The goods and services (GST) was ushered in to create a common national market. As a far-reaching fiscal reforms, GST aimed to provide a simplified and single tax regime, reduce overall tax burden and bring down prices of goods and services.
GST was introduced to prune multiple tax levies and reduce compliance obligations. Also, it brought about uniformity in taxation of goods and services across the country, thereby removing trade barriers such as check posts, octroi/entry tax/ LBT. This has reduced lead time and logistic costs, leaving a positive impact on the supply chain, from procurement/imports till ultimate delivery to end-consumer.
Implementation of e-waybill reduced potential tax leakages and facilitated ease of doing business to give further impetus to the logistics sector. Despite initial delay in process of export refunds, subsequent redress was undertaken through remedial actions including ‘Special Fortnightly Refunds’.
Another positive step was pruning tax rates by bracketing most commodities within 12-18 per cent tax bracket to generate market confidence and lower prices of commodities. The GST Council, with adequate representation of state and Union governments, has been on the forefront of addressing the concerns of the industry and providing regular updates/ clarifications. Very recently, it debated bringing the petroleum sector under the GST ambit, thereby generating fresh confidence among the assesses.
However, the journey has not been easy. IT infrastructure, the backbone of GST, has savoured many hiccups. Further, the delay in resolving IT glitches resulted in overhauling of the return process along with the need to infuse new formats for addressing the stakeholders. Input tax credit (‘ITC’)-matching mechanism, the foundation to regulate credit flow, did not take off and left room for potential revenue leakages, thereby causing non-compliance.
To add to the woes, the industry was wary of approaching the Authority for Advance Ruling as most of the rulings were pro-revenue. Further, the National Anti-Profiteering Authority has been slapping profiteering charges upon many sectors and its applicability has been extended by two years, thereby causing further discontent.
The government stands firm on availing ITC through the seller-buyer matching mechanism and, accordingly, proposes to implement a new system of return filing, which has also seen multiple deferrals owing to lack of IT infrastructure. Though the new system boasts of ease of compliances, the industry is now settled with the present system and is anxious to adopt new formats, which seem to be beset with uncertainty over technical glitches and possible mis-match issues, due to non-filing or delayed filing by suppliers.
Albeit propagated as a simple tax regime, GST has significantly increased compliance burden with challenges, inter-alia, issuance of regular notices by tax department for minor mismatches. In addition, the detailed formats rolled out for annual return and reconciliation under GSTR 9C make it even more difficult for companies to disclose information, not reported in monthly returns in a financial year.
To sum up, the entire eco-system of compliances under GST needs to be simplified and made user-friendly, especially for small and medium sector enterprises. In lieu of the above, although operational readiness to roll out this important reformative step appeared insufficient and tardy, a strong foundation has been laid, thereby creating room to accommodate changes and propagate the government’s agenda of ‘ease of doing business’.