GST journey: a year of twists and turns

It is close to a year since the Goods and Services Tax: one nation, one tax, was implemented on July 1, 2017. The aim of this new indirect tax regime was to simplify the taxes on goods and services by replacing the former and more complex forms of national, state and local taxes.

It has taken under its umbrella the wide gamut of indirect taxes like the Central Excise Duty, VAT, Entry Tax and Purchase tax, and is administered by the Centre as well as the states.

The GST has turned out to be a structural reform of mammoth proportions with several benefits for the economy and its citizens. These reforms will allow the real GDP growth of the Indian economy to hit 6.75% this fiscal year with expectations of 7% to 7.5% real GDP growth in 2018-19. Small and medium-sized enterprises (SMEs) and small taxpayers have benefited from the GST system with a number of relaxations.

Here are the highlights of one year of GST:

a) Technological support to GST law:

High expectations surrounded the new GST system taking off under a canopy of strong technological support. The government’s vision of digitising the business processes and compliance system was seen as a welcome move. GST Network (GSTN) had tight deadlines to set up a seamless software to allow a smooth transition for taxpayers into the new regime and enable them to continue to comply with tax laws.

The complexity and the enormity of the task meant the GSTN faced several initial hurdles. Increased load led to frequent system failures and postponement of due dates to deposit GST. Despite all this, GSTN has put commendable efforts in developing a user-friendly interface and provided offline utilities for GST return filing, thereby enabling SMEs to comply with the system in weaker network areas too.

b) Delayed refund of IGST to exporters:

The delayed refund of Integrated GST (IGST) has led to blockage of working capital funds with export houses having suffered. The textile industry, in particular, is expected to stare at a loss of
Rs 1,500 crore refunds budgeted for this year.

The export industry faced a slump in growth, registering only Rs 30,280 crores in 2017-18 as against the anticipated Rs 32,500 crores in the previous fiscal year.

To curb any further fallout, the Central Board of Excise and Customs (CBIC) has decided to direct GST authorities of various states to speed up the process of refund and has also organised periodic refund drives to give exporters a chance to approach the jurisdictional authorities to clear pending refund applications.

c) Claiming of input tax credit:

The monthly three-stage return filing process by the GST Council had left many Indian companies questioning whether the allowability of the input tax credit of GST paid on the raw materials claimed by buyers will later be disputed by tax officials.

Many have already started getting notices for credit mismatch between GSTR-2A and GSTR-3B. Many businesses have already set aside a considerable sum as a provision to cover any probable risks due to rejections of their credit claims.

Experts, too, are of the opinion that there seems to be no guarantee whether this input tax credit and transitional credit claimed by companies would be approved post scrutiny by tax authorities at the closure of the fiscal year. This can be seen as a kindle for possible long haul litigations.

The GST Council has vouched for simplifying the business compliance under GST. In another year, taxpayers will be required to fill out a simpler return like a GSTR-3B and a parallel system of invoice upload will exist to avail input tax credit without the hassle of matching the claims across multiple returns.

New anti-profiteering rules have also been inserted under GST to hear out the people on complaints filed against businesses who do not pass on the benefits of reduced taxes. Further, GST in India has created a wider tax base by bringing the unorganised sector under the tax net, too.

GST was introduced in Malaysia at almost the same time as India. However, this system was repealed with effect from June 1, 2018 in Malaysia due to a political rejig. Not to forget, the steady recovery of oil prices from $27 per barrel in 2016 to $70 per barrel in March 2018 was another major factor for the repeal.

However, the scenario in India is different with sound political stability and indirect tax collections being major contributors to government revenue from here onwards!

(The writer is founder & CEO ClearTax)