How is life under the GST regime?

This is what businessmen Portfolio talked to had to say



The implementation of the Goods and Services Tax is the most significant reform of 2017 and it is the businesses that have had to make most of the adjustments since this July. Portfolio spoke to some businessmen to find out how they are faring.

We observed that while some of them are happy as there is a reduction in tax rates and widening of Input Tax Credit (ITC) base, a few are not as pleased as it has negatively impacted their business. But all of them agree that complying with the new tax rules has been the tough part.

Compliance blues

Nikhil Jain, a trader of electronic items, spent ₹4,000 updating his accounting software and started filing the GST returns on his own. “Returns filing is a time-consuming activity and we are losing some precious time in filing the multiple returns each month. This time can be better utilised in developing the business,” he points out. He adds that the fee for late filing of returns, paid by him, has not been credited to his account yet.

It is also to be noted that the compliance burden has been eased significantly by the GST Council following its recent meeting. Normal taxpayers now have to file only GSTR 1 and GSTR 3B till March 31, 2018, in place of GSTR 1, 2, 3 and 3B returns.

Ikshvakh, a cement trader based in Visakhapatnam, had outsourced the whole compliance process to a tax consultant. He says, “due to the heavy workload on tax consultants, the returns are being filed after the due date, but the late fee is being borne by us. At times, even if the delay was due to non-functioning of the GST portal, the late fee had to be paid by us, which is totally unfair.”

Taking into account the woes faced by businessmen in filing returns in the initial months, the Centre has waived the late fee for returns of July, August and September 2017. The late fee penalty for returns of October onwards has been reduced from ₹200 earlier to ₹50 and ₹20 for normal and NIL taxpayers, respectively.

A cement manufacturer of Andhra Pradesh, who does not want to be named, says GST help desk calls aren’t answered for a long time. “Even if the calls are answered, they are not able to answer our queries,” he says. Regarding input tax credit, he says that it is claimed on a self-assessment basis but he is wary about the final assessment as non-filing of invoices by the vendor disallows his ITC.

Archit Gupta, Founder & CEO, ClearTax, says, “We are seeing businesses on our platform eager to finish compliances on time. Businesses are slowly getting used to the return filing and other compliances. SMEs are still facing some issues, but that should get resolved with quarterly filing. Frequent changes to GST rules have kept businesses on their toes, but the government has shown immense flexibility in accommodating taxpayer concerns.”

Exporters’ woes

Firoz Khan, an exporter of minerals and chemicals based in Gujarat, is one among many exporters who complained about delay in grant of refunds pertaining to Integrated Goods and Services Tax (IGST) paid on goods exported out of India.

Similarly, ITC due to them on their purchases for exports is also being delayed. He says, “the government had promised that the refund mechanism will be expeditious while introducing GST. But in fact, the grant of refunds was extremely delayed, which took a toll on our business.” He says that he has a large amount blocked due to this and has no scope to recover it in any other way. “We cannot increase the selling prices of our products too as the export market is too sensitive to the prices.”

When the Letter of Undertaking (LUT) for exporting without paying IGST was introduced, nobody, not even the government officials, was aware of how to process the LUT, claims Khan. He says it took quite some time to finally smoothen things out.

He believes that a trial run of the GST software a few months before the implementation of GST would have helped.

Reacting to these issues of exporters, the Government has announced the introduction of the e-wallet system from April 2018 to ensure notional credit of taxes immediately, which will resolve working capital blockage to some extent.

Tax rates and ITC

Though Nikhil has had a few problems complying with GST, he is happy as the GST rate on most of the products he deals with has been pruned from the highest 28 per cent slab. Also, conditions are better off in terms of input tax credit availability because he is now able to claim credit on almost all the taxes paid on purchases, for which he was ineligible earlier.

Traders are hugely benefited because of GST. Under the earlier tax regime, traders like Nikhil were registered only under VAT that is applicable to the respective State.

Therefore, he was then not eligible to take the ITC on the central tax on his purchases.

But with GST unifying the whole nation with a single tax, he can now claim ITC on all his purchases, which eventually widens the ITC base.

He says, “customers are also happy as we are passing on the benefits enjoyed due to reduction in tax rate and higher input credit.”

Similarly, Madhu Damodaran, Business Head, Coachieve Solutions Pvt Ltd, which provides HR solutions, says that after implementation of GST, his vendors were forced to be registered under GST as the law otherwise requires him to pay the tax under reverse charge mechanism.

“Due to this, we have most of our vendors becoming GST-compliant which, in turn, helped us to widen the ITC on our input,” he says.

Please note that the reverse charge mechanism for above mentioned transactions has been deferred till 31 March, 2018.

Siddharth Sood, co-founder of Wildcraft, says,“with our product portfolio spanning outdoor apparel, gear and footwear, we have four different GST rates applicable to out products.

While we have seen some categories being positively impacted by GST, others have been slightly negatively impacted. On the whole, though, we are better off than the earlier tax regimes and these benefits have been passed to the consumers.”

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