GST’s tentative first steps

The wait for Goods and Services Tax, or GST, which was 17 years in the making, was similar to the maternal hope that actor Rakhee’s character had for her sons in the 1995 Bollywood movie Karan Arjun . Her now iconic dialogue — “ mere Karan Arjun aayenge” (my Karan Arjun will come) — resonated with those looking forward to the GST’s implementation.

The new tax structure, which hopes to unify India’s $2.2-trillion economy, finally saw its day on July 1 amidst political debates, social media campaigns, satires and even fake news. While the Government has been fire fighting through the first month of GST, the common man on the ground seems to have got a taste of the new regime.

“Ab toh main bhi tax bharta hoon, aur dukanwala bhi, ” (Now, along with me, the shopkeeper also pays tax), says Lakshman Singh, a clerk who lives in Delhi’s Chandni Chowk. The unsophisticated view will embolden the policy-makers in the North Block, given that one of the objectives of the GST is to bring more traders and businessmen under the tax net.

The customers have a crucial role to play here, say experts. Many shopkeepers continue to ask customers if they want a kuchcha (fake)bill or pucca bill. If a customer opts for the kuchcha bill, then it defeats the whole purpose.

“Ask for invoice, you must know the final prices, ensure that GST is charged properly,” says Bimal Jain, Chairman, Indirect Taxes Committee, PHD Chamber.

The initial days under the new regime came with confusion. Some even wondered if the GST had made things more complicated than before.

But Arvind Subramanian, the chief architect of Economic Survey, noted that “It is inaccurate to suggest that the GST is more complicated than the system it replaced… Structure of multiple rates has been reduced to a structure of 6 rates. More important, uniformity or the principle of ‘one good, one tax’ all over India is now a reality.”

Success of this indirect tax regime largely depends on the Goods and Services Tax Network (GSTN), a company set up primarily to provide IT infrastructure and services for implementation of GST.

It’s responsible for three main services on the GST Common portal, namely registration of traders, filing return and making payment.

“We started the service delivery (enrolment) from November 8, 2016. From June 25, 2017, we started new registration and payment services,” says Prakash Kumar, CEO, GSTN. All these (facility for filing different kinds of returns) have gone live as per the pre-announced timeline,” he points out.

Kumar stresses that the States, where the implementation is tougher to manage, are also working hand-in- hand. “Regular up-load of supply data (invoice data and other records) is the key to hassle free return filing for taxpayers. As far as migration is concerned, 71.78 lakh out of 86.54 lakh taxpayers (from the business community) have migrated to the new regime, which is 82.95 per cent conversion.

“It’s not a mean achievement, especially when the threshold for registration was increased from ₹10 lakh to ₹20 lakh,” says Kumar.

“The signing of migration form using DSC (digital signature) or EVC (electronic verification code) was a big change for majority of taxpayers. The Government introduced EVC as another means of authentication and that has become very popular,” he said. While large corporates have found it easier to be compliant, the SMEs have faced some challenges. It is lack of certainty in rates and policy framework that is a cause for concern for industry, a GST expert said.

MS Mani, Partner-GST, Deloitte in India, said that the SMEs are critical in the GST value chain, and they are being persuaded by their customers to register and become part of the GST chain. Since they will also enjoy input tax credit, most of them would be willing. However, getting all compliances right from the beginning would be a big challenge.

Then there are privacy concerns. But Kumar of GSTN assures. “We have taken the best in class security system adopting multi-layered security for the GST System and the data stored in it. The Core GST System is not directly exposed to the Internet.”

A month into the new regime, it’s too premature to pass a judgement. As Arvind Subramanian says, “At the end of the fiscal year is when we should begin to assess GST’s impact on the economy.”

(With inputs from K R Srivats)

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