The Goods and Service Tax (GST) system or the revolutionary tax system after a decade of intense debate came to fruition and existence two years ago. GST was introduced to the country to reduce the tax burden on producers and foster growth through more production. Though the tax structure has tried to solve major issues relating to the taxing in India, the reform has many challenges. The government on several occasions, has given clarifications to reduce ambiguities and make the process smooth and easy.
Mentioned below are few of the challenges of the GST.
Reporting of HSN
Harmonised System of Nomenclature (HSN) is an internationally accepted coding system. In filing monthly GSTR 3B, the detail w.r.t. to the HSN of the inward supplies was not required, however, the HSN wise detail is required in the annual Return GSTR 9. Reporting of HSN code increases the time and effort for monthly or quarterly compliance. Overall in the longer term, not aligning the system of business with the GST regime could have multifold impact on the business.
Numerous offences and penalties under GST
There are numerous penalties and offences under GST, principles of which are also mentioned by law. For example, not registering under GST, even though required by law is an offence. There are many other offences and penalties, which can hinder its popularity in India. The general penalty under GST for any offence for which it is not specifically mentioned will be liable to a penalty extending Rs 25,000. A person can be arrested for certain GST related offence by authorised CGST or SGST officer.
Reconciliation in GST
The Reconciliation process in GST is not new to any taxpayer as this was a common practice in earlier VAT and excise regime. After reconciliation a taxpayer needs to match the data between the books of accounts to complete the process.
In the GST regime, the process of reconciliation is a challenge. The invoice number that the purchaser has recorded does not match with seller’s invoice received in 2A. Both follow a different principle. One of the major challenges in following a reconciliation process is that both parties involved may have different nomenclature of storing the invoice numbers. On the other hand, the implementation has a hard match around invoice number.
Refunds are time taking in GST regime
It was assured that 90 per cent of the refunds of GST would happen in seven days at the time of GST implementation. But on the longer term, it did not happen. The recent unearthing of fake invoices and fraudulent practices to corner input tax credit may only lead to more scrutiny and more delays. This results in human interfaces, which may lead to the involvement of corruption.
Several items to be brought under the ambit of GST
There are certain items, which do not come under the ambit of GST. It is applicable on items such as petroleum products and electricity should be brought under the GST to boost the manufacturing sector. At present, there is no official data available to show the present GST tax collections vis-a-vis the revenue being collected by 17 taxes such as VAT, Octroi, service tax and luxury tax, which got subsumed once the GST was rolled out.
Lack of an efficient Helpline
Filling GST can be a great challenge as there is no helpline number, which can make this job hassle-free. Rules are complex and compliance is tedious. Even tax experts sometimes fail to understand what needs to be done in a particular situation. In this situation, a typical tax payer cannot understand the nuances of GST. There is no efficient government helpline where a taxpayer can call and discuss his queries.
Several market players are offering solutions to deal with the challenges related to GST in different ways. They are as follows;
There is a wide range of accounting softwares available in the market to help the taxpayers while filing GST returns. It makes the work easier and simpler. Such software are exclusively designed with algorithms that identify errors on each step of the GST filing process to make it hassle-free.
The Indian Government is taking certain initiatives to find solutions to the challenges. The Modi government is trying its best to simplify and rationalise the GST regime.
In future, the council may consider merging the 12 and 18 per cent slabs into a single one of possibly 15 or 16 per cent, which will also simplify the rate structure.
Revisit the GST law
Revisiting the law, can make the necessary changes and will further ease the process of tax filing by removing the unnecessary flaws. This will further improve the tax collection rates. In the longer term, the country’s economy will grow.
With hindsight, it can be said that overcoming the challenges relating to GST implementation, the tax reform will have a long-term impact on the country’s GDP growth, ease of doing business, expansion of trade and industry in the country making it a significant economic power.
The author is the Co-founder and Director at BUSY (Accounting Software)