With the government enjoying a majority in the GST Council and a stabilising mop-up, one could expect that the Centre would quickly simplify the process further
GST – the journey of this landmark tax reform over the last 23 months – has been rewarding as the economy moved favourably towards the organised sector.
The journey paced up through 34 GST Council Meetings, recognised the need to deliver benefits to consumers and MSMEs through rate cuts, took initiatives in digital reforms, provided free accounting software and a vigilant Anti-Profiteering Authority that hit headlines on numerous occasions.
With the government enjoying a majority in the GST Council and the stabilising trend of GST revenues, one could expect that the Centre would quickly introduce the simplification reforms and take up immediately issues that were put on the back burner. The most pressing one being easing compliances through the “simplified return” – the single-page return under ‘Sahaj’ and ‘Sugam’ formats. This, in itself, will be a big respite for small traders.
On the other hand, for the organised sector, the new return process coupled with the proposed Section 43A seek to put the onus on large businesses for vendor compliance. It is necessary that the new input tax credit (ITC) mechanism, which requires suppliers to report every invoice and the recipient to lock the same on the GSTN portal, is used as a tool to encourage greater compliance participation and not lead to large businesses being needlessly pursued for any non-compliance of vendors.
Any tax digital reform of this magnitude requires a well- prepared ecosystem -- Large tax payers hope that the government puts into effect measures for smooth migration and bolster its IT system to deal with the iterative process proposed for claiming ITC.
On the policy front, the GST Council is likely to move forward on the prolonged debate on ending the moratorium on natural gas and other petroleum products from GST inclusion. A decision to this effect, which was in the past influenced by state governments, may now see the light of day as the industry clamour gets louder.
Another continuing deliberation for the government would be to table the plan of moving towards a single revenue neutral rate as against the current 5-tier tax structure. Whether any move could be expected in the short term will depend on the GST mop-up targets that will be finalized for the upcoming Budget on July 5.
In the past, any amendment to the law required a majority vote in the Lok Sabha as well as the Rajya Sabha. As the House arithmetic is set to change, it is likely that amendments that were put in the cold storage may be actively taken up.
Some of them could include considering changes in the place of supply rules for goods or services, relaxation in the stringent and vast penal provisions and the like. Industries would also do well to bring to the table any issues or propositions that warrant changes to the GST Act.
Now that monthly compliances for FY17-18 are completed and the deadline for the annual return is soon approaching, the Revenue Department has all the transaction level data to commence audits. With officials armed with data from two sets of sources (from the supplier and through acceptance from the recipient) and incrementally data from the E-Waybill system in the case of goods, businesses should expect technologically aided audits that are pointed and specific to start.
The government’s technology platform to perform a 3-way match, including the proposal to mandate tax-invoice generation from the GSTN portal, is a sure means to ensure a high compliance rate coupled and minimal tax evasion. One important cog in successfully achieving this objective requires that businesses should be given time to assess and implement the impact on their processes and IT systems for automation. A collaborative testing period and implementation period will go a long way in stabilising GST for India Inc.
The transaction level data available with the government is slated to revolutionise the entire tax landscape in India. In the near future, it could become a barometer for businesses to assess the economic well-being of organisations and businesses.
To conclude, back with a huge majority, the incumbent government should now ensure that the nascent tax regime achieves all that was promised at the stroke of midnight in Parliament on June 30, 2017 – “One Nation, One Tax”.Smita Bhandari is Tax Partner, EY India. Piyush Bihani, Senior Manager, EY, contributed to the article. Views expressed are personal.The Great Diwali Discount!
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