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What Could Be The Problems During Rollout Of GST - Outside View by PersonalFN

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What Could Be The Problems During Rollout Of GST
Jun 30, 2017

The Parliament has cleared the way for the roll out of the Goods and Services Tax (GST). The Council for GST has finalised the tax rates for respective categories of good and services.

But this was only half the battle...

As we approach July 1, 2017 - the rollout date for GST - most traders, professionals, and businessmen are feeling the butterflies in their stomachs. This is because there's too much uncertainty, confusion, and fear of the unknown.

Some of the common issues corporations, individual businessmen, and professionals are likely to face are:

  • The entire process of invoicing, filing returns, and claiming input tax credit will go paperless and will be carried out through the Goods and Services Tax Network (GSTN). Various platforms have questioned the operational preparedness of this system.

    Finance Minister of West Bengal, Mr Amit Mitra has raised serious doubts about the readiness of the IT infrastructure. "Entire GST will depend on one IT system of GSTN. The presentation given by them clearly shows that they are not ready and need more time. They have appointed 34 Suvidha providers for the whole country...will that be sufficient?", The expressed to media. This reaction from a person who headed the GST committee has raised many eyebrows.
  • Many businesses, especially the smaller one are still ill-prepared to handle the transition amid a host of rigorous compliance processes. Plus, there is a tendency among the unorganised sector participants to dodge the tax liabilities through manipulated systems, which will be severely challenged under GST. The migration to GST will be cumbersome for such businesses and there are questions about the sustainability of such organisations under the GST regime. While filing returns and claiming input tax credits, there's a thin margin for errors. This means small businesses will have to seek professional help or appoint a full-time person, else their business arithmetic may suffer from miscalculation. Filing as many as 4 returns every month, plus one annual return is not child's play. Multi-state registration might be tedious for smaller companies doing business across states.
  • Implementation of GST might cause some working capital problems for small and medium enterprises initially; until the majority of businesses become well-versed with the system and compliance level, in general, goes up.
  • The mechanism of GST is such that there's a little scope for manipulations as the uploaded returns will automatically get double-checked, and the discrepancy, if any, will make it simpler for the tax authorities to fix the tax liability.
  • In contrast, large companies that work with the Enterprise Resource Planning (ERP) software will find it comparatively easy to move to the GST regime. A few modifications in the software would take care of increased compliance. Moreover, those in the manufacturing industry would find it relatively simple to migrate to GST as compared to other players in the services industry. The latter will have to substantially improve their understanding of new laws since compliances are likely to increase.

To sum-up...

So, the implementation of GST and its successful rollout is easier said than done. The rating system proposed under GST will be a crucial factor going forward. As the compliance record of an entity (be it an individual or a company) will encourage or discourage others from doing business with it.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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