Companies are hoping govt gives them time to adjust to GST: Tax expert

L Badrinarayanan, Partner-Tax of law firm Lakshmikumaran & Sridharan India, said that while clients are bullish about the Goods and Services Tax (GST), there are concerns about being punished for any wrongdoing given the novelty and the huge volume of transactions.

“The transaction numbers that could go up to 4 billion a month have been unheard of in this country. Companies are hoping that the government does not come down hard on them and gives them time to adjust to the new regime,” Badrinarayanan told Moneycontrol.

Lakshmikumaran & Sridharan Attorneys is working exclusively with Goods & Services Tax Network (GSTN), which will carry out the IT administration for the new tax.

The GST regime will be implemented from July 1. While the final tax rates for goods and services have still not been finalised, they will be put into the tax brackets of 5 percent, 12 percent, 18 percent and 28 percent. Badrinarayanan said that the rates could be disclosed only by mid-June so that companies do not do advanced tax planning.

He said that their firm is looking to ensure that there is adequate training provided to the clients so that they are well prepared before the deadline. “We also have weekly updates, publications and conference calls to help clients,” said Badrinarayanan.

Limited information on the rates has been cause for concern since they have been unable to plan their tax liabilities for this financial year.

“Rates are a concern which companies have and it is a complex area. For instance, they ask if they procure goods and services from unrecognised firms, what the classification of these services is. Also, they want to know how the IT systems will be automated to ensure that returns are filed properly and on time,” he explained.

Overall, while the companies may not be ready from the first day, tax experts said that they are better prepared than before.

According to him, companies expect the situation to stabilise in two to three years. “Our clients expect that in the near future, the exports will become competitive and time to market will reduce. We can have a centralised warehouse and there can be economies of scale,” he said.

The GST Council will meet again on May 18 and it is expected to decide on the final rates to be applicable for the 80,000 items in the country.