Despite the government’s best intentions to roll out GST tentatively by 1 July, stakeholders do not seem prepared to embrace the new indirect tax regime that early. Be it small traders, a large number of SMEs, tax consultants and technology companies are “looking nervous” to be the part of the new indirect tax structure, especially in the absence of the final GST law which is still to emerge, hopefully by 31 March. “I do not think that small and medium enterprises or small traders are prepared for it,” says Mahesh Gupta, ex-president of PHD Chamber of Commerce. Making a law is easier than making people aware about its impact on their business lives; so the “government has to initiate a programme to train this community, otherwise it would create more chaos”, says Gupta.
Agrees Bimal Jain, a tax consultant with A2Z Taxcorp LLP, says: “The state of unpreparedness is an issue that we have been raising before the government for long. About 75% of the SMEs’ universe (5 million) needs time to make a smooth transition from paper to a paperless form of tax compliance.” Since the country is moving towards the biggest indirect tax reform, there is a broad consensus that if the government really wants to implement GST by 1 July, then a GST awareness programme needs to be officially taken up at a mass level and on a war footing. “To me, September looks like a more practical date to bring in GST as by that time, the government can take them (traders & SMEs) on board,” feels Jain. In the absence of these programmes, a large part of the tax-paying community would become dependent on tax consultants which would have a cost paying which would make these smaller businesses uncompetitive. “Tall claims that GST would make tax compliance easy with minimal cost would be defeated if small traders become dependent on CAs or other tax consultants,” says Archit Gupta, Founder & CEO, ClearTax.com.
Besides the trading or small business community, GST service providers (GSPs) — a body of about 34 government approved technology companies providing crucial IT support and an interface between tax authorities and taxpayers — are also waiting for GST’s fine print to evolve the required software support.
Taxation experts or consultants also complain about non-availability of the final GST law with its attendant rules and regulations.
They also look helpless for want of the final law as it is impossible to deduce the GST’s impact on a particular business or a tax-payer. Though four broad categories of GST rates have been finalised (as 5%, 12%, 18% or 28%), little is known about which product or service will fall under which tax bracket. This (fitment) exercise is likely to be completed by 31 March this year.
Moreover, the government has yet to spell out taxation rates for services. Currently, services are taxed at 15% rate, but many feel that services are likely to fall under the 18% taxation bracket which would surely have an inflationary impact.
In its latest meet on Thursday, the GST Council has, however, made a significant leap by passing all enabling legislation relating to GST. But the trickiest part of getting it passed by the legislators (Parliament and the state Assemblies) still remains. Many foresee a possibility of the GST coming either by July or latest by September this year.