Change of tack

Revenue Secretary Hasmukh Adhia has has done well to concede that a rejig in the GST rate structure (in other words, fitment of goods) is needed, in view of the impact on small business. Coming soon after steps to ease the compliance burden of SMEs (extending the composition scheme threshold to ₹1 crore, keeping reverse charge in abeyance and allowing units below an annual turnover threshold of ₹1.5 crore to file quarterly returns), the statement indicates a sense of urgency at the highest levels to respond to the grievances of the business community. The fact that a clutch of Assembly elections are around the corner has no doubt contributed to this pro-active approach. A panel comprising the finance ministers of Assam, Bihar, Punjab and Jammu and Kashmir is looking into ways to ease the difficulties of SMEs, and is expected to submit its recommendations on October 29. Clearly, we are well past the days when the initial travails with the network were dismissed as teething concerns. Now, it is clear that rules and rates need to be tweaked to ensure that the economy gets back on the rails. GST is a landmark reform measure, but the devil lies in the implementation. By subsuming a range of taxes (Central, State and local), GST is meant to simplify compliance for business and boost the tax base of the government. If GST is now being viewed as an instrument of sarkari harassment, it is obvious that things haven’t gone according to plan.

The Centre and the GST Council should go beyond the fitment issue and address the growing sense of exasperation over the GST network. It defies reason that the returns can be uploaded only in English, inconveniencing small units in particular. The system does not allow for the returns to be ‘saved’ periodically, even as some 15 pages need to be uploaded. This has contributed to delays in uploading returns, given the unreliable internet speed in many parts of the country, for which the enterprise pays a penalty! While the finance minister has waived the penalty on August and September returns, the Government should go further — sort out design issues in GSTN, which includes difficulties arising out of matching invoices, facilitate the filing of periodic summary returns, and settle for detailed returns on a quarterly or half-yearly basis. Given these hassles, it is not surprising that less than half the eight million assessees have filed GST summary returns for September. It would be absurdly self-defeating if this huge headache of compliance were to drive bona fide players into the black economy, where bills can be done away with.

An impression is gaining ground that the GST system looks upon all enterprises as potential tax evaders. For a government that began its term on an enterprise-friendly note, this is truly ironic. It’s time to reiterate first principles of economic reform — and rescue GST.

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