Over the past 10 months of the Goods and Services Tax roll-out, the government has made multiple changes in the taxation regime. The taxpayers of the nation, baffled by the complexity of the indirect taxation regime, requested the government to make the entire process simpler. Following the requests of the taxpayers, the government eliminated various drooping processes from the regime as well as included few constructive ones in order to make the regime more stable and easy to comply with. And as the regime will soon complete a year of its roll-out, the expectations of the taxpayers from the regime will increase.
The EOUs and SEZs
The EOU stands for Economic Oriented Unit whereas SEZ stands for Special Economic Zone. The objectives of these units are concentrated to increase the trade and supplies in the nation and enhancing the economy of the country. Hence, the government had to shift its focus from the small-scale issues of the regime to the bigger and more relevant ones. The majority of the exporters who had been facing the refund issues were relieved to a great extent by CBIC (Central Board of Indirect Taxes and Customs). The authoritative body credited more than INR 12,000 crores of stagnant refunds to the exporters.
Now you must be thinking that why still the compliance-related issues are arising every single day in the regime. The main reason is that India is a vast nation and a home to millions of small, medium, and micro-sized enterprises. And most of these businesses do not have the access to the GST reporting tool as well. That’s why the government, leaving no stones unturned, had to combat the issues like profiteering, wrongly filed return forms etc. You couldn’t blame the government for all the taxation mess. Few major faults hindering the regime’s growth are also made at the taxpayer’s end.
The misinterpretation of the English language
Many businesses in India that are situated in the far-flung areas do not have the access to proper technology. Also, these businesses aren’t able to effectively comply with the rules and regulations of the Goods and Services Tax Act as the format is in the English language. Following this complication, the government had to make more than 60 changes in the regime related to GST rates in India 2016/2017 and over 70 changes related to the exemption management system.
The major issues
If you are expecting the regime to be simplified entirely in less than a year, then you are just fooling yourselves. Since the regime is still evolving, the complication occurrence rate will keep on fluctuating. As of now, the prime issues in the regime are:
1. Refunds- The stagnant refunds have become such a major issue because the lack of refunds directly means the lack of working capital. The exporters in India had to temporarily shut their businesses as thousands of crores of refund is still stuck with the government. Although the government is trying to resolve the process, the timely refund credit to the businesses is highly doubtful.
2. Exemption- Most of the businesses aren’t been able to comply with the exempted items from the Goods and Services Tax Act. The government has modified the exemption list multiple times in order to provide ease to the baffled taxpayers especially the small-scale ones. As the government increased the items included in the exemption list of goods and services, it also had to shuffle the GST rates in India 2016/2017.
3. The classification of goods and services- As per the rules of Goods and Services Tax Act, each good and service is tagged with a specific code. This code is used to identify the type of transaction the reason being the destination-based taxation regime. Moreover, the government has different tax percentage levied on different goods and services available throughout the nation. This stands as one of the hurdles in the way of the taxpayers to an error-free tax-compliance.
4. GST network- Since the regime is completely digital in nature, the majority of Indian businesses rely on the functioning of the GSTN (Goods and Services Tax Network). The portal has disappointed the taxpayers several times in the recent past. The portal crashed the same day of the roll-out of the e-way billing mechanism. Without the availability of a robust software, the revenue collections will continue to suffer.
The government has made more than expected changes in the Goods and Services Tax Act but hasn’t been able to completely achieve the objective of GST that is one tax, one nation. The government should first put an end to all kinds of the evasion measures and then move forward to implement strategies in order to increase collections.