First anniversary of GST: A SWOT analysis

To a large extent, GST has also removed the cascading effect of taxes since only a single tax is charged for most transactions. Doing away with check-posts have given trucks the freedom to deliver goods faster.

First anniversaries are a good time to reflect on the past, assess the present and contemplate about the future. This is particularly true of a law such as GST, which impacts everyone in some manner or the other. If one were to take an opinion poll today on the GST law, a majority would opine that GST as a concept is good for India, but its implementation could have been much better. This article takes a look at the positives and negatives of GST and does a bit of crystal-gazing into the future.

Positives

First, the positives. The biggest positive after the implementation of GST has been that the economy has not been hit with inflation. The GST Council did well to nil rate, exempt or keep essential commodities in the lowest tax slab, which ensured that food inflation did not take off exponentially. The resilience of the economy took in its stride the 3% increase in the rate of tax on most services. At the time of introduction of GST, the real estate industry was in pause mode due to the effects of demonetization and RERA - GST ensured that the industry remains in pause mode for some more time. Another positive is the fact that during the first nine months, the GST Council was quite proactive in responding to issues that arose during implementation, including rates of tax and the endless technical issues with the portal.

To a large extent, GST has also removed the cascading effect of taxes since only a single tax is charged for most transactions. Doing away with check-posts have given trucks the freedom to deliver goods faster.

Negatives

For all the positives, there are as many, if not more negatives. The Central Board of Indirect Taxes and Customs (CBIC) has not given up its fondness to issue notifications and circulars that only serve to add to the literature on GST. A total of 424 notifications have been issued since GST made its arangetram on July 1 - an average of 1.17 per day. A new law will demand certain clarificatory notifications to be issued, but the clarifications issued under GST suffer from an abundance of quantity, but a shortage of quality. For instance,

Notification No 27/2018-Central Tax specifies that inter alia, lighter fuel, including lighters with gas, not having arrangement for refilling can be disposed after seizure by the proper officer as mandated by Section 67(2) of the CGST Act. Based on this notification, can the taxpayer reach a conclusion that other goods seized cannot be disposed? The notification does not provide an answer. The CBIC should update the GST tariff, Act and Rules with all amendments on a quarterly basis instead of rapidly churning out Notifications.

There has been a lot of data coming out about the monthly tax collections under GST. But there seems to be no authentic data on how many new taxpayers have been added after GST was introduced. If this figure is too miniscule, it gives rise to a concern that some taxpayers have found a solution to work around the GST law, without getting themselves registered. Other negatives are the existence of artificial restrictions on input tax credit such on employees’ insurance, a needlessly lengthy GST tariff and the fact that too many changes have been made to the filing of returns. The biggest negative in the GST era appears to be the fact that protracted litigation appears unavoidable in the future.

Even though the magical concept of matching of invoices has been put on the backburner, many taxpayers have received notices asking for clarifications as to why the Input Tax Credit as per their monthly 3B and the auto-generated 2A do not match.

It would be a very rare taxpayer whose 3B/2A will match- that is how accounting and tax documentation works. Since there are no timeframes to avail credit, it should suffice if the taxpayer does this reconciliation at the end of every financial year. With no announcements on the process of GST Audits, it appears inevitable that even in the future, notices will be received, responded to and litigated.

Major surgery

In the build-up to the elections next year, the government can earn quite a few brownie points by performing a major surgery on the GST law, instead of fixing the bits and pieces. The GST Council should minimise the GST tariff to only Chapter Headings, artificial restrictions on input tax credit should be removed, a stable system of filing of returns should be introduced, the reverse charge mechanism on purchases from unregistered dealers should be forgotten forever and need-based notifications should be issued.

Most importantly, the proper officers should be issued detailed guidelines to implement the law without complicating it. It is undoubtedly a tall task, but someone has to do it.

(The writer is a Bengaluru-based Chartered Accountant)

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First anniversary of GST: A SWOT analysis

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