GST: What small businesses want

India decided to celebrate July 1 as GST Day yesterday. In this backdrop, Ms. Kajal Anand assesses the impact of this fundamental regime change at the ground level, especially from the perspective of small businesses
– By Ms. Kajal Anand

The Goods and Service Tax (GST) regime completed its one year yesterday. Since it was altogether a new taxation system and much different from earlier tax regime, there were several challenges in its adoption and acceptance. In comparison to other countries, India has adopted GST to a great extent in a short timespan. Much has to be done still to simplify and rationalise the tax structure so that even a common man can easily comply with the new system.

Noteworthy achievements

Subsuming 27 taxes and 26 cesses was a cumbersome task but it has been accomplished with extensive collaboration between central and state governments. This single accomplishment can be looked upon as one of the best examples of the success of India’s cooperative federalism which works despite diverse political views and thought differences.

At ground level, there exists a mixed reaction about GST on its completion of one year among the trading community and small businesses of the country. The trading community under the leadership of the Confederation of All India Traders (CAIT) cooperated to the best possible extent although not all may have agreed with various stringent provisions of the law and the compliance procedure.

GST has brought in fundamental changes in the taxation system as most of the commercial taxes stand subsumed in GST. This has certainly relived the traders from the burden of multi-compliance and multi-authorities. The e-compliance in GST has virtually blocked the direct interaction of traders with officials reducing corruption to a great extent.

One pivotal advantage of GST is the availability of input credit which means no one has to pay the tax from his pocket except the consumer as GST is a destination-based taxation system and only the end-consumer in the supply chain ls liable to pay tax. This feature makes GST a unique system. Once GST is established as a stable taxation system in the country, it will be beneficial to both, the traders and government from the perspective of revenue. Repeated amendments in GST rules reflect the government’s genuine appreciation of issues and concerns expressed by the trading community from time to time.

Gaps needed to be filled up

However, the issues like filing of multiple returns, refunds from the department, awareness and education about GST fundamentals and its compliance obligations will need the government’s immediate attention as the key priorities for next year. Here are a few important suggestions to the GST body for the betterment of the new taxation system:

• Instead of monthly returns, quarterly returns should be prescribed on Form 3B for making return filing simpler.
• The refund process should be in the form of automatic credit to the traders’ bank accounts.
• The HSN Code should be made mandatory only for manufacturers and not traders.
• For traders doing business in more than one state, instead of applying for a registration in each state, one registration number should be allowed to be applicable—Pan India.
• A number of small traders across the country do not have computers. The government should, therefore, provide a subsidy to equip themselves with modern technology tools such as computers and essential software readying them for e-compliance.

Technical changes required

Besides these micro-level points, there are a few other technical changes demands of small businesses. In order to make GST compliance process simplified, it is necessary that pending amendments in GST Act should be done as early as possible. No input credit should be denied on the pretext of invoice matchmaking. The traders should be allowed to edit the returns. The classifications of goods should be made easier. Inter-state supplies should be allowed in composition scheme. A GST Lokpal should be constituted for fair and transparent redressal of grievances.

Reverse charge mechanism should be deferred till March 31, 2019. To take CST down the line, it is necessary to constitute joint committees of traders and senior GST officials at the district levels. Traders should be given representation in GST Council. A comprehensive incentive scheme should be given to traders who adopt digital payments for complying tax obligations and use digital payment in their day to day business by allowing rebate in tax. A mass awareness campaign should be launched across the Country to educate the traders about basic fundamentals of GST and its compliance thereof. E way Bill should be allowed only on inter-state supplies and not on intra-state.

In a nutshell, GST can be a great taxation system, provided the government gives enough time for traders to understand the nitty-gritty of GST. The proposed amendments in GST Act should be made as early as possible. With mutual cooperation between the Government and small businesses, GST will surely emerge as a good taxation system. One more year may perhaps be needed to turn GST into a stable taxation system in India.

About the author:

Ms. Kajal Anand is the Immediate Past President of All India Cosmetic Manufacturers Association and Head of Women’s Wing for Maharashtra State of Confederation of All India Traders (CAIT). She also heads Debon Herbals as is managing director.