Businessmen can’t understand the GST, Chartered Accountants can’t GST, even I can’t understand GST, these are the words of a BJP minister. At an event, Madhya Pradesh Food and Civil Supplies Minister Om Prakash Dhurve refused to speak about the Goods and Services Tax saying, he could not understand what it was and claimed that even CAs and businessmen are failing to understand it.
While what the minister said here would be a major embarrassment for the BJP, the complexity of the GST, in fact, is a concern raised by stakeholders. Here’s what makes the GST so difficult that even ministers are failing to understand it.
Multiple GST rates:
Currently, the GST regime slots items under four primary tax rate slabs — low rate of 5%, standard rates of 12% and 18%, and high rate of 28%. Other than this, gold and jewellery are taxed at a concessional GST rate of 3%, while rough diamonds are having a 0.25% levy. It seems like an easy categorisation, but it is not as different tax rates are applied to different items, which may together be used to manufacture one product. For example: A cycle maker buys cycle parts at 12%, tyre at 5%, paint at 28% and eventually sells it at 12% GST. Similarly, snacks have been categorised under 12% slab and cashew under 5%, but happens to masala cashew?
A case for sweets is even more interesting. A simple milk sweet comes under 5% bracket, the moment silver coating is put on it, its tax goes up to 18%, and further, if it is flavoured with chocolate, the tax shoots up to 28%.
Now, traders or businessmen are expected to file GST returns every month, while the GST Council is mulling to make it quarterly, it still is too complex to understand due to multiple filings. Under the GST regime, a businessman is expected to fill three forms. GSTR 1 is a monthly return that should be filed by every registered dealer. It contains details of all sales by every dealer. GSTR-2 is a detail of all purchases and GSTR-3 is a furnished detail of all sales and purchases and the payment of GST.
The process also includes uploading invoices. If the process was complex enough, the taxpayers are being hit by frequent technical snags, often leading to delays in filing. The current system of matching of invoices places huge burden on the electronic infrastructure and entails huge compliance costs for the small and medium sectors.
On October 30, the government extended the last date for filing GSTR-2 and GSTR-3 for the month of July to November 30 and December 11. A week before the government had waived penalty on the delayed filing of initial GST returns for the months of August and September. As per the data with the GST Network (GSTN), a huge chunk of businesses file their returns after the expiry of the due date.
The Integrated Goods and Services Tax (IGST) is applied when goods or services move from one state to another. The IGST is shared by the Centre and states at a fixed rate. However, most of the integrated GST comes from exporters, who are exempted from GST and hence, the refund has to be made to them. The process of refund has begun but the pace is very slow leading to their woes, according to several media reports.
The products under GST is based on Harmonised System of Nomenclature (HSN) codes, a globally standardised system of names and numbers to classify traded products. Under the system, it becomes absolutely necessary to classify the goods and services and determine the appropriate rate applicable to the specific product or services. While businesses are still confused about under what bracket several products will fall into, categorising under HSN codes get difficult.