Two years of GST regime

Today marks the beginning of the third year since the Goods and Services Tax (GST) was launched. The government and its cheerleaders will praise the new regime’s virtues and its implementation. The fact, however, is that GST is still work in progress.  

In the past two years, the GST regime has undergone significant transformation, through 90 notifications on rate changes and exemptions. The non-tariff notifications number about 175 for Central Tax and 20 for Integrated Tax. As many as 28 orders on various issues have been issued. The Central Board of Indirect Taxes and Customs has issued about 370 circulars, press notes and fliers on various issues, beside about 50 FAQs (Frequently Asked Questions) bulletins. The Customs and Excise administrations have made many consequential changes in the laws, changed several procedures and issued many clarifications.  Hundreds of case laws and advance rulings have complemented the changes in laws.

The GST Network (GSTN), the technology backbone for GST, has also made numerous changes and issued many guidance notes and clarifications on operational matters. After initial glitches that caused much disruption, the technology platform has stabilised somewhat. Even so, tax payers and the administrators do struggle with difficulty in handling exceptions. The annual returns and many forms are so designed that many in the trade have problems filling these.

During the past two years, the government has responded promptly to most representations of the trade. The GST Council has approved all the changes in the rates, laws and procedures through remarkable consensus in all its meetings. Tricky issues have been referred to special committees for detailed study and recommendations. Whenever necessary, the deadlines have been extended to give the trade more time to understand and to ensure compliance.

Exporters have suffered working capital shortage, when made to pay Integrated GST (IGST) on their import during the first few months of GST introduction. The system glitches in grant of refund of IGST paid on export goods worsened the problem. Thereafter, the pre-import condition on import without IGST payment against advance authorisation caused great hardships. Even now, deemed export is not treated at par with physical export. And, many facing difficulties in rectifying of mistakes, getting refunds of unutilised credit on account of export without IGST payment, etc.

The main concern of the trade has been to stay compliant with the raising of invoices, paying of taxes and filing of returns. Correctness of the classification, valuation, input tax credit claimed, transition credits, annual returns, etc, will come for verification and stringent scrutiny when officials start audits.  

Going forward, new return formats have been approved and these will go through a trial period before being made compulsory for large tax payers from October onward, and for other tax payers from January onward. Some changes in the laws relating to the new composition scheme for service providers, raising of the registration threshold for goods suppliers to Rs 4 million, a supplier mandatorily offering facility for digital payment to a buyer, empowering the commissioner to extend due dates for annual returns, restructuring of cash ledgers, levy of interest on net tax liability, disbursement of refund by a single authority, levy of penalty on the profiteered sum, etc, are required to be made. Hopefully, the proposals for such amendments will form part of the Finance Bill when the Union Budget is presented later this week.

E-mail: tncrajagopalan@gmail.com