Required Changes for Positive GST Provisions
Goods and services tax known to be the most ambitious tax reform since independence is now active and doing a great round of applause from numerous trading communities and political parties with equal protests against rates decided for some particular sectors. The apex governing body of GST i.e. the GST Council has taken every step to make the smooth transition of traders and business units into the GST though taking care of every rule and regulation to be secure and feasible. Still, there are some set of rules which has taken a toll over the business units and needs some changes in order to justify the tag of ‘Good & Simple Tax’ given by prime minister Narendra Modi itself on the eve of GST launch on 30th June.
Now let’s discuss some needy changes in GST that will make businessmen happy and contended with the new tax scheme:
Quarterly Returns Instead on Monthly Return – In order to validate the returns and their respective data, the GST council has decided to take a strict turn towards the returns schedule. The council has squeezed the time period of returns down to every month from previously followed quarterly return schedule. This decision has been speculated to be not fair for the trade bodies who are dealing in numerous transactions ranging from days and weeks to complete. The invoices, challans and other related documents are always pending in this time period till the transaction completes on the verge of delivery of goods and services. This creates a lack of documentation while return filing on the scheduled dates of a month, ultimately leading to an increased risk of penalty and lowered compliance rating.
The trading bodies are likely to raise voice over this monthly return issue soon and it is also a necessary conjunction for both government and businesses to re-think about this tightly scheduled return process. Returning back to quarterly returns timeline will give a businessman a required space to breathe for all the transactions happened in a considerable amount of time i.e. 3 months.
One Step Return – The issue of return has stuck with each and every businessman right now, as previously the traders were required to file a single return on the quarterly basis but in new GST regime, the returns are taken down to 3 returns every month. The decision itself made tension across the industrial bodies on such a strict compliance introduced. According to the rules related to the returns, on every 10th the businessman must file all the outward supplies of taxable goods and/or services while on the 15th of a month, all the inward supplies of goods and service must be filed within the portal. And the cumulative returns of the whole month will be done on 20th of every month which together makes the process very hectic as business units are already coping up with various day to day operations and this added compliance has created a dire situation for the businessman. Given that many businesses are still facing issues in getting accustomed with technology for filing the returns online while also lacking the manpower to suffice the strict routine of returns.
The trading community has already revealed their acute problems regarding the multi returns in a month and has done various meetings and handed various presentations to the governing body to grant relaxation into this schedule. The government can decide one date of a month on which a consolidated return filing can be done including sales, purchases and final return filing to help save the precious time of businessman who is busy adding a share into the economy. If by any chance, the government pay heeds to this multi returns issue of the taxes, it will be a boon for everyone for the business community.
ITC Disallowance to Buyers – Input tax credit is a very significant aspect of the transaction and to maintain a stable capital for running a business, it must be cross checked accordingly. But there is a catch in this whole process as for a normal person to understand the hardship of a buyer who has paid all the liability from his side. It is drafted in the Sections 16(2)(c), 37, 38, 73 of Central GST Act (CGST) that if a seller defaults in payment of his part of taxes, the buyer is now again liable for the taxes due of the seller. Rather It can also be called as an unfair provision as a buyer will have to suffer in the case a seller doesn’t pay his part of the tax to the government. Is it really a good provision for the taxpayers across the nation as there are a lot of dealers and merchants who own default background in tax payment and dealing with such individuals may create disharmony in the transaction structure of associated parties where they have done no fault to the rules and regulations set by the government.
As an addition to this grave situation, after a time period of 3 months, the ITC will get automatically reversed into the GST ledger of buyers which will ultimately lead him to pay this GST from his side. It is healthy to create strict compliance within the tax paying base but penalizing a genuine buyer will only discourage the individual and will eventually create havoc into the entire value chain. In such situations, the government should make an alternative way to combat this set of practice by giving buyers a platform to rate aforementioned kind of defaulters individually so that another party in the chain can skip this particular kind of loss. Also, it will be great from the sides of government to consider the payments made by the buyer and not to take action on the basis of other party’s willful default.
The compulsion of E-way bills – The GST Council introduced e-way bills for transporting any goods with value more than INR 50,000 to be registered online in order to check evasion of taxes across borders. The necessity of e-way bill has been done mandatory for all the interstate and intrastate supply of goods. While interstate transactions are logical for the e-way bills to be accompanied with logistics but it is no explainable by the intrastate point of view. According to the GST tax rules, the goods and services are being taxed at consumption or destination based which clarifies that an item with value more than INR 50,000 must have secured a tax compliant position by entering the state borders. So, if an item is already taxed and under the logs of tax data, the e-way bill within the state proves to be null oriented.
The government must seek another way to verify goods and items being transported within the state by the means of simple procedural checking or supplier provided slips, as an e-way bill is way ahead for such kind of local transactions, only leading to time-consuming verification processes.