Chandigarh,23.03.17-With thumping majority in both the houses of parliament, government is all set to present the draft CGST, SGST, UTGST, IGST and Compensation bill in Parliament on Friday. They have planned to bring these bills in the form of money bill, so that Rajya Sabha could not interfere with the political ego of the ruling party from enforcing Goods and Services Tax.

 

It looks like that the Government is in haste to pass the GST laws irrespective of the chaos it is going to create once it is enforced. Without having the preparedness for GST, the leaders just want to fulfill their political agenda. Let me tell you the challenges which GST is going to face on which are far away from being addressed by the government.

  1. First and foremost the IT infrastructure which is required for such a huge online tax system is a big challenge. It had been reported that in the beta test the system prepared by Infosys Limited crashed when 8 lakh entries were punched. As far is real figures are concerned it is expected that over 300 crores entries shall be made on GST network every month. Apart from robustness of the system, it is the big challenge to provide 100% IT infrastructure in all parts of the country. It is proposed that Facilitation centers shall be opened up, but the reality of how these are going to work is going to be big challenge.
  2. Lack of preparedness amongst the business units is a major concern. If GST is enforced on 1st July 2017, they are left with just 3 months to adopt GST. It is next to impossible for the large scale industries to manage their stocks, purchase, sale and make a paradigm shift from origin based taxation to destination based consumption tax in such short span of time. Even the small and medium sized entities are also facing challenges due to lack of resources. There is lack of knowledge and government is not able to address the concern due to lack of unification between centre and state tax authorities.
  3. The Indian Revenue Services (IRS) officers lobby is unhappy with the powers have be given to the political driven state revenue officers. In case of taxpayer with turnover less than Rs. 1.5 crores, 90% of the cases shall be assessed by the state authorities and mere 10% by the Centre government. Also in case where the taxpayer’s turnover exceeds Rs. 1.5 crores only 50% cases shall be given to central tax authorities. Now if the state authority shall decide the fate of both the state revenue as well as centre revenue from GST as what is applicable on State GST shall also be applicable on Centre GST
  4. Since the government has agreed to compensate the states for any loss occurred due to GST, it is necessary that proper mechanism should be developed in order to ensure true and fair reporting of the tax revenue by the state government. GST Council should prepare a audit committee to audit the financial statements and then decide the compensation to be given to a particular state.   
  5. The government is now planning to give exemptions to sectors like SEZ, Beedi etc, which is against the spirit of GST. If such an exemption is given the GST Credit Chain will break which will lead to evasion of taxes and violation of law. Entities which shall be given the exemptions shall become the pindora-box of GST evasions.
  6. There is a huge confusion as to what rates shall be applicable on a particular item. The government is yet to do fitments of the items which will decide the tax structure. If these fitments are delayed the industry shall not be able to make arrangements for applicability of GST. This will raise issues like the quantity of closing stock to be kept at appointed date, transitional issues and various other concerns.
  7. 12 meetings of GST Council had concluded but there had been no discussion as to what is going to happen to the service sector. Whether there shall be four rate structure in services sector as well. Is there any exemptions available and how they are going to transit to new law. There is not even a single provision in draft GST law which caters for the services sector despite contributing more than 50% of the Indian GDP.

If these issues are not addressed before the new law is forcefully applied, it is sure that we are going to become a big failure on GST despite of the claims being made by our leaders. Government should think about the ground realities and then move towards this direction.