New Delhi: The powerful federal indirect tax body, the Goods and Services Tax (GST) Council, will instruct field officers at the central and state levels to be lenient with traders for procedural lapses in the first year of implementation of the new indirect tax regime from 1 July.
Although the council is confident that small and medium businesses are prepared for GST, given the enormity of the reform, central and state authorities will be lenient, an official with the council said on condition of anonymity.
“In the first year we have to handhold them rather than penalize them for procedural infractions. Everyone in the council is sensitive about it. Major offences such as clearing of goods without invoices, however, is a different matter," said the official.
The decision comes in the wake of apprehensions of the trade and business community about an anti-profiteering provision in the GST law intended to be a deterrent against not passing on the benefits of any reduced indirect tax liability to the ultimate consumer.
The Confederation of All India Traders, a traders’ body with 60 million members, said in a representation to Prime Minister Narendra Modi on 8 June that a period of nine months beginning 1 July should be declared a transition period during which traders will be given immunity from prosecution for procedural lapses.
While businesses and large traders will be prepared for the GST roll-out with their IT systems, small traders, especially those in villages and remote areas, may take time to become part of the GST network on account of lack of awareness and infrastructure constraints.
Another official in the government, who also spoke on condition of anonymity, said that the last point of sale—trader to consumer—in villages has always been the weakest link in the state-level value-added tax system.
Raghav Bandil, a law degree holder and a stone dealer by profession based in Gwalior, Madhya Pradesh, said on a recent visit to the capital that he was enthusiastic about GST implementation although there will be challenges.
“Even if we have to pay for Net banking, the benefits that we get are much more. All the hassle of going to the bank and making payments is eliminated," he said.
The GST Council is meeting on Sunday in the capital to complete some of the remaining work, including addressing concerns relating to tax rates brought up by the industry and finalizing how the anti-profiteering mechanism will be implemented.
The council has already cleared nine rules under GST laws and it is working on a few others which could be approved even after the implementation of GST as these are not required at the time of roll-out. These include rules relating to “advance ruling" and search and arrests. Advance ruling is a facility available for taxpayers to get an idea of what the tax liability on certain transactions will be in advance.
To facilitate smooth transition and to address sector-specific concerns, the GST Council has set up 18 sectoral groups to interact with the industry. The groups will resolve issues raised by sectors like telecom, banking, oil and gas, and mining, a finance ministry statement said on Friday.