Form and substance

Nearly a year since the introduction of GST, the filing of monthly returns remains a rigmarole for some, and a nightmare for others. In an effort to ease the compliance burden of both buyers and sellers, the GST Council last week rightly decided to move to filing a single return each month. The new format will be made available in another six months, till which time the present system of a seller filing GSTR1 and GSTR 3B will continue. It is, however, baffling that the new form should take another six months to be put on stream. Even as a single return system is introduced in October or November, buyers will be allowed provisional credit — to be adjusted against final input tax credit due to them on the basis of bills submitted — for another six months (or till March 2019). In the final phase of reform, invoice matching will once again come into force, with the network presumably being in a position to take on the data load, unlike in 2017. Provisional credit to buyers will then be discontinued. Learning from the lessons of last year, the GST Council should ensure better preparedness in moving to the final ‘invoice matching’ phase. Inconvenience to businesses, particularly MSMEs, which lack the resources to cope with delayed receipt of input tax credit, or an excessive tax payment, should be avoided. The chaos of last year led the Centre to withdraw GSTR-2 and GSTR 3 in November, as a result of which only a summary of monthly sales (GSTR 1) and a self-declared monthly tax return (GSTR 3B) are required to be filed at present. This, however, has not really helped either enterprises or the government. With virtually no invoice verification taking place now, tax authorities are constantly suspicious that buyers are overstating their input tax credit claims, or that sellers are understating their tax liability. This sort of ambience is contrary to what GST set out to achieve — namely, easing tax compliance and the conduct of business.

The Council has set a target of raising ₹12-lakh crore in 2018-19, or a mop-up of ₹1-lakh crore monthly. However, GST collections were about ₹85,000-90,000 crore in most months of 2017-18. In pursuing revenue targets, the Centre should not breathe down the neck of businesses, and instead sort out systemic glitches.

The Council, however, did well to respect the opposition to a sugar cess as well as to a concessional rate for digital transactions, displaying a consultative approach. Its decision to nationalise the GST Network is understandable in view of data privacy and accountability issues. However, the Council has so far overlooked a core issue in GST compliance: of MSMEs struggling to cope with forms in English. This places them at the mercy of middlemen or lower level tax officials. It would be a pity if GST earns a bad name for these entirely avoidable reasons.

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