1. What makes GST so difficult to understand even for BJP ministers

What makes GST so difficult to understand even for BJP ministers

Businessmen can't understand it, Chartered Accountants can't understand it, even BJP minister can't understand it. Here are the things that make GST too complex, too difficult to understand.

By: | Updated: November 10, 2017 1:48 PM
Here’s what makes the GST so difficult that even ministers are failing to understand it.

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%.

Multiple filing:

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.

Integrated GST:

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.

HSN Codes:

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.

  1. Varadarajan Seshamani
    Nov 10, 2017 at 10:23 pm
    As of now, I have observed the following: 1. There are too many returns to be filed 2. The access to the system is slow and often unavailable 3. Theree are windows of opportunity to file returns, instead of that window being 24/7 - as it should be 4. There is too much unnecessary detail being asked for by the system, such detail will only clutter up the ssystem and give the system far more detail than is necessary and further, the cost of provision of this detail, both to the filer and to the system is far more than what benefit the system coiulfd gain 5. Cost of accounting compliance has increased subsstantially for most companies, it has certainly increased by 75 for me. 6. The system is co complex and counterproductive that I have to resort to consulting 2 External Consultants and that has further increased cost compliance headaches 7. Many small companies will now have their managements focus more on GST issues, rather than their own work, we are in that state
    Reply
    1. Hari Singh
      Nov 10, 2017 at 7:47 pm
      hope govt will make it more simple and easy so that every one can understand it?
      Reply
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        Anil Nirodi
        Nov 10, 2017 at 4:24 pm
        The journalist who has ranted on the subject wants us to believe that all readers of this rubbish article are illiterate. The days of a Munshi working in a Chopda have vanished a long time ago. the software on a computer can resolve the issue of multiple tax rates for every single item without any discretion. Perhaps some of their children can teach them the so called complexity which can be eased by software. All that has happened is people like you and the traders can not continue to evade paying taxes for every single transaction and are being prevented from generating BLACK Money. That is the only reason all these silly excuses are being invented. The relevant software is already in the market. You all whining gentry will get used to this new way of tax regime unless the previous political dispensation resumes power and indulges in giving sops, concessions and handouts to gain votes.
        Reply
        1. Ramesh B Bhatia
          Nov 10, 2017 at 3:20 pm
          it was Good Simple Tax which is now big headache ? Why. ? before it was clear in understanding that business house will show total and total purchase hence total tax collected total tax paid. This is similar to Vat system , but including each invoice is complicated THIS must be removed. The example of Cycle or Sweet is same as traders were doing before . If sweet is mix of various dry fruits with different price still shops were calculating the cost and price ? same thing with cycle in both case cost of various items is included in final product ? where is confusion on Selling price ? On purchase Tax is charged on individual items # FINAL product is charged with TAX . So there should be no confusion - only Govt should remove retail invoice details ? This will make it simple process . Only Business to business invoice should be shown like VAT ,, I hope it is clear unless I have misunderstood or those who had drafted the bill with discussion in parliament .
          Reply
          1. bharatkumar
            Nov 10, 2017 at 3:17 pm
            Common People is facing problem. For example, credit card pay back - we have to pay the cost of item purchased plus Rs.100/- plus 18 of service charges. Why? we need to pay? Other example, if we purchase an electrical items for house use, we have to pay 18 tax on the cost of the bill. When congress was in power, we have to pay 4 something, but suddenly you charged 18 , why? We pay Income Tax, We pay Tax, but those money spending just like you got it from some lucky draw. You dont' have respect and values to the money, which we are giving. Secondly, you raise the ry of Central Govt./State Govt. More than Central and State govt work force working in Private Companies, their ry is less. Secondly, these employee has to pay bribe to your govt employee for getting things done. Public is much worried about this drastic decision of govt.
            Reply
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              Ravi Kumar
              Nov 10, 2017 at 3:00 pm
              How many people understand the Cons ution of India
              Reply
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