October 18, 2017

GST: Operational Issues and 2019

Government has announced July 1, 2017 as the date of implementation of GST and Government is banking a lot on ‘One Nation One Tax’. Right from the time when NaMo was Chief Minister he was very clear that GST can’t be implemented and BJP will not allow implementation till the desired infrastructure is not in place. Now that he is the Prime Minister, he has placed all his resources to good use for the implementation of GST. Bank accounts are there. Business class is made aware. Majority of state government have been roped in and the Corporate’s are sensitized for the same.

So are we GST ready?

The answer is – No. In present form it will lead to substantial litigation.

If government thinks that  infrastructure and technology are the only things that are needed for flawless implementation then they are mistaken. Theoretically GST roll out seems possible but practically there are many dark areas that could hamper a smooth  transition,  the operational part in executing GST is complicated .

Take for example a cargo from Mumbai has to be shipped to Nagpur. Once GST is in force, cargo has to be accompanied by e-challan with a validity of 24 hours. If for some reason the cargo doesn’t reach the destination in 24 hours then a new challan can be generated by giving a reason. To this extent it is simple. But in practice, how does the consignor send this regenerated challan to the truck driver?

Businesses that register turnover of 1.5 crore will be state government responsibility and beyond that central government comes into the picture. Imagine the part of the financial year when a business crosses INR 1.5 cr limit, who takes a back seat. Who sends the notices if required during the financial year.

A company that goes to a different states for temporary business will have to pay advance tax based on perceived sales. In case of lower sales it is not specified in how many days the difference amount would be refunded. This would impact the SME’s badly because their limited capital would be blocked . This contradicts the spirit of ‘Start Up India’.

How strong is the IT set up? Imagine the amount of data to be uploaded Pan India, are the servers up to the mark and are the personnel trained enough ?

Number of invoices to be uploaded would in billions every month. We have witnessed Aadhar Card issues because of non-functional servers. Government may not face severe hardship as it is backed by excellent MIS but objective of GST can’t be achieved if there are uploading issues, litigations and missing clarity between state and central government on issues related to roll out of GST.

Who is the loser?

The loser by default is the NATION.

One practical issue. At present a proprietor and SME hires a CA firm on annual basis for servicing all tax obligation. The CA firm typically has employees depending on the number of clients. The owner of the business has to go out for various meetings. More or less the work is on auto mode with regard to VAT, ST and TDS.

Going forward the CA will have to spend maximum time in office to file monthly tax requirement and various queries. Add to this, his involvement in assisting the clients on day to day queries. The SMEs who never appointed an accountant and were dependent largely on CA firm will now be forced to either get personally involved in accounting or appoint an accountant to specifically take care of GST accounting and filing.

There seems to be a deliberate attempt to sabotage the entire system or those that framed such GST clauses are too naive. The work of CA is bound to increase manifold because as compared to earlier quarterly system, GST is monthly. A CA would require more staff to file returns for his clients. His cost goes up and collaterally the cost for the Business community also goes drastically impacting profits.

Take another example of present system. A company files quarterly returns for the VAT and claims benefit for the amount based on sales and purchase value. The Tax department is sending notices for the period 2013- 14 now. How does the buyer in such cases catch hold of the seller if he/she has not paid their share to the government. It is all based on trust. The Sales tax law says that if the seller has not paid , then the buyer has to pay the difference amount with penal interest. This reverse tax collection has costed dearly to a lot of companies. There is option of paying such amount in small parts and alternately the company can file a case in High Court. Imagine if the same notice was sent by Sales Tax in a matter of maximum six months then the buyer can handle the issue in a much better way. All this has happened because of some flaw in the back end or because of insufficient manpower in the department.

Now compare this with GST implementation. There are bound to be notices because of some issues. Is the government ready with sufficient manpower in their offices? The operational part seems to be a herculean task just looking at it.

The current system consumes three to five working days for filing returns once in a quarter. Once GST is implemented the number of days would be more or less the same but on a monthly basis. The team that has prepared the online documentation has not done a good job. In present form it looks like a police state instead of the Governance that the PM has always advocated. The focus should have been more on making it user friendly which is missing even before it is rolled out.

IMG_20170618_125442Knowledge of business class is not up to the mark on GST. Even though the intention is good but poor knowledge will lead to chaos. There seems to be an agenda of creating ground for 2019. A horrible image of NaMO. When people face problem they blame Modi not the minister. By this who benefits?

Amount of anti Modi and anti BJP content that is already on WhatsApp groups is beyond imagination. The video of NaMO where he is seen telling MMS that GST will not be allowed without IT infrastructure has gone viral. The video is edited and it does not cover the reason he gives, people getting an adverse image of NaMO. This is just the starting. As always the BJP social media cell seems to be sleeping. High time they move ahead of achievements and infographics. They have to fight anti Modi content. RW will do whatever in their capacity but BJPs social media cell needs to pull up their socks.

Impact on 2019

Demonetisation has already played havoc for many. Now the RW are divided in two parts. One says it was a bad call with sufficient data to what they say. And other saying the exercise was good. My take is the exercise was successful. Even though the benefit to the treasury may not be seen in tangible terms but it has compelled the people to do away with shady transactions. Most visible success is seen in Real Estate.

However, in terms of the content that floats on social media and in particular WhatsApp groups BJP has not done anything. Imagine roughly two more years to go for general elections and after GST roll out how opposition and newstraders would be using the issues to their advantage.

Few days back there was a news in Deccan Chronicle that Civil Aviation Ministry has requested deferment. But Ministry of Finance has said they are ready. An ideal situation would have been to do a dry run for a period of two quarters. The government should have asked the tax payers to comply with dry run and rewarded them with some incentives.

Citizens elect a party to run the government and create convenience. If the good is seen as inconvenience then citizens have to be made part of decision making. Demonetisation was different ball game and can be accepted to keep citizens away till it was announced. With regard to GST neither the CA community nor the SMEs seems to have been involved.

The intention is good, implementation is full of flaws at face value itself. Tax payers are not running away from GST but the way it is being forced. Dr Swamy has been openly writing and following up on the need to postpone it by 2 years. He also has genuine concerns on GSTN. Hope better sense prevails. Once again I feel the implementation should be postponed and a dry run should be done for two quarters with some incentives to the tax payers to arouse interest and motivate them to participate.

Middle class has been at the receiving end and has no room to run away or stage a protest. The burden of key corporate defaulters, scams of previous government and farm loan waiver is all creating problem as a whole. All development gets negated when a middle class person goes to bed on 20th of the month and starts wondering how he/she is going to manage the remaining month. Friendly borrowing is the only way out other than credit cards and personal loans. Why can’t the government give option of skipping three EMI’s on housing loan in a year without penalty to middle class?

The reason for BJP winning in state elections and it’s bright scope in 2019 is because the RW have no option other than BJP. But a silent word has started. If this vacuum continues for another three to five years then 2024 we are on our way to see an alternate to BJP.

The implementation of Jandhan Yojna and Give Up LPG Subsidy are excellent examples of people involvement. GST at face value gives an impression of forced implementation. The way people perceive and accept change is important. Whatever the government decides will be seen in next six months and balance will decide whether BJP will have smooth ride into 2019 or with number crunching till results are announced. NaMo is risk taker and this is the biggest risk he has taken in his political career.

Picture Credit: Rishabh Lens

Link Ref: Deccan Chronicle

Authored by:

@ZeroAppeasement  http://newsnviews.online/author/robins/ and @bobsimhan  http://newsnviews.online/author/osl-narsimhan/


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