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The thorny problem of simplifying the returns and taking the best out of the revenue model (comprehensively cover the parallel economy) to get maximum tax and the Nandan Nilkeni Model which was much simpler has been attempted by the Institute of Chartered Accountants of India. This SUF model does not even require the receiver to confirm the receipt as once tax is paid by the supplier- the government has nothing to lose. Only the missed invoices if any are to be uploaded by the recipient and if accepted by the supplier get added to supplier liability and recipients credit. The major areas of revenue leakage have been also highlighted. (Article on SUF uploaded a fortnight back)     

Some transaction/products like electricity, 5 petroleum products, stamp duty, liquor have been kept in out of GST in line with the States demand on considerations of fall in gross revenue which incidentally increases the revenue of the centre also. Some of them may over a period of time be merged. Presently 5 petroleum products are being seriously examined which do not require any constitutional amendment and only require the GST Council to recommend and Centre and States to agree. In due course of time, the stamp duty also needs to be subsumed to avoid tax on tax. Artificial barriers to credit- works contract, motor vehicles, rent a cab, out door catering etc even if used in furtherance of business have been restricted to some extent. The astute tax planner may be able to overcover some of these within the present frame work of law. However, the smaller assessees would be the losers as they may not have expert advisers.

The main objectives of GST have been and are:

  • Enlarge the tax base now that India is moving towards being a developed economy,
  • Encourage the parallel economy which presently contribute less on nothing to the tax to join the mainstream,
  • Avoiding the cascading impact of multiple levies. i.e tax on tax,
  • Reduce the multiplicity of taxes on transactions and lead to a common market,
  • Reducing the cost of compliance for Government and assessee and
  • Reduce the interface between the tax payer and the administrators by using information technology.

The experience in the last 10 months on the total collections has not been very encouraging though the economy continues to grow at more than 7% per annum. GST has helped the direct tax collections to clock a 16% growth to some extent. The collected in GST post July except for March 2018 ( which normally peaks with 25% more) however have not been upto the expected level even though the number of registrants has increased by more than 30%. The parallel economy has registered but not paying the tax due, some maybe availing excess transitional/ normal credits and awaiting the decision on the reverse charge from unregistered suppliers. The technology infrastructure was pushed through without the normal user testing. The ill effects of the big bang reforms with credit matching instead of a graded implementation have led to many compromises with frequent amendments and government is unable to implement GST effectively.

It is a fact that the corruption in the system especially in the intra State transactions has dipped to less than 10% of the pre-GST times. A very big achievement. Tax compliant assessees are seeing a major reduction to the "transaction cost" which could be anyway in the region of 1-2.5% depending on the geographical location.

The improvements expected with Sushil Modi ji proactive dialogue with the trade and professionals this week and more in the coming month of May could be as under:

  1. Simplify the return filing process so that at least the business to business part of the economy is enabled to transact business freely,
  2. Build capacity and expand the IT infrastructure to be able to manage billions of transactions,  
  3. Continue to broaden the base with e-way bills being implemented in all major States *[1],
  4. Correct the several restrictions (staying into the area of pure business – like payment linked credits) and drafting lacunae (can lead to avoidable disputes),
  5. Postpone or do away with the credit matching mechanism,
  6. To win back the trust of the tax payer with simpler and fair laws (equal interest, artificial time limits removed and accountability for the tax administration),
  7. To put IT based identification of tax leakage areas and identifying the errant tax evader and
  8. Get the annual GST audit put in place to identify and correct the transitionary errors as well as errors due to lack of understanding of the law. *[2]
  9. Amend the law to ensure that those in threshold and composition are not able to split their businesses into scores of different PAN numbers and different GST numbers. *[3]
  10. Have a robust system of ensuring that any mobile squads or investigating agencies are unable to commence any proceeding and close it by getting compromised.  

We the citizens of India hope and wish the hard-working team of officers of CBIT as well as GSTN solving the problems being faced by SME while keeping revenue leakage in mind the very best to bring out a fair and transparent GST. Later maybe in 2019 simplify it further into a stable and certain law. 

[1] The system to avoid compromise of vehicle stopped for spot check or at borders is critical as in the past, this was a major area of leakage. Only the tax compliant were proceeded against. Tax compliant assessees need to be rewarded with no or very little checking.

[2] The initial GST audit is expected to correct the present situation of very poor knowledge of the law with the revenue, professionals and taxpayers. It would also sensitize the common errors which could lead to exposure in future for the tax compliant.

[3] In Central Excise entities working in tandem were clubbed in case of sharing / flowback of profits etc. 

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Category GST, Other Articles by - Madhukar N Hiregange 



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