After implementation of Goods and Services Tax (GST), there was a common perception among general public that now compliances will be made very easy. But that perception shattered from the very first month of return filing. Over complicated forms, a non responsive portal, confused drafting, huge data compilation etc resulted in overall dissatisfaction among businessmen, tax practitioners alike. Government also responded to the need of taxpayers from time to time and took few steps to simplify the processes but the difficulties in compliance are far from over. In this article, I am suggesting few changes, which in my view will make compliance more easy and affordable for taxpayers.
1. Increase the Registration Threshold:
Current Threshold limit for obtaining compulsory registration is Rs 20 Lakhs, which is low considering the increase in inflation and per capita income of citizens, the same need to be increased to at least 25 Lakhs for Services providers and 50 Lakhs for Traders & Manufacturers. It will provide relief to many small scale businesses who are trapped in the compliance cycle every month.
2. Composition Scheme for Service Providers:
It has been observed that tax rate of 18% is applicable to most of the services under GST law, many customers are unwilling to pay such huge amount, due to which many small service providers are not able to retain the clients. This additional burden of Tax can either be reduced by lowering the tax rates for services or by giving an option to opt for composition scheme. Optimal Tax Rate under composition scheme should be 5% on bill value and threshold limit should be 50 Lakhs.
3. Reduce the frequency of Return:
Return filing frequency should be reduced to “Single Return Per Quarter”. Tax should be collected monthly. A Single Return Per Quarter will give a breather to Tax payers as well as to Tax Consultants.
4. Do away with RCM concept:
One of the most draconian provisions under GST law is taxability of goods & services on Reverse charge basis. It leads to unnecessary confusion in the mind of taxpayers, one has to pay taxes upfront and after that one can avail ITC of the same. It is creating chaos in compliance as well as in maintaining accounts. If government repels these provisions it will provide a huge relief to tax payers.
5. Increase Threshold for audits:
Current threshold limit for getting accounts audited under is Rs 2 crores, which is very low considering the complexities involved in the audit. Also cost of audit will add to the cost of compliance. Time and effort required will also be huge. Hence it will be wise to increase the limit to Rs 5 crores.
6. Supplier wise Reconciliation of outward Supply:
At present in Form GSTR-1, a taxpayer has to provide details of each and every supply invoice wise and date wise. It leads to unnecessary data compilation on portal and makes the portal inefficient; instead of this supplier wise quarterly reconciliation will lead to easy compliance and low data handling on portal.
7. Provisions for late fees need to be relaxed:
Late fees should not be used as alternative source of revenue by the government. Late fees of Rs 10 per day with maximum capping of Rs. 500 per return will provide the right balance in punishing the defaulters and encouraging the compliance among tax payers.
8. Revision Facility for returns:
One can still rectify the returns by making amendments in the returns of next tax period; however it is not an easy and better substitute for rectifying the data in the same tax period. Amendments are also creating chaos in accounts keeping and return filing. Hence option to revise returns must be given to taxpayers.
9. Other suggestions:
a. Automatic Refund sanctioning authority.
b. Do away with the HSN wise supply details requirements in return.
c. Rationalization of tax rates: 5%, 12% and 18% should be merged into one.
d. Decrease the processing time for GSTR-1 from Current 15 Minutes to 2 Minutes.
The author of this article is practicing at Indore city and can also be reached at firstname.lastname@example.org