As India prepares to usher in a new indirect tax regime, experts believe implementation might not be very easy.
The Goods and Services Tax (GST), the country’s biggest tax reform, is scheduled to be rolled out from July with the Parliament passing all the crucial laws on April 6.
The main problem now is implementation, which politicians and experts say, will not be smooth as companies have to file as many as 37 forms in every state.
While the compliance cost will increase, businessmen will have to brace for penalties, harassment and even jail term.
Many smaller units will have to buy software and hire professionals to compile the transaction details to get tax refunds. For those having units at remote places, filing returns online will be a challenge in absence of internet connections.
One of the main architects of the GST and former prime minister, Manmohan Singh, has warned that the new indirect tax regime could be a “game-changer” but fraught with “difficulties”.
Congress leader Veerappa Moily has cautioned the government that the rushed GST rollout from July will make it a “technological nightmare” for businesses.
Here are the 10 things that taxpayers have to look out for in the new GST regime:
1.Multiple tax forms
Companies will have to go through a grueling exercise of filling up and filing multiple forms for central GST (CGST), the inter-state integrated GST every month.
“The basic returns under GST could be 37 in a year for a single GSTIN—GSTR-1, GSTR-2 and GSTR-3—for each month, and one annual return. For a company with operations in 20 states, it means 740 annual returns,” says Archit Gupta, founder and CEO of Cleartax.com.
For an e-commerce company, it could even be as high as 432 returns in a year.
2.Can GSTN support a flood of data?
GST Network is geared to accept up to three billion invoices a month from 8.5 million taxpayers from day one.
The common portal (www.gst.gov.in) acts as an interface between different stakeholders in the GST ecosystem, namely taxpayers, tax departments, banks, the Reserve Bank of India, external service providers, among others.
The portal becomes the touch point for taxpayer registration, invoice upload, tax payment, getting input tax credit, maintaining the cash ledger and stock holding etc. This would mean that the network must have the capacity to handle massive amounts of data, and hence the fear of a breach.
Given the experiences of online filing of income tax and VAT, experts doubt the new GSTN will be able to seamlessly match billions of vouchers, facilitate tax collection, provide refunds and check evasion.
3.Go digital without hard copies
GST will herald not only a new tax but also a 100% digital system to file returns and payments., further raising questions about adaptation, especially in arear of low internet adoption.
“All filings, communications and payments will be through a common portal. There will be a discontinuance of hard copy filings and a move towards digital India. It will be a Herculean task as a large number of people especially the small traders do not have access to electronic facility,” says Priyajit Ghosh, a partner looking into indirect taxes at KPMG.
Subramanian Swamy, a leader of the ruling Bharatiya Janata Party, has openly expressed reservation at the security and privacy of the GSTN, which will be 51% owned by private players.
Opposition leaders—Congress’ Kapil Sibal and CPI’s D Raja—have expressed concerns about data privacy under a private company GSTN.
Finance minister Arun Jaitley has assured lawmakers in Parliament that there will be IT firewalls and penal provisions for any leak of information.
Given the rise in cyber crimes, can leak of information and technical glitches be ruled out?
5.Allegations of draconian provisions
Some of the Parliamentarians raised objections to some of draconian provisions of arrest for fraud in the initial years as many new firms will be using the GSTN system for the first time and are bound to make genuine mistakes.
Although Jaitley has assured that small businesses will not be covered by the harsh provisions, every offence of tax evasion will be compoundable.
There will be no arrest for frauds up to Rs 2 crore. For offences between Rs 2 crore and Rs 5 crore, it is going to be bailable. For offences over Rs 5 crore, it is going to be non-bailable.