Budget 2018: Finance Minister Arun Jaitley will present the Modi government's Union Budget on February 1. The Modi government's budget will be the last one after Goods and Services Tax (GST). GST was implemented last year. With the implementation of Goods and Services Tax (GST) in July 2017, India witnessed the birth of one of the biggest tax reforms.
Budget 2018: Finance Minister Arun Jaitley will present the Modi government’s Union Budget on February 1. The Modi government’s budget will be the last one after Goods and Services Tax (GST). GST was implemented last year. With the implementation of Goods and Services Tax (GST) in July 2017, India witnessed the birth of one of the biggest tax reforms. Implementation of the same could have been better especially from a small taxpayer perspective. We must appreciate the openness of the authority in listening to the issues and suggestions for providing relief to small taxpayers. However, there are still some issues which are yet to be addressed by the government. Some of the issues which the Modi government could look into in the coming months in order to facilitate ease of business for small businesses have been enumerated below.
1. Broadening of composition scheme
Composition scheme has been provided under GST so that small taxpayers (upto a defined turnover) can conduct business with simpler compliances. One of the major demerit condition provided under this scheme is that the person opting for this scheme cannot engage in making any inter-state supplies. Thus, the trade has been restricted to the boundaries of a state for small players who seek to avail the benefits of this scheme. It will be good if the government can do away with this condition and allow inter-state transactions for businesses who have opted for composition scheme. Additionally, the composition scheme is only applicable to traders, manufactures and specified services (restaurants). It is urged that all service providers should also be allowed to opt for composition scheme. The Modi government can look into this in Budget 2018.
2. Ease of filing of GST returns
The exiting formats of the GST returns are same for all the tax payers irrespective of their turnover or scale of operations. In the existing format of the GST returns, the information required to be furnished is quite vast and it consumes a majority of the productive time of small players. In order to provide relief to small businesses, government should come up with a simplified form for GST returns (such as requirement to provide invoice series could be done away) so that they spend less time in filing the GST returns and concentrate on their business. Further, it is recommended that instead of taking invoice level details on monthly basis, government should provide relaxation to the small traders by requiring them to furnish a consolidated invoice level details in the annual return to be filed at the end of the year or during assessment. Alternatively, small traders may provide a declaration to their customers stating that they have made sales to them during the year basis which their customers can take the credit. FM Jaitley should look into it in Budget 2018.
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3. Resolution to technical glitches of GST portal
GST was implemented in India in July, 2017 subsuming majority of the indirect taxes that businesses earlier paid to the Centre and states separately, with the aim of creating a common market. Implementation of such a regime required a complete overhaul of the tax filing system. However, till date India’s biggest tax reform is yet to be fully put in place, thanks to patchy technical implementation. This has caused a significant concern for many tax payers as they are unable to file the returns within the deadline. A large part of a traders’ time is devoted to filing returns, which is absolutely unproductive for them. At the moment, GST Portal issues seem bigger to the small traders than the frequent dates of filing of returns. From the GST portal crashing under load, to a very complicated process of filing returns, taxpayers across the country are expecting the government to either resolve their technological issues or provide relaxation in filing of GST Returns by reducing the number of returns. It is also recommended that government may provide separate timelines for filing of returns for different class of taxpayers basis their turnover or scale or operations. This can be addressed in budget 2018.
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4. E-way bills to be scrapped
Nationwide e-way bills are expected to go live from February 01, 2018 (in respect to inter-state movement of goods) on the day of Union Budget. The existing system of e-way bill, may prove to be a regressive step for small traders as it would lead to increase in compliance burden and delay the smooth movement of goods from one state to another. With industry already grappling to come to terms with GST compliances, this e-way bill process will prove to be another arduous process which will be counterproductive especially for the small traders who are already burdened with the unnecessary compliances and procedures. It is recommended that government should exempt small traders having turnover of upto INR 1.5 cr from issuance of e-way bills.
5. Abolish reverse charge on procurement from unregistered persons
Under the GST regime, tax would be required to be paid under reverse charge by registered recipient of goods or services in respect of procurement of goods from an unregistered vendor. However, procurements from one or more than one unregistered supplier is exempt upto INR 5000 in a day. Post GST rollout, several large businesses had stopped buying from unregistered dealers owing to difficulties under the reverse charge mechanism like the paperwork and the cumbersome processes. However, keeping in mind the issues for small unregistered traders, government provided marginal relief to the industry by suspending the applicability of said provisions till March, 2018. It is earnestly requested that this provision be completely abolished and Budget 2018 will be crucial.
6. Frequency of tax payment under GST
Currently small tax payers having a turnover up to INR 1.5 cr have been granted option to file their returns on quarterly basis but tax on the same needs to be paid monthly leading to a working capital crunch for such taxpayers. For majority of small traders, payment from their customer comes at a later stage. Therefore, monthly payment of tax leads to blockage of working capital for small traders. The pre-GST scenario allowed quarterly tax payment along with quarterly return filing. Therefore, it would be desirable if small traders upto a predefined threshold can be given an option to pay on quarterly basis instead of monthly basis. GST is an evolving law and issues or procedural problems faced by small tax payers should urgently be resolved so as to enable such businesses to focus on their core functions of supply of goods/services. Modi government should look into the issue in Budget 2018.
By Anita Rastogi, Partner – Indirect Tax, PwC India. Prashant Gupta and Nakush Hasija also contributed to this article.