WIRC Bulletin - July 2018




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 In a historic moment, Goods and Service Tax (GST) was implemented at Parliament’s Central Hall on the intervening night of 30th June and 1st July. The launch event, being hailed as India’s second tryst with destiny after Independence on August 15, 1947, saw speeches from Finance Minister Arun Jaitley, Prime Minister Narendra Modi, and President Pranab Mukherjee. PM Narendra Modi, in the historic Parliament address, termed GST as good and simple tax for the nation. The Prime Minister said that scope of GST is unlimited to the financial system, adding, that India will now move in a new direction. President Mukherjee, said that tax implementation will be transparent under GST. He termed the tax as a tribute to the “maturity and wisdom” of India’s democracy. Further, he “GST will create a strong incentive for buyers to deal with honest and compliant sellers who pay their dues promptly,” President Mukherjee said in Central hall of Parliament.  “The new era in taxation is the result of a broad consensus arrived at between Centre and States,” President Mukherjee added. 

GST is basically an indirect tax that brings most of the taxes imposed on various goods and services at the point of manufacture, sale and consumption of goods and services under one umbrella at the National level. While in Pre GST Era, taxes were levied separately on Goods and Services.

 Goods and Service Tax (GST) replaced all indirect taxes levied on goods and services by the Government, both Central and States. GST is one of the biggest Tax Reforms in India since its independence.

GST has been envisaged as a more efficient tax system. Below are the benefits of GST:

  1. i) Simplification in Tax System: Pre GST Era, Central Taxes like Central Excise Duty, Special Additional Custom Duty (SAD), Additional Custom Duty(CVD), Additional Excise Duty, Service Tax, Taxes on lottery, betting and gambling. State Taxes like VAT/ sales Tax, Entertainment Tax, Luxury Tax, Entry Tax in place of octroi, Electricity duty. All above various taxes under Central Government are now subsumed in CGST and While State taxes are now subsumed in SGST.
  2. ii) Record Keeping: With introduction of GST, various records / formats need not to be maintained to make a compliance under various Acts & Laws like in the Pre GST regime. It result in saving of time / paper work and Staff member will devote their time on some other important activity from Organisation perspective.

iii) Elimination of Multiplicity of Taxes and their cascading effects:   One of the Key benefit from GST is removal of the cascading tax effect. In simple words removal of Tax on Tax. Below example shows the net saving from cascading tax effect.

Pre GST Post    GST
  RS. RS.
Sale  Price 1000 1000
Excise Duty @12.5 % 125 0
Sub  Total 1125 1000
VAT @ 5.5% 61.88 0
CGST @ 9%  
Cascading effect while calculating VAT (an indirect tax) is levied not only on the product value but also on the Excise Duty (as an indirect tax). 



SGST @ 9%   90
Total 1186.88 1180
Cascading effect 6.88

 Main advantage from nullifying cascading effect is saving in Cash flows and lower burden on net landed price to the ultimate customer.                      

  1. iv) Gain to Logistic Company: Logistic companies in India have maintained multiple warehouses across state to avoid CST & local taxes on inter-state movement of goods. Occupancy of warehouses, most of the time, is idle and leads to unnecessary burden of increased cost. With introduction of GST various taxes are abolished and hence efficiency of logistic Company would definitely increase due to abolition of entry tax post.  India’s logistics sector would gain the most from the goods and services tax as the cost would fall by almost 20%. (Ref: Economic Times of India as said by Hon. Road and Transport Minister).
  2. v) Scheme for Small Business: Composition Scheme is introduced for small businessmen whose turnover is less than Rs.150 lacs. For them GST is optional and they will pay very lower tax as compare to prevailing tax rates.
  3. vi) Online Procedure: Starting from Registration to filling the returns as well as payment of taxes is online. It helps entire process to be faster, accurate and hassle free.

Vi) Unorganised Sector: GST’s main focus is on increasing the taxpayer base by bringing SMEs and the unorganized sector under its purview. This will make the Indian market more competitive than before.

 There are  the Challenges before  all types of  businesses across the country . Some of challenges are below  : 

  1. i) Compliance : Filing timely GST returns is one of the biggest challenges before most of businesses . Especially ,SMEs and Small traders are facing more problems due to sea changes in requirement of data and big gap between traditional record keeping to digital record keeping . Further, there is lack of awareness about data required for uploading returns. To overcome this challenge ,one can really need to relook the present  data and required data to be maintained for smooth filing of  GST returns .While filing returns some times faces  technical problems like GST  portal is not functioning properly , updating records at very slow speed etc.

The government is considering a proposal to tweak the way people file their goods and services tax (GST) returns. The move, to customise the form as per the varying requirements of the taxpayer, is expected to significantly simplify the filing process.

The ultimate aim is that the small tax payers should be able to file the returns without much assistance from outside (Ref.: Economic Times of India as said by Ajay Bhushan Pandey, the newly-appointed chairman of the GST Network (GSTN) ).     

  1. ii) Cash Flow : Managing the Cash flow with sudden increase in the prevailing tax rate of particular group of commodities from prevailing rate 5% to 18% under GST would result in increased tax outgo leading to cash flow issues. Under GST, any branch transfer whether local or inter-state branch transfers would attract GST . Similarly, exporters will have to procure duty paid inputs and claim refund after exporting leading to cash blockage. Prior to GST, EPCG benefit was available for custom duty and CVD as well. But under GST ,EPGC benefit is up to custom duty while IGST to be paid in cash, this will have a negative impact on the cash flow. The above concerns are addressed to GST Council by various Business Associations and Chamber of Commerce. Hoping that positive outcome will come out and it helps to ease the burden on cash flow.

vi)Reverse Charge : In a normal course of business , Supplier has to pay tax on the Supply of goods or Service Provider has to pay on the services rendered .But in the reverse charge, recipient of goods or services or both is liable to pay GST. According to the Section 9(4)of Central Goods and Services Tax Act, if a purchase is made from an unregistered vendor, the liability to pay tax is transferred to the buyer. This provision largely affected to the small and unorganised sector, the most of registered businesses avoided purchases from them and its impacted negatively to small and unorganised sector . The GST council announced in its meeting  that  the ‘Reverse Charge Mechanism’ put on hold until September  30, 2018.

vii) IT Systems and Accounting Software : Suitable changes are required to be made in ERP system  and also IT framework aligned with the new provisions, to enable generating various reports required for GST compliance . Main challenge is major changes /modifications of entire IT frame work which is in line with GST –compatible . SMEs and unorganised sectors do not have adequate IT support and to adopt new system or do major changes in existing  system leads to increase in maintaining cost of business . GST council is working on the simpler system for small traders and it helps to SMEs to make the compliance under GST more  easier and    hassle-free  as well. 

viii) Export Delayed Refund :   Major  challenge before exporter is  blocking of significant amount of working capital due to widen gap between date of export and time requires to get   refund on taxes paid on inputs . Sometimes ,refund get delayed due to strict compliance procedure and its’ affect on their business negatively .

 Conclusion: One year journey , there is many changes made in tax structure and way towards to make more and more simple . Movement towards goods is becoming more easier  in GST than erstwhile tax regime. Lot of improvements is going to take place in E-way Bill System and it leads journey towards EASE Of Doing Business . Continuous efforts are being made to increase the registered dealer under GST and widen Tax Base. GST council is working on the various challenges faced by the businesses like Compliance issue, Filing Returns ,Delayed Refunds and issues related to Anti Profiteering. Hoping that suitable solution / outcome will definitely come out and its’ helps to adoptability of GST at a large scale of businesses .  I believe that, if GST widens tax base , the growth boost gets from internal movement towards  goods is going to be very high and which helps to achieve our desired Economic Growth!!!!!!    


9 thoughts on “GST : 1ST HAPPY BIRTH DAY !!!!!!!

  1. Dear Sir,
    Thank you very much for sharing the article. You have rightly pointed out the various achievements and challenges for the GST regime in the coming years especially with respect to the compliance requirements for SME and the refund procedures for exporters. Do let us know what you think on the following issues:

    1. To effectively deliver the promise of ‘one nation one tax economy’, product such petroleum goods should be brought under GST. This will not only expand the tax base but will further remove the cascading effect and benefit the citizens. What are your views?
    2. How should the compliance procedures and returns be simplified so that the SME can easily adapt to them. I do agree with you regarding the technological challenges and the various technical glitches. How should the Government address them?
    3. What are your views on having multiple tax slabs? How to effectively have a common tax base.

    Thanks You very much

    1. Thanks for your comments .
      My views : I am agreed with your views . Petroleum Products comes under ambit of GST , cascading effect of taxes will nullify . At present , State Revenue major share comes from petroleum products therefore it will take some come petroleum products under GST ambit . Definitely it will be beneficial to common man . Government should think +vly on critical this aspects .
      Secondly ,Compliance part should be easy to do.One page Return Should be introduced to avoid complications .
      GST council is working on the same . Hoping that outcome will come in near future.
      Our Tax Rate structure is very complex compare to other countries . In my opinion , rate structure would be different but the focus to be needed on rational tax structure .
      I am hoping that you will agree on the above.
      CMA Vinod Shete

  2. Vinod shete has nicely drafted and i agree to the view presented some suggestions are below.
    the info is elaborative and brings to light how gst child is growing
    1. Govt should develop app for small business and traders which will make them easy to file return.
    2. Cascading effects of gst on petroleum products is bound to continue otherwise if this permitted
    govt will be dry as govt collects huge funds and deploys them like (schemes for farmers) . so collect
    from common man and give to farmers
    3. Technologically gst portal is improving and it is better than GST Regime.since GSTR 1 and GSTR 2a have to match to get the confirmed credit.

    1. Dear Mr. Pravin Garud
      Thanks for reading and expressed your views .
      I am having same opinion that Govt shall try for simplification in filing return w.r.t small traders. GST council is working on the same and hoping that outcome will definitely come . Simplification in filing return is one of the major tasks / agenda’s before GST Council .
      Petroleum Products comes under ambit of GST , cascading effect of taxes will nullify . At present , State Revenue major share comes from petroleum products therefore it will take some come petroleum products under GST ambit . Definitely it will be beneficial to common man . Government should think +vly on critical this aspects .
      CMA Vinod Shete

    1. Shobhaji, Thanks for your comments on Article. Major benefit of GST is nullifying cascading effect of taxes and
      its impacted lower burden on net landed price to the ultimate customer. Wider Scope of GST defenitely will help to get more revenue from taxes to the Government and which will be used for various Welfare Schemes to the benefit of Common Man.

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