Large taxpayers may be asked to file their goods and services tax (GST) returns earlier than others, a move that would help reduce last-minute rush on the GST Network portal. A group of ministers, headed by Sushil Kumar Modi, Bihar’s deputy chief minister, has recommended this as an interim solution to the GSTN glitches that are vexing sections of the taxpayer community. Stating that GSTN is robust enough to handle the expected traffic — not more than a fifth of its capacity is being utilised even during rush hours — Modi told Sumit Jha in an interview that Infosys would send its technical teams to all states in a week, which would stay there for a brief period and assist local tax officials to operate the system better.
After the GoM’s recent review of GSTN, have you been able to identify the reasons behind the glitches in the system?
When you launch such a massive IT system, it is impossible to have foreseen all the possible problems. But we are proactively trying to improve the GSTN’s functioning and fix the technical issues encountered. In about a week since our last meeting, we already managed to fix several issues, which resulted in glitch-free filing of returns for August.
Taxpayers are known to defer filing returns to the last few days. Has that had a negative impact on the stability of GSTN?
Despite the (last-minute) rush, only 10-20% of GSTN’s capacity is being utilised. So, in terms of capacity, the system is equipped to take the load. But we have proposed to the GST Council to stagger the filing of returns by taxpayers so that sudden rush towards the deadline can be avoided. We could fix a revenue threshold and ask the taxpayers above it to file returns earlier than others. In the VAT regime, 80% of the revenue came from 5% of dealers and (this might not be very different under GST). So we could ask these large assessees to pay taxes at the beginning of the filing period, even while safeguarding revenue flows to the government.
What are the specific issues that GSTN is working on currently to address the glitches?
In the last meeting, we set timelines for GSTN to improve itself. As I said earlier, some of them have already been sorted. The system is robust and 22 crore invoices have been uploaded so far. Additionally, we have also asked Infosys, which has built the IT system on behalf of GSTN, to send technical teams to all states. These teams will be stationed in the respective states for a brief period and will assist the tax officials to understand and operate the system better. The GoM is meeting again on October 4 to assess the status and ensure that timelines decided earlier are being met.
Initial reports of GST collections are encouraging, says the Centre. Do the states, including yours, share this view?
States aren’t concerned about any shortfall in revenue, as they are protected against it by law under the GST regime. The Centre is bound to compensate any state for any revenue shortfall from GST (from what 14% annual growth from the relevant 2015-16 base would have yielded).
Will Bihar need compensation?
It is too early to extrapolate from the collection of July as the system is still stabilising. As far as Bihar is concerned, it’s a consuming state (which could benefit from GST) and we don’t expect any revenue shortfall. If at all Bihar needs compensation, it won’t be for more than a year or 18 months of of the five years for which the Centre has agreed to compensate states fully for any revenue deficit from GST. When will petroleum products — crude, petrol, diesel, natural gas — be brought under GST? States, it seems, are not very keen on the idea as items yield them substantial VAT revenue.
Petroleum products are in the GST purview as per the Constitution; the GST Council needs to decide when and how they are taxed. Currently, the view is that since the system is still stabilising, we should rather wait. Besides, states would need to prepare themselves for the change. A final decision will be taken by the council at the appropriate time.
Over half of the items in the consumer price index (CPI) basket are exempt from GST and a 5% tax is levied on another 15% of the basket. However, latest retail inflation data suggested that the GST has been inflationary. Your comments.
I don’t think that is a fair analysis. The roll-out of GST hasn’t led to increase in the price of goods. Inflation numbers of months during the monsoon season typically indicate rise in prices for fruit and vegetables. This is an annual phenomenon and should not be attributed to GST.
One of the prime objectives of GST is to bring more businesses into the formal economy. Have you seen any evidence of this happening yet?
I met a dealer last week who had paid `11 lakh as GST for July. He told me that he was paying only `1 lakh as monthly VAT in the earlier regime. This gives you an idea of the extent of tax evasion that prevailed earlier and how GST can thwart it and widen the tax base with new taxpayers.
One of the features of GST is invoice matching which makes it difficult for any business to misreport transactions. However, with the postponement of the dates for filing GSTR-1,GSTR-2 and GSTR-3 returns, hasn’t the objective been defeated for the time being?
The detailed returns will still be filed for July albeit a little later. Invoice matching has not been abandoned as it will eventually be carried out for every month.