GST collections, as per a Press Note released by the CBEC on August 29, 2017, had touched Rs 92,283 crore, which, according to finance minister Arun Jaitley, has exceeded the targets set by the government for GST collections and brought ‘comfort’ to the government as per the recent news reports.
The uniform regime of taxation called the goods and services tax (GST) was conceptualised 17 years ago. It has been an arduous journey for the government since then, in which it has shown perseverance, keenness and political grit to make it a reality in a country with economic and socio-political diversities. GST subsumes all the major taxes, including excise, service tax, value-added tax, central sales tax, entry tax, etc. It has brought the Centre and states in one fold in respect of taxing the transactions pan-India on one yardstick, i.e. ‘supply’. The technology is the backbone of GST, which enables filing of returns, payment of tax and also provides a reconciliation or mismatch mechanism. GST was purported to bolster the economy and bring much-needed respite to the industry in terms of cost reduction and the ease of doing business. However, in the last two and a half months, since GST became a reality, the effectiveness of this tax has consistently faced challenges in fulfilling the very purposes for which it was implemented.
GST collections, as per a Press Note released by the CBEC on August 29, 2017, had touched Rs 92,283 crore, which, according to finance minister Arun Jaitley, has exceeded the targets set by the government for GST collections and brought ‘comfort’ to the government as per the recent news reports. The soaring GST collections raised hopes that the government may reconsider lowering the rates, especially for goods which fall in the 28% tax slab. However, the transitional credit which the government has offered to the industry against its supplies in the next six months (generally known as ‘deemed credit’) has been revealed to be a whopping figure of Rs 65,000 crore approximately, even though all the assessees have not exercised this option yet. This may take away from the earlier-mentioned ‘comfort’ factor and has led to scrutiny of all major claims of transitional credits made by the assessees.
Further, the expansion in the tax base at the outset due to the applicability of GST on transactions not taxed before would likely shrink after the industry avails the credit generated by payment of tax on such newly-taxable transactions. GST collections may decline and it is apparent that fingers would remain crossed at least for the next two quarters of FY2017. The GDP growth slumped to 5.7% in the Q1 of 2017, which can be attributed in large part to the run-up to GST. The industry is still reeling under the challenges posed by GST and has not come to terms with it. Against the above backdrop, it would be interesting to observe the GDP growth rate for Q2 of 2017. In addition, if the number of extensions provided to the assessees for filing different statutory declarations are to be construed as a trend, the ease of doing business front may be rendered unstable. Technology was slated to render the edge to the GST effectiveness through a holistic and easy compliance system. The technology interface extended to the assessees though the GSTN (Goods and Services Tax Network) portal is struggling, even though it has not yet faced the test of full-fledged compliances of all the assessees put together.
The industry is seemingly unprepared to comprehend the return formats due to lack of readiness of the IT infrastructure to map every possible transaction or scenario. Technical glitches are galore when the assessees try to file even the consolidated returns, which are simpler. Extensions in the timeline for filing statutory forms may be meant for strengthening the preparations of the assessees to deal with compliances, but in the hindsight, it seems to be serving the government equally in terms of helping them revitalise the GST technology. The GST statute, in itself, has presented myriad issues as it leaves key aspects prone to multiple interpretations. The FAQs, published through various modes, disclaim any legal force and are, at instances, contradictory. As the notifications for amending the rates and the provisions of law keep trickling, the assessees are left clueless and the fear of repercussions of possible non-compliance of the law looms large. The challenge of overcoming the hurdle of compliances and taking the correct tax positions is keeping the industry engrossed and few, if any, seem to be thinking in terms of cost saving and procedural efficacy by aligning with the GST technology.
Though the government has shown huge effort in trying to address the woes of the industry, it has largely been reactive rather than proactive. The initial dilemma over e-way bills, treatment of stocks in transit, uncertainty over availability of credit of tax under reverse charges on services performed prior to GST regime and point of taxation of such services are issues that indicate the proverbial chinks in the armour. The challenges in GSTN interface such as inability to modify or delete uploaded data, DSC (digital signature certificate) not getting uploaded, introduction of interim return days before implementation of GST, lack of clarity on export procedures in light of changes brought by GST in realm of taxation are few instances that seem to indicate there could have been more test runs and trainings to the industry before the implementation of this new tax reform. A consolidated Guidance Note similar to one issued after the introduction of new service tax regime in 2012 would have been helpful in place of FAQs being issued every now and then.
However, no matter how enormous the challenges look, nobody still doubts the positive aspects of GST. If implemented effectively even from now onwards, it is indeed capable to achieve the goals it was meant to achieve. The government needs to match up its own speed—which it exhibited in rolling out GST—in implementing the same. The enormity of the proverbial iceberg is still unknown and only hope and temporary comfort cannot steer the government and the industry clear of it.
Partner, Indirect Tax, KPMG in India