The Goods and Services Tax (GST) was implemented on 1 July 2017. Over the last seven months the industry faced many obstacles and hurdles, in terms of getting ready for GST, pricing, transition of credits, IT systems, operational issues on obtaining refunds and filing of returns, finds a survey conducted by auditing firm KPMG.
It says, “The Government on the other hand tried to ease the GST processes over a period of time by rationalising GST rates, providing clarifications on various issues, simplifying the return filing process and providing relaxation on operational aspects.”
KPMG conducted a survey to gauge the Industry’s experience on GST implementation so far. Here are findings from the Survey and the Industry’s expectations going forward.
Responsiveness of the government
• A large number of respondents have given a thumbs-up to the Government on taking adequate steps to respond to the Industry’s requests such as rate changes and providing clarity on rules and processes. This is evident given that the rates for majority of the goods/services were reduced to a more acceptable level, basis continuous requests from the Industry. Further, clarity on taxation of high seas sales, discontinuation of the process of submitting bonds for exports, paying tax on procurements from unregistered dealers was also provided, thereby easing the burden on the Industry.
• However, the Industry feels that training for GST officials could have been better, especially on a need of the helpdesk being more effective in resolving queries or concerns. Further, a majority of the respondents feel that the time given to assessees to implement GST related changes has not been sufficient and the notifications and circulars on changes should be issued well in advance.
• Pricing under GST was one of the focus areas for the Industry as well as the Government. According to respondents, GST rates and tax credits on procurements were the key drivers for influencing the pricing decision. However, a majority of the respondents feel that pricing has primarily been neutral on account of GST and has not witnessed an increase as was expected.
• Majority of the respondents feel that anti-profiteering provisions are not clear and the Government should have laid down clear guidelines on how to compute the profit on account of GST, much before GST was implemented, so that adequate steps could have been taken by the assesses.
• With uniform taxation across the country, supply chain was expected to undergo a major change under GST, with rationalisation of depots and alternate procurement sources. As per majority of the respondents, GST has impacted their procurement and supply chain, with decisions now being taken largely on the basis of commercial aspects rather than tax, as was done earlier. However, the reduction in the number of depots for pan-India operations as was expected is still to occur.
• Exporters of goods and services believe that the benefits provided to them under GST is not adequate, with the refunds on exports not processed till date, leading to blockage of working capital. Further, withdrawal of exemptions on procurement for export purposes have further increased the strain on working capital.
• With respect to transition from the erstwhile regime to GST, a majority of the respondents feel that their concerns were taken care of, but expect problems around carry forward of credits of cess, and the eligibility to carry forward credit on stock lying at different locations. This concern is real, as many assessees have already received notices for review of the credits transitioned to GST and reversal of credit of cess carried forward.
• The Industry faced major issues in meeting compliances, with the GSTN portal not functioning and deadlines being extended at the last minute. The respondents feel that the return filing process of GSTR1, GSTR2 and GSTR3 should have been postponed till the portal was fully stable. Further, the facility of revising the GSTR3B should have been allowed, given that assesses were not fully ready with data for meeting GST compliances.
• Almost all the respondents feel that the GSTN portal can be made more effective, by making the return filing utilities available much earlier rather than closer to the deadline and the error report being generated instantly in a clear manner. Also, the expectation is to expand the excel utility so as to capture all details required in the GST returns rather than having manual intervention for certain aspects.
• The respondents were unanimous on the increase in burden caused by the GST compliances, with multiple returns to be filed state wise at a transaction level and matching sales and purchase data for the purpose of claiming credit. Also, capturing of the information required for filing the GST returns at a transaction level was the most time consuming aspect of getting the IT systems ready.
“Overall, a significant majority feel that GST would have a positive impact on the Indian economy, especially with the availability of full credits on procurements and requirement of matching of sale and purchase data for claiming credits. The Economic Survey 2017-18 has revealed robust GST collections and a large increase in number of indirect tax payers, majority being voluntary. With the encouraging data points from the Economic Survey 2017-18 and the first Union Budget post GST implementation just round the corner, Industry expects further rationalisation of GST rates and simplification of compliances,” KPMG concluded.