New Delhi, July 2, 2017

Doubts linger on tax rates and laws; govt working overtime to address them

It’s a Sunday, but for Revenue Secretary Hasmukh Adhia, Day 2 of the rollout of the Goods and Services Tax (GST) was given over to ceaseless toil as he and his team were working overtime to ensure a smooth transition to the sweeping tax reform measure.

A bit of hype and euphoria may have seen the government home on July 1, the first day of GST, but reality began to dig in on Sunday, although the Finance Ministry claimed that no “major problems” had been reported.

“We have got encouraging reports from roadside dhabas and big restaurants as well as from kirana shops to departmental stores that have started getting acclimatised to the new tax system,” the Ministry said.

Businesses were still seeking clarity on the GST rates and laws; tax experts, who were concerned about possible litigation in the coming years, wanted greater certainty about the classification and the rates.

And Adhia was in the thick of things, busting misconceptions about compliance under GST and urging businesses to go ahead with “business as usual” under the new levy.

“Your provisional ID will be your final GSTIN number. Start your business,” he said, clarifying that businesses do not have to wait for the final ID.

Firms can continue doing their business and register for GST by July 30, he said, adding that invoices can be generated manually, and businesses require internet connectivity only during filing of returns. Further, those in retail business only have to file a summary of their sales, he said.

With several pending issues such as the finalisation of the E-way Bill, registration of businesses, and the implementation of GST by Jammu and Kashmir, the government and industry expect that it will take at least 2-3 months for the new levy to stabilise.

“There could be some glitches, but the Centre and State governments as well as the GST Network are well prepared. But the section of the industry that was hoping for a delay in implementation has to catch up and comply with the new tax,” said former Revenue and Economic Affairs Secretary Shaktikanta Das.

Of doubts, there were aplenty. “Readymade apparel above Rs.1,000 is to be taxed at 12 per cent. But what happens if it is discounted and the price is lower? Similarly, there is confusion over taxation of hotel rooms and restaurants,” said an expert.

“The rollout of the GST is a good beginning but now implementation will be the main issue. Tax authorities will have to provide more clarity on issues such as the interpretation of laws and rates, place of supply and input tax credit,” said Satya Poddar, Senior Tax Advisor, EY (India).

Bimal Jain, Executive Director, A2Z Taxcorp, said many companies are confused about the registration and migration process to GST.

Loose ends

Tying up all the loose ends will take time. The Finance Ministry is expected to notify the date for collection and deduction of tax at source at a later date. The GSTN has said the registration for this will now open on July 25. Existing taxpayers can enrol over the next three months for GST.

The logistics industry is hoping for clarity on the E-way Bill that proposes to make registering with GSTN mandatory for the movement of goods of over Rs.50,000.

While the provision has been deferred for now, industry hopes it will be reviewed, perhaps even dropped. “Provisions of first and last-mile registration and linkage to distance will increase costs and delay shipments,” said Vijay Kumar, COO, Express Industry Council of India.

The Centre is also hopeful that Jammu and Kashmir will implement GST by the month end. The State Assembly will now take up the GST Bill on July 6.

[The Hindu Business Line]