Ten Changes In GST That Will Benefit Both Businesses And Consumers

Whatever the hiccups and glitches in its implementation, there is little doubt that the goods and services tax (GST) has been a great leap forward in terms of a tax policy. Besides making India a single market with uniform taxation, it has encouraged voluntary compliance to an extent that one sees even job workers and petty contractors registering their industries and enterprises.

However, there are indeed concerns which need redressal. With Prime Minister Narendra Modi indicating an open mind for amendments in the implementation and structure, here are a few suggestions which will help both businesses and consumers.

1. Even after a financial quarter having passed since the GST was implemented, there are old businesses which have not received the goods and services tax network numbers after applying for the same – needless to say, these businesses are incapacitated. State-wise nodal officers should be appointed to expedite the process in a time-bound manner and their contact details announced through multiple fora.

2. A dedicated forum to entertain queries and clarify doubts on harmonised system nomenclature codes for products will assuage the insecurity of businessmen who fear penalties in the future for incorrect declaration of codes.

3. A major inconvenience faced by businesses is filing three returns for sales, purchase and comprehensive on the tenth, fifteenth and twentieth of every month. The exercise is particularly taxing for small businesses, where the proprietor himself must attend to the filing. According to reports in media, government is mulling some changes in the number of filings and period. Besides clubbing, the three-monthly returns into one, it will come as a huge relief if businesses with annual turnover of less than Rs 50 lakh are allowed to file their returns annually.

Likewise, businesses with annual turnover of less than Rs 2 crore can be allowed to file returns on a quarterly basis. Without affecting the collections in a major way, it will also decongest the traffic on portals around the returns filing days.

4. Another contentious issue is the incumbency of the seller to deposit the tax paid by the buyer to claim the input credit. In this regard, the government has passed the onus on businesses to “choose carefully” whom they buy from. This responsibility must lie with the government and erring businesses penalised for delay in depositing the collected tax or filing returns.

5. All filing of returns under the GST, as should be known, is only through the GST portal. But many small businesses either do not have access to technology or aren't savvy enough to deal with it. They are being charged an exorbitant amount by “consultants” or taxation advocates to file their monthly returns. It will help if facilities are provided for manual filing at commercial tax offices or provisions made at banks, post offices, etc, for a nominal fee.

6. The provision for reverse charge is essentially a tedious circumvention which does little more than block an organisation’s capital with the government. The filing and deposit of the same can either be done away with or limited to bare minimum transactions.

7. The input credit which accrues with the government because of the differential GST rates between purchase and sales must be cleared periodically through direct transfer into bank accounts. As of now, the provision is that the amount will reflect in the business entity’s ledger. There are some businesses where the differentials are huge and will keep piling as input credits. To give an example, the GST rate of taxation on copper and brass is 18 per cent and for chains made out of them, 28 per cent. For imitation jewellery further made by cutting these chains, it is a mere 3 per cent.

8. While most goods categorised in the 28 per cent rate slab are justified as luxury goods, a high rate of taxation, particularly on goods which can be transported, away from the gaze of the taxman, provides a temptation for evasion. Prudence demands that goods such as shoe polish, small articles of wood, plastic and leather, and bags, etc, where a bulk of the manufacturing is under non-corporate entities, be brought under a lower tax rate.

Additionally, a 12 per cent rate for non-air-conditioned restaurants is pretty high. In many states, it has meant a hike from 2 per cent tax under the value added tax regime to the existing 12 per cent. With a mechanism for continuous interaction with representatives of various trade bodies, there can be scope for reducing the GST on many other products.

9. The proposed central e-way bill should include provision for consignor-only mention of the GST number in case of interstate transportation of goods to unregistered dealers.

10. Last, as comprehensive returns are already mandated periodically, the need for yearly assessments by tax officers can easily be done away with. For random scrutiny, as in the case of income tax, notices can be sent from central offices either in the states or at the centre. It will bring a huge relief to businesses ever at the mercy of whimsical officers.