By Parag Mehta
The introduction of the Goods and Services Tax (GST) last year was a major step towards the government’s ‘one nation one tax’ goal. The launch of GST saw acclaim and opposition from various quarters.
GST has proved to be a learning process for the government, industry, professionals and the consumer alike. The entire backend infrastructure for the government and the industry had to be upgraded and reworked. And industry professionals and tax officers were back to classroom to understand the implications of GST.
The first year had it share of issues and confusions, many of which the government was quick to resolve. The GST rules have undergone many changes and amendments since launch to accommodate the many lessons learnt, but there is still a lot to achieve before it can become a truly successful policy. Here are some of the areas for improvement.
Stability in GST network for compliances
The IT infrastructure of the GST network, which is the backbone of GST, needs to stabilise. Frequent changes in due dates and GST returns should be avoided. The current structure of returns is complicated and difficult to comply with for small and medium businesses. The proposed simple GST return that is currently under development must be introduced at the earliest.
Working capital blockage for exporters
Exporters are facing a huge cash crunch due to the blockage of funds by GST authorities. Streamlining the entire refund process and ensuring a speedy disbursal of refunds with minimum documentation is the need of the hour.
Centralised assessment for large service providers
One of the major apprehensions of large service providers like banks, insurance companies and financial institutions is that issues could crop up as the various states could interpret certain provisions differently. Hence, even though registration is not centralised, a centralised system would ensure uniformity of assessments and easy compliance by the main office.
Abolition of reverse charge on purchases from unregistered vendors
The payment of GST by receivers of services/goods for purchases made from unregistered vendors has been put on hold till September 30. This puts undue burden on such business to capturing of data and comply with the same. The abolition of this clause would be a great relief to the businesses.
Clarity on cross charging for services
The head office procures various services like HR, IT, legal and professional consultancy for the entity. Such services are deemed to be provided to the various branches and hence require internal billing. The clause should be amended to remove the services from the relevant provisions.
Centralised Advance Ruling Authority
Advance ruling authorities have been set up in each state, with each giving divergent views on similar matters. As a result, businesses are left confused. Creating a Centralised Advance Ruling Authority would be an ideal
Petroleum products and diesel to be brought under GST ambit
Prices of petrol and diesel have reached all-time highs. If these were to be brought under the ambit of GST, it would help reduce the prices. Besides, businesses that use petrol and diesel as inputs will be able to claim input tax credit on GST paid on these purchases.
Real estate sector
There have been calls to include stamp duty under GST since introduction of GST. It is important to exempt development rights from taxation (it was not taxed under service tax either) as this is increasing the cost for builders and resulting in many projects being held up.
The GST rate for the hospitality sector is determined based on the hotel’s declared tariff. Hotels often offer different tariffs for online/offline/corporate/regular customers, and as result face issues to determine the declared tariff. The GST rate should be determined based on the tariff collected and this would smoothen the entire process of collecting GST.
Parag Mehta is a partner at N.A Shah Associates LLP.