a unique and customized GST regime is nothing less than historic. Though beneficial in the long-term, a run up to GST implementation has led to near-term supply-chain disruption. Complex rules and rate structure are sure to increase the compliance burden, especially for small and medium companies and the jury is still out whether GST will really improve the ease of doing business in India.
© Vedaprakash
15-06-2017
[1] DNA, GSTN’s ooline tool to reduce taxpayers’ dependence on GST Suvidha Providers, Sat, 10 Jun 2017-03:04pm , ANI.
[2] http://www.dnaindia.com/business/report-gstn-s-offline-tool-to-reduce-taxpayers-dependence-on-gst-suvidha-providers-2467730
[3] Deccan Herald, GSTN’s Offline Tool to run independent of GSPs, ANI, Published: Jun 10, 2017, 3:44 pm IST; Updated: Jun 10, 2017, 3:45 pm IST.
[4] http://www.deccanchronicle.com/business/economy/100617/gstns-offline-tool-to-run-independent-of-gsps.html
[5] The Hindu Businessline, Uncertainty looms as GST roll-out just a fortnight away, published on June 14, 2017
[6] http://www.thehindubusinessline.com/economy/policy/uncertainty-looms-as-gst-rollout-just-a-fortnight-away/article9727171.ece
[7] LiveMint, GST: India’s Great Migration challenge, Last Modified: Wed, Jun 14 2017. 08 49 AM IST.
[8] http://www.livemint.com/Money/bXWRVIwcqyApe4SVnpi62I/GST-Indias-Great-Migration-challenge.html