Damp squib

All eyes were on the 22 nd meeting of the GST Council on October 6. Big-bang decisions were expected, considering the general feeling that the Indian economy is headed for the ICU and there is no better tool than GST to prevent it from going there. The decisions taken paled in comparison to the expectations — rate reductions were announced on some items, an e-wallet scheme with no particulars was announced for exporters, the reverse charge mechanism was deferred and compliances in respect of filing were relaxed for some taxpayers.

There is a general feeling that this is not enough from the GST point of view to prevent the economy from continuing its journey to the ICU. In their wisdom, the lawmakers decided to reproduce all the 20,000 items that were present in the erstwhile Central Excise Tariff and assign GST rates to each of those items.

Since GST made its arangetram , there has been constant tinkering with the rates for more than 100 items. An additional 27 items were handpicked for a rate reduction on October 6, including plain chapati, roti and dried mango. Persons drafting the GST law have perfected the art of complicating tariff entries.

Consider this on namkeens “bearing a brand name on which an actionable claim or enforceable right in a court of law is available (other than those where any actionable claim or enforceable right in respect of such brand name has been foregone voluntarily).”

In the first quarter after the implementation of GST, exporters have been hit the hardest. A series of notifications were issued providing exporters with the option of charging IGST in all their invoices and claiming a refund, or not charging IGST by either issuing a bond or providing a letter of undertaking (LUT).

Those who charged the tax and claimed a refund found that the Government’s bank balance was not sufficient to issue refunds; those who were permitted to execute a bond were forced to get a bank guarantee to accompany it and the ones that had to execute a LUT found that the process was being delayed.

The need for a bank guarantee has been relaxed. Each of the above situations resulted in the working capital of exporters getting blocked. As for the e-wallet scheme, not much by way of information has been announced. Considering the fact that technology and GST have not got along well with each other till now, exporters cannot be blamed if they are cagey as to how this would operate on the ground.

The GST Council decided to jack up the limit for the composition scheme to ₹1 crore and permit quarterly filing of returns for taxpayers with a turnover up to ₹1.50 crore. The reverse charge mechanism has been deferred till March 31, 2018.

All these are measures would not only ease the compliance burden for these taxpayers but would also ensure that traffic to the GSTN is not heavy, which would benefit other taxpayers.

After all these relaxations, the Government is of the opinion that 90 per cent of the taxpayers would file their returns quarterly.

The question is whether matching of invoices and filing three forms monthly is necessary for the remaining 10 per cent of the taxpayer population.

The GST Council should take a relook at the GST law as a whole and not just the individual parts that have proved troublesome.

The writer is a chartered accountant

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