The Cochin Chamber of Commerce and Industry organised an Online Session on ‘3 Years of GST’ on Friday, 21st August 2020 on the Zoom Platform.
Hon’ble Justice P.B. Suresh Kumar of the High Court of Kerala delivered the Inaugural Address at the Session. The Session was handled by Tax Expert, G. Shivadass, Senior Advocate, High Court of Karnataka. Ms. Devika Rajagopal, Assistant Manager – Taxation & Finance, Harrisons Malayalam Limited, spoke on behalf of the Industry outlining the pain points that businesses and trade face today.
The President of the Chamber Mr. V Venugopal welcomed the participants to the virtual meeting.
Inaugurating the Webinar, Justice Suresh Kumar appreciated the Chamber for consistently organizing such relevant sessions for trade and industry. He said that the introduction of GST has been a game changer for the Indian economy as it has replaced the multi-layered, complex indirect tax structure with a simple, transparent and technology–driven tax regime. The GST collections have been hit this year as the raging Covid19 pandemic and resultant lockdown have derailed the Indian and global economy. As the economic activity gets back on track across the country, the GST collections are expected to look up in the forthcoming quarters.
Mr. Shivadass started the Session by saying that the Goods and Services Tax (GST) has completed almost three years of operation. Hailed as the single-biggest tax reform, the GST was rolled out with a bang in a special session of Parliament three years ago and subsumed 17 existing indirect taxes including the excise duty and sales tax. GST was introduced as the biggest tax reform and is showcased as a ‘One Nation One Tax’. He said that the initial period was very stressful for the trade and the Government, but over a period of time it has stabilized to a large extent though many issues still remain unresolved.
Mr. Shivadass said that the GST law has enabled plenty of optimistic possibilities, some of which are already beginning to bear fruit like 3.5 million new dealers registered in the first 6 months, 12.3 million (June 20) registered dealers with more than 50% being fresh registrations. The introduction of e-way bills and removal of state check posts have reduced transportation time by 20-25%. Indirect tax to GDP ratio has increased from 4.38% in 2014-15 to 4.9% in 2018-19 and Indirect tax to total tax ratio increased from 43.85% in 2014-15 to 45.10% in 2018-19.
On the benefits of GST, Mr. Shivadass said that before the GST, businesses had to spend a lot of time complying with different rules and regulations of various tax departments. Fortunately, the cascading effect of taxes on goods and services has been eliminated with the implementation of GST, making it easier for businesses to expand their operations and increase revenue. The transparency in procedures and laws has also resultedin an increase the Government’s monthly average revenue collection under the indirect tax. Traders and the various industry segments are also enjoying a seamless flow of tax credit, stabilizing their cash flow.
Talking about the shortcomings of GST, Mr. Shivadass said that after the introduction of GST, there has been a steady rise in the offense of creating fake invoices to fraudulently claim an input tax credit (ITC). Such invoices are created by racketeers who do not carry out any business and issue invoices without the actual supply of goods and services. Due to the ongoing COVID-19 pandemic, any significant step for GST reform has come to a halt. Although multiple tax structures make it complex, restructuring of tax rates is difficult due to the decline in revenue. There have also been issues with transitional credit and input tax credit, he said.
Mr. Shivadass added that the most crucial requirement today is the need to introduce fewer tax rates and consolidation of various circulars, notifications, orders in the law for a simple GST compliance. Presently, there are five tax rates. The Government is already taking severe measures to put an end to tax evasion and bring efficiency into GST compliance. Businesses can utilize GST software solutions to help them overcome compliance challenges and make time to focus on their growth.
Going forward, it is important to lay down a clear, taxpayer-centric strategy to ensure predictability and consistency in the application of the GST laws and procedure, he said. Efforts should be undertaken to widen the tax-base, rationalize rates, and simplify the law. Initiatives such as E-invoicing should be broadened to cover pre-filled return/refund claims as well as risk-based E-Audit. The IT platform should be made more robust for a richer user experience. Input Tax Credit, the very soul of GST, should be freed of needless restrictions, Mr. Shivadass said.
The second half of the session dealt with the issues trade and industry face with respect to various changes in the GST reform in light of the current circumstances.
Ms. Devika Rajagopal said that the pandemic has arrested business activities across the board and recovery of full payments from the customers on outstanding invoices, is proving to be an uphill task. In order to manage the working capital, businesses are bound to offer some discounts to its customers for realizing timely payments. Further, in several cases, debts will turn out to be bad, and businesses would not be able to realize any payment. What emerges from the ruling is that if there are no pre-fixed criteria and basis for arriving at the quantum of discounts which is mentioned in the agreement on the date of supply, then no tax adjustment would be permitted in any case. Businesses are issuing credit notes for discounts during the COVID period without application of mind and careful reading of the legislation, which may prove to be a costly affair once the accounts are audited by the Department.
Companies may get Input Tax Credit (ITC) for free distribution of personal protective equipment (PPE) kits, sanitizers, masks, and other such goods which provide relief from coronavirus. Companies can attain relaxation through corporate social responsibility (CSR) norms; however, CSR rules have already allowed companies’ spend on Covid-related goods to be treated as CSR expenditure.
She also spoke on the ever changing GST legislation and added that it is hard to keep updated with the GST legislations as there is a new notification or circular every day. She also added that with the introduction of new GST return, one has to go through the pain of understanding the return once more, that too when people have just gotten used to the existing return.
Following this, there was a brief discussion wherein the Speaker clarified the issues raised by Ms. Rajagopal.
The meeting ended President of the Chamber thanking everyone for having participated in the meeting.