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Photo: PTI
Photo: PTI

Streamlining GST compliance is a must

The government has done well to plan a transition to a new return-filing systembut it must also enhance the GSTN portal's capabilities

The government’s implementation of the goods and services tax (GST) from 1 July 2017—exactly a year ago—was a bold step. It was a landmark tax reform and marked the dawn of a new era in the indirect tax system in India.

Ease of compliance was supposed to be among the key features of GST. The government has been endeavouring to achieve this. However, the discomfort of such a tectonic transition to GST compliances is being experienced by all stakeholders, while the government tries to address various issues proactively.

It has been actively engaging with taxpayers to address several issues that may have resulted in litigations. This proactiveness has been evidenced by numerous sector-specific “frequently asked questions", clarifications, circulars and the constant addressing of queries via social media and helplines. These steps have been helpful for assessees to correctly determine the applicable GST on their business transactions and comply with the tax requirements.

The edifice of compliances under GST was based on the “matching concept", requiring the seller and the buyer’s data to be matched periodically. The idea was to eradicate tax leakages and enable seamless flow of credits. The returns and compliances were also planned around this concept, requiring the assessee to primarily provide invoice-wise details in the returns for outward and inward supplies, along with a separate return for tax payments. However, the IT system—the goods and services tax network (GSTN) portal—did not support the process, leading to trade facing teething problems, and requiring the government to come up with quick-fix solutions.

A temporary solution to the problem of matching concept was also provided by suspending the requirement of filing a return for inward supplies and introducing a summary return for tax payment in form GSTR 3B.

The government also kept the provisions of tax deduction at source, tax collection at source, and reverse charge from unregistered persons temporarily in abeyance and made several extensions in the rollout of the e-way bill system. Other relief, such as extensions in due date and waiver/reduction in late fees for filing returns were also offered.

Technical glitches and data mismatches along with manual processing of refund claims proved to be a major challenge for exporters eligible for obtaining GST refunds, leading to blockage of working capital. The government has tried to address this by organising special refund fortnights to resolve the obstacles faced by the exporters and expedite the sanctioning of pending refund claims. However, a permanent solution for this challenge may be complete digitization of the refund process, as envisaged earlier, and seamless functioning of GSTN portal-enabling accurate transmission of data.

The GST Council discussed the compliance- related challenges in its 27th council meeting held on 4 May and decided to streamline the compliance process by introducing a single-page return, relieving the assessees from having to file multiple returns.

The in-principle approval for this new return- filing design has been agreed with a three-phase implementation plan:

•First phase (for six months) wherein filing of the existing forms GSTR-3B and GSTR-1 would continue;

•Second phase (for next six months) wherein a new return facilitating invoice-wise data upload and claiming input tax credit on self-declaration basis is proposed to be introduced; and

•Third phase wherein the facility of provisional credit is proposed to be withdrawn and concept of matching would be reintroduced.

The government has done well to plan the proposed transition to the new return-filing system in a phased manner. This will give the stakeholders enough time to adjust to the new process.

It will, however, be imperative for the government to ensure that the new return format does not create additional challenges for the government as well as taxpayers. Easing compliance by introducing the simplified return format will not be enough. The government must also enhance the capabilities of the GSTN portal. The portal should be capable of managing and processing the voluminous data without any glitches and also provide the opportunity to revise the data in case of errors. Simplicity of returns along with the GSTN portal’s increased capabilities will both be imperative for enabling smooth compliances.

The economic survey 2017-18 estimated that the gross domestic product in fiscal year 2018-19 will increase, recovering from the dip in the previous fiscal year—which was primarily on account of the initial transition to GST and effects of demonetization. One of the factors contributing to this growth expectation will be further stabilization of GST through streamlining of tax compliances. Minimization of tax leakages, further widening of the tax base and achieving higher tax compliances will play a key role in achieving the desired GDP growth.

The ideal scenario—one of the GST truly turning out to be a good and simple tax—will not materialize until the exiting complexities are adequately addressed. If the government can pull this one off, it will be a good anniversary gift for taxpayers.

Suresh Nandlal Rohira and Sandeep Pareek are respectively, partner and director, Grant Thornton India LLP.

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