The C Times, 10th June 2017, Agartala: A small-scale manufacturing company with operations in only one state will have to file a minimum of 37 returns instead of the current 13 once the goods and services tax (GST) goes live from 1 July 2017, increasing work for industry, accountants and banks.
This is what many tax professionals are worried about. They fear the compliance score will be used to assess the credibility of a business. This could wipe out small businesses that face cash-flow problems and delay payments. Since their problems will now be public knowledge, buyers will avoid this company leading to further payment delays.
The Indian Banks Association, a body that represents 237 banks, has informed a parliamentary panel that their members were unprepared to implement the new indirect tax regime.
“Everything will now be online and will need to be updated regularly. A business will have to file 37 returns in a year (three returns per month and one annual return) per state”. “If it does business from offices in more than one state, the number of returns will go up accordingly. A business with offices in three states will have to file 111 tax returns in a year.”
“Similarly, Integrated GST (IGST) will be levied and administered by the Centre on every interstate supply of goods and services,” said the FAQs added.
A dual GST adheres to the constitutional requirement of fiscal federalism since both the Centre and states have the powers to levy and collect taxes. “The central GST and state GST would be levied simultaneously on every transaction of supply of goods and services, except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits,” the FAQs noted.
While 24 states have passed state GST acts, seven have not done so yet.
Understanding GST intricacies are not easy because while the location of the supplier and the customer within the country is immaterial for the purpose of CGST, SGST would be charged only when the supplier and the customer are within the state.
An illustration from the FAQ published by the government: Suppose the CGST rate is 10 percent and the SGST is 10 percent. When a wholesale steel dealer in Uttar Pradesh supplies bars and rods to a construction company within the state for, say Rs 100, the dealer would charge CGST of Rs 10 and SGST of Rs 10, in addition to the basic price of the goods. The wholesaler would be required to deposit the CGST into a central government account and the SGST into the account of the state government. “Of course, he need not actually pay Rs 20 (Rs 10 + Rs 10) in cash, as he would be entitled to set-off this liability against CGST or SGST paid on his purchases.
With the government announcing GST for four tax rates — 5 percent, 12 percent, 18 percent and 28 percent — industry will face implementation challenges that include system upgrades, manpower training and understanding new taxes. Every transaction, sale or purchase, will now have to be recorded online to benefit from the tax paid earlier.