On paper it looks like an expansion of the tax net. But, experts feel the proposed GST threshold at ₹5 lakh for North East and ₹10 lakh for the rest of the country may be difficult to administer.

At the estimated 20 per cent value addition a trader selling goods worth ₹10 lakh a year earns a monthly margin of little over ₹16,000.

The GST threshold is set based on the existing VAT threshold, as demanded by the States.

However, as R Muralidharan, Senior Director, Delloite India, points out filing VAT returns are easier when compared to mandatory e-filing of GST returns where every purchase invoice has to match with the sale invoice.

“It would be too much for a small fellow”.

Sachin Menon, Partner and Head, Indirect Tax at KPMG, has little doubt that keeping the threshold so low will be “counter productive” and may give rise to corruption, as small assesees are helpless before the tax officials leading to “extra commercial considerations”.

The total taxable value for the ₹10 lakh business is ₹2 lakh. Assuming a 20 per cent GST, the estimated tax is ₹40,000 (before claiming the input credit).

Menon says the cost of collecting this tax should be same or higher than the tax itself. “It would be a national waste,” he says.

Bipin Sapra tax partner of EY, doesn’t rule out the complications. But he says most of such small traders may get away by paying composite tax.

According to the draft guidelines issued on Tuesday, businesses having transactions up to ₹50 lakh a year can pay the composite tax of “not less than one per cent” on the taxable value without getting into the nitty-gritty of claiming input credit.

But then why not make it simpler for the smaller businesses? Why include them in the GST scheme at all?

And, as Amit Shovan Roy, Director of the Thiruvananthapuram-based Centre for Development Studies, asks, what will be the net gain to the nation by taking all the trouble to catch that roadside ‘pan’-seller?

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