GST, two years after its inception, has proved to be a roller-coaster ride for all stakeholders. The GST regime has been marked by continuous change. What are the critical tasks ahead?
Ideally, GST rates should have been stable, GST policy should have had a clear roadmap and technology should have been flexible. However, GST rates are evolving, GST policy is going through changes and technology is rigid (not keeping up with the pace of change).
The GST Council has met 35 times and went on to make numerous changes in GST legislation. Certainly it’s an achievement to conduct so many meetings and unanimously address so many issues. However, quick fixes and changes in the GST law have brought uncertainty in the design of GST.
Given this, it will be preferable that, going-forward, a detailed long-term roadmap for GST policy should be prepared. This would entail some of the following micro and macro moves:
Combine GST cash ledger and CGST credit ledgers:
At present, the GST payers need to deposit cash in separate cash ledgers (such as CGST, SGST and IGST). Instead, of this if only one cash ledger is prescribed, then, the problem of GST in incorrect GST heads, will be nipped in the bud.
Utilisation of CGST:
Utilisation of CGST credit is now restricted to State-wise baskets, though, pan India, there is only one Central Government. Given this, like the erstwhile service tax regime, the option of cross-utilisation of at least CGST credit across India should be explored.
Address place of supply challenges:
In GST legislation, there are multiple provisions which increase the possibility of wrong determination as to whether a transaction is an ‘intra-State’ or ‘inter-State’ (though in both case the GST rate will remain same say 18 per cent). However, if intra-State supply is wrongly treated as inter-state supply or vice versa, the tax payer is required to pay the tax demanded and then can claim the refund of the incorrect tax paid. This leads to additional compliance burden. Alternatively, inter-Government adjustment could be explored.
Reduce data collection points:
GST payer is required to file E-way bills, GSTR-1, GSTR-3B, ITC-04, Annual return and Annual Audit (if applicable). Even under the proposed return system there are three returns. Multiplicity of returns conveys lack of trust in the GST payers.
Auto-populate Import details:
At present, import data is not connected with GST portal, leading to duplication of details by the importers. By linking IGATE with GSTN, the government can reduce the compliance pressure for the GST payer.
Make invoice matching an annual exercise:
It is proposed that after July 2019, ITC will be available only on the basis of matching of ‘invoices’. Effectively, through this provision, the GST payer is burdened with the responsibility of ensuring that all their vendors pay GST and file returns. It may be noted that in Income Tax, the TDS details are tracked, but at a ‘PAN level’. Thus, while the matching could be proposed in GST, however, it can be on GSTIN level (so if a supplier has issued 800 invoices to a buyer in a month, only total GST for the month will be looked at rather than the 800 invoices). Further, if possible, the matching can take place annually.
Introduce GST tariff document:
At present, more than ten rates are applicable on goods and services. This has resulted in making classification and rate identification a critical exercise. As there is no excise tariff like document which a GST payer can refer to.
Given the aforesaid, similar to Central Excise Tariff, the Government may consider introducing a tariff of GST rates, for both goods and services. If the tariff is based on internationally accepted classification, then it will help address classification issues.
Enable ASP/GSP/ fintech relevant:
Currently, the GST site does not function on the due date of filing of GST returns. Therefore, to address the above challenge, the Government can use the services of various app developers like ASP/GST/Fintech and creating customised apps which will be more helpful.
Bring electricity and petroleum sector in GST:
Non-inclusion of specified petroleum products means neither can petroleum sector entities claim input tax credit of GST charged to them nor can the businesses buying these petroleum products (such as paint industry uses few petroleum products as inputs) claim credit resulting in cascading of tax.
Similarly, exclusion of electricity sector leads to denial of credit on solar power plant / wind power plant and has adverse impact on the government’s ‘renewable energy mission’.
Address real estate sector challenges:
GST is levied on transactions of goods and services which are typically intended for consumption. Apart from consumption, there are certain procurements, which are not only for consumption but rather an investment avenue. One of such example is gold procurement which attracts GST rate @ 3 per cent (with ITC). Real estate sector is an avenue for investment (wherein most of the home buyers invest their life time savings) than consumption and thus, levying GST @ 5 per cent on flats (other than affordable) without ITC amounts to levying taxes three times (input taxed supply, GST rate 5 per cent on output and 7 per cent stamp duty).
Thus, GST rates on real estate could be brought down to say 3 per cent and levy of GST on development rights should be unconditionally exempted. This will also help in the ‘housing for all’ mission.