With the implementation of Goods and Services Tax (GST), industry will enjoy benefit of tax credit on input. It will be allowed only after proper procedure and satisfaction of certain conditions. So, a company will have to map all these inputs in respect of the output supply. The eligibility of the input tax shall be subject to the condition that the same should be availed in furtherance of the business. This shall be reported through the inward return (eligible and non eligible credits). The company will have to maintain proper accounting and identification system such that it results in smooth availment and filling of return under GST. This will substantially hike the advisory, accounting and IT cost for the industry.
Huge compliance burden has been imposed upon the e-commerce sector where tax collected at source provisions would apply.
As the cost of tax compliance will go up, the government should act as a knowledge partner as all businesses entities would not be able to afford high-end consultation fees. Availing the facility of GST Suvidha Provider (GSP) and Application Suvidha Provider (ASP) will be expensive as they will charge hefty fees for the infrastructure facility provided by them. Introducing facility of GST Suvidha Provider (GSP) by GST council will play a crucial role in making filing returns more user friendly and customer focused. Also, developers of tax solutions are providing value added services of Application Service Provider (ASP) and they will focus on taking taxpayers’ raw data on sales and purchases and converting it into GST returns. These GST returns will then be filed on behalf of the filer with GSTN via the GSP.
The proposed credit mechanism in GST would require investment in IT infrastructure. It will have to be compatible with the software and the computer system proposed to be used by the government for disbursing credit. Cost of IT infrastructure will go up to comply with the credit mechanism.
Overall, the huge investment in the IT infrastructure and human resources shall become the necessary call for the GST regime. It would be a challenge before businesses and lawmakers to make the GST compliance cheaper and efficient as compliance costs will rise substantially.
The writer, Atul Gupta is a chartered accountant, indirect tax