It has been 4 months since the GST legislation was thrust upon the taxpayers. I use the word ‘thrust upon’ because the Government did not heed to the suggestions to make the law simple. The whole scheme of the Act and the associated compliances are based on the notion that all taxpayers are dishonest and therefore full control must be kept by the respective department. Numerous extensions have taken place in filing of all returns which has added to the confusion. No doubt the Government has issued many FAQ’s and held seminars but that was too little and too late. The damage has already been done. Across various states traders and service providers have started various methods to evade tax. This will continue to happen till the time the law is made simple and less complex for the taxpayers. As a concept GST is great but its implementation in India has caused the mess where we all find ourselves. This is what the Government needs to do:
- Reverse charge
Section 5(4) of the Integrated Goods and Services Tax(IGST) and section 9(4) of the Central Goods and Services Tax Act need to be deleted permanently. This only adds to the compliance burden. There is no revenue loss to the Government. A registered person has to first raise a self-invoice if he takes a supply from an unregistered person, pay the tax and then claim the input credit. Continuing with this will force businesses to buy from registered persons and make small shopkeepers redundant who are not liable to register because of the exemption linked to turnover.
- Multiplicity of Rates
Multiple rates add to the confusion. Selling a product in loose quantity attracts a different rate, if packed will attract a different rate. Why have these distinctions? It is but obvious that tax payers will find loopholes in drafting and try to fit the product in another rate than what the Government wishes it to be. The end result-more litigation. The judiciary is already burdened, and multiplicity of rates will further increase litigation.
- Multiple returns
The tax payer has to file 3 returns in a month. GSTR-1, GSTR-2 and GSTR-3 for outward, inward and payment of taxes for the month respectively. In GSTR-1, the tax payer is obliged to file invoice wise details of his outward supply. In GSTR-2, the taxpayer is supposed to match all his input as per his records with the outward supply details filed by his vendors/suppliers. This is the most complex part in the entire GST compliances. Every month the tax payer will reconcile all his inputs invoice by invoice and report to the same to the Government. Imagine the time, effort and money spent in doing this unproductive compliance.
The Government should keep it simple and ask the taxpayers to only file its outward supply details on a quarterly basis and trust the taxpayers in so far as claiming of input tax credit is concerned. There is no harm in learning the best practices from other countries where compliance has been made simple. Let the form GST 3B be made the only form to be filed on a quarterly basis.
- High rates of tax
Higher the rates, higher the incentive to evade tax. India is already a highly taxed and compliance driven economy and the high rates in GST will hurt the economy more than by doing any good. Taxing goods at 28% or 43% (including cess) is not the way going forward. Majority of the population buys cars only because the Government has miserably failed to provide effective public transport. Yes there are Metros to commute but given the population size is the Metro enough? The answer is an emphatic No.
- One Nation One Tax
This concept is a misnomer. The current legislation is far from one tax. If that were it, then why can’t the taxes paid in one State be adjusted the output of other States. Therefore, there are still 29 SGST’s and CGST’s credit for which cannot be claimed by a taxpayer in another State. The law should allow input credit in respect of tax paid anywhere in India and these artificial barriers should be removed. How the revenue collected has to be distributed is for the Government to decide. Why should the tax payer be made to suffer on this account. To claim credit again entities will be set up in different jurisdictions which will only increase litigation. Therefore the Government should permit set off of input credit of all states with the output tax of any State.