Large companies disappointed with key GST issues, await clarity

Key areas of concern include anti-profiteering laws, input credit

Large companies are disappointed that many key issues following the rollout of Goods and Service Tax such as anti-profiteering laws, transition credit issues, and denial of certain input credit was not addressed by the GST Council in its meeting yesterday. Large corporates, who pay 90 per cent of the total tax revenues, now hope that their concerns will now be addressed in the next council meeting in November. 

“The government has addressed the immediate concerns of 90 per cent of tax payers who contribute approximately 10 per cent of the tax collection by relaxing the compliance norms. But the concerns of minority taxpayers who pay 90 per cent of the tax revenues, will hopefully be addressed in next council meeting,” said Sachin Menon – Partner and Head of Indirect Tax at KPMG in India. Citing an example, Menon said the 35 per cent abatement on GST payable on existing car leases is indeed welcome but is not good enough as still the lessee will end up paying 28-30 per cent GST as against 15 per cent service tax in the earlier regime.  

The corporates are also grappling with other issues such as how to comply with the anti-profiteering provisions which has the potential of litigation, and restrictions on single credit note against multiple invoices. 

“The companies with exports have been given a relief by the council yesterday. The Council has also deferred Reverse Charge Mechanism which was procedural concern for large corporates. The council should have given more clarity on anti-profiteering clause which is a big concern for large corporates,” said Biren Vyas, Partner, Grant Thornton India. 

As per anti-profiteering clause in the GST, if the authority finds that a company has not passed on GST  benefits to its customers then it will either direct the entity to pass on the benefits to consumers along with 18 per cent interest apart from levying a penalty. And if the beneficiary cannot be identified will ask the company to transfer the amount to the 'consumer welfare fund' within a specified timeline.

Auditing firms said the council should clarify whether anti-profiterring ccompliance  is required to be implemented product wise, division wise, registration wise or company as a whole or companies have freedom to implement any which suits to its business operations. 

Many textile companies have reported a loss in business as many of their suppliers are not ready with the GST software and staff. Large companies have formed teams which are meeting their suppliers and customers so that they are GST ready.