View of CHALLENGES OF THE GST IMPLEMENTATION

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Vol.04,Special Issue 07, (RAISMR-2019) November 2019, Available Online: www.ajeee.co.in/index.php/AJEEE

CHALLENGES OF THE GST IMPLEMENTATION Prachi Chourasia¹, Dr. Sarita Rana²

1Research Scholar, School of Commerce, Davv, Indore

2Assistant Professor, St. Paul Institute of Professional Studies, Indore

Abstract:- The GST system, which acts in India, seeks to minimize the complexity through the implementation of a common base and rate throughout the country. In the Indian Tax Structure, GST has termed the biggest tax reform. In the Indian Constitution, taxation authority was well described. The various rate structure and enforcement framework using expensive reporting procedures place a huge strain on businesses, especially SMEs, and have an adverse economic effect. The Government can reduce the burden of compliance on SMEs by ensuring that SMEs are included in full GST requirements through a longer transition period. Exporters face a substantial reduction in their work capital under the new system that restricts their ability to place new orders. This paper describes the concept of GST, explains the main features and the problems caused by effective implementation.

The paper focuses more on the benefits of GST and the challenges facing India in its implementation.

Keywords:- Goods and Services Tax, GST, Challenges, Features, Implementation.

1. INTRODUCTION

The word tax is derived from the Latin word taxare meaning estimation. The tax is not a voluntary payment or donation, but an enforced contribution, as required by the legislative authority, and any contribution imposed by the government, whether in the name of toll, tribute, tax, duty, customs duty, excise duty, subsidies, aid, supplies or any other name.

Broadly, there are two kinds of taxes: Direct and Indirect taxes. Taxes are levied in India by the central government and the state governments.

The Goods and Service Tax is a combined indirect tax on all products and services across the country. Before the introduction of the GST, the tax on the manufacturing of products by the Union and the State Government was levied at multiple phases. There are two components of GST while transactions are carried out within the state, namely the Central Goods and Service Tax (CGST) and the State Goods and Service Tax.

In the case of inter-state transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST). The IGST would be approximately equivalent to CGST plus SGST. Goods and service tax is a simple tax and should lead to a much easier administration. According to the customer perspective, the deduction from the total tax presently estimated at 25%-30%, the free movement of products and services from one country to another boundary on hours of payment of state tax or entry tax and the decrease in paper practice to a big extent.

Experts have listed the benefits of GST as follows:- 1. It would introduce 'one country one tax'.

2. It would absorb all indirect taxes at the central and state levels, thus eliminating the cascading effect of tax.

3. It would lower the prices of goods and services which, in turn, would help companies to increase their consumption.

4. Higher threshold for registration that will exempt many small traders and service suppliers.

5. When all taxes are incorporated into the GST scheme, it would eliminate the number of compliances such as return filling.

6. It would help to eliminate the separate tax on goods and services requiring the transaction to divide its value between goods and services, which would lead to greater complications.

7. It would broaden the tax regime by covering all sectors, including the unorganized sectors, thus widening the tax base. This would result in better and more revenue collection by the government.

8. GST would simplify the work procedures and minimize the tax burden on e- commerce and logistics companies.

9. Youth Employment Generation as a GST trained expert.

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1.1 Need of the Study

This research will assist us to examine the problems and challenges of GST after implementation, demonstrate the gap between current indirect taxes and GST, and also demonstrate the advantages and difficulties that GST may encounter after implementation in India.

1.2 Objective of the Study 1. To grasp the GST concept.

2. To know the history of GST in India.

3. Study the advantages and challenges of implementing the GST.

1.3 Research Methodology

The study is based on secondary information from distinct sources, such as journals, articles, newspapers, magazines, websites, etc. Accessible secondary information is used only for research purposes. Secondary GST data have been widely used to draw conclusion.

It is an explanatory study and will lead to future research studies.

2. REVIEW OF LITERATURE

 T. Venkataramana and T. Mahvdeva Reddy, 2017 studied the Goods and Services Tax (GST) - Benefits and Challenges of Implementation in India.

 Adukia, 2015 studied the impact and implementation strategy of GST in India.

 Subhamoy Banik, Advocate Arundhuti Das, 2017 studied the GST in India:

Impact and Challenges.

 Dr. Jadhav Bhika Lala, Dr. TA Rajput, 2017 studied the Challenges and problems of GST in India.

 Aparajit Pandey, 2017 studied the Implementation Issues in India’s GST.

 Dr. Habiba Abbasi, 2018 studied the GST: Impact and Challenges Faced by Indian Economy.

3. CONCEPT OF GOODS AND SERVICES TAX

Goods and Services Tax, India's largest tax reform since independence, which has been underway for a long time. GST is designed to simplify India's indirect tax system by replacing a host of taxes with a single unified tax. GST is a comprehensive, multi-stage, destination-based tax levied on every addition of value.

GST will bring a new dimension to the Indian economy by creating a common market and decreasing the cascading tax impact on the price of goods and services. The tax structure, tax incidence, tax computation, compliance, input loan usage and reporting processes will be affected by the entire indirect tax system. India has adopted the dual GST system as CGST and SGST.

4. NEED FOR GST MODEL IN INDIA

The following are the supporting factors for adopting GST:-

1. The current scheme enables for a multiplicity of taxes, and the implementation of GST is likely to rationalize it.

2. There are many fields of services that are not taxed. They will also be covered after the implementation of the GST.

3. Appropriate GST will lead to the availability of credit for interstate purchases and a decrease in compliance requirements.

4. Existing taxes which is Excise, VAT, CST, and Entry Tax have a cascading effect on taxes. So we end up paying tax on the tax. GST replaces current taxes.

5. The introduction of GST will do more than simply redistribute the tax burden from one sector or group in the economy to another.

6. The GST will assist to prevent distortions induced by the current complicated tax system and will help to develop a common domestic market.

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5. FEATURES OF THE GST

1. The authority to make laws on supplies in the course of interstate trade or trade will stay with the central government. States will have the right to levy GST on intrastate activities, including services.

2. The governance of GST will be the responsibility of the GST Council, which will be the apex policy-making body for GST. The members of the GST Council will be the central and state ministers responsible for the finance portfolio.

3. The GST levy threshold is a turnover of Rs. 1 million. The threshold for a taxpayer who performs company in the north-eastern state of India is Rs. 500,000.

4. IGST will be levied by the central government on the interstate supply of goods and services Imports of goods shall be subject to basic customs duties and to IGST.

5. The key benefits associated with GST are: Offers a broader tax base, needed to decrease tax rates and eliminate classification conflicts.

6. Eliminates the multiplicity of taxes and their cascading impacts.

7. Rationalizes the tax structure and simplifies compliance processes.

8. Automates compliance processes to decrease mistakes and boost effectiveness.

6. BENEFITS OF GST IMPLEMENTATION 1. For Business and Industry

a. Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore all tax payer services such as registrations, returns, payment etc would be available to the tax payers online which would make compliance easy and transparent.

b. Uniform tax rates and structures: GST will assure that indirect tax rates and structures are common across the nation, improving certainty and ease of activity.

In other words, GST would render doing business neutral in the nation, irrespective of the decision of doing company.

c. Gain to manufacturers and exporters: subsuming major central and state taxes on GST would reduce the cost of locally manufactured goods and services in full and comprehensive set-up of input goods and services, and phase-out of the Central Sales Tax (CST). This will improve the competitiveness of Indian products and services in the global market and boost Indian exports.

2. For Central and State Government

a. Simple and Easy to Manage: Numerous indirect taxes at the central and state level are replaced by GST. Backed by a solid end-to end IT system, GST would be simpler and easier to manage than any other central and state indirect taxes levied so far.

b. Better Control on Leakage: GST will lead to improved tax compliance due to a strong IT infrastructure. Due to a large number of transfers of input tax credits from one state to another in the value-added chain, there is a built-in mechanism in the design of the GST that would encourage traders to comply with the tax.

c. Higher revenue efficiency: GST is supposed to reduce the cost of collecting tax revenue of the government and will, therefore, result in greater income efficiency.

3. For Consumer

a. Single and transparent tax proportionate to value of goods and services: Due to the numerous indirect taxes levied by the center and the state with complete or no input tax credits available at the progressive stage of value-added, the price of most products and services in the nation is loaded with many hidden taxes. Under the GST, there would be only one tax from the producer to the customer, which would result in the transfer of income paid by the final customer.

b. Relief in overall tax burden: The overall tax burden on most commodities will come down, which will benefit consumers, due to the effectiveness of the administration and the avoidance of leakage.

7. CHALLENGES FOR SUCCESS IN INDIA

1. Issues faced in GST implementation- There has been a lot of media coverage (mostly adverse) on problems related to the problems experienced by companies in complying with the current Goods and Services Tax system introduced on 1 July

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2017. Complaints as reported in the press concern issues ranging from poor availability of the GSTN system, non-availability of certain forms and formats, delays in GST refunds paid, transitional issues in the transfer of input tax credits from the old VAT and CENVAT systems, inability to complete outward sales invoices in the GSTN system, Issues of GST rates and problems experienced by informal sectors and industries such as textiles operating in cash with little paperwork. Many of the problems are of real and transitory nature and are discussed by the GST Council and the Government.

2. Issues in collecting taxes on sales- Issues occur due to various rates and classification. For example, in the case of paper sales, pamphlets are taxed at 5 percent, letterheads at 12 percent, files at 18 percent and hard-bound registers at 28 percent. In the case of companies with total sales of more than 75 million Rupees, four digits of HSN code are required for each sale and, in the case of imports and exports, 8 digits of HSN code are required to report all sales. This creates difficulties for companies, some of which are risk-averse and chargeable at the maximum level appropriate to prevent issues during the audit. However, it is expected that this problem will be discussed over time as companies are likely to be clear about the right HSN Code over time and the relevant rate for their purchase.

However, classification issues could arise during the audit, which could lead to further problems for companies.

3. Issues in preparing the tax returns- This again occurs because of the restrictive information demands in the tax form, including transaction-level data for all transactions, the requirement to match purchase data, as well as thorough information on the Harmonized System of Nomenclature (HSN) Code for Goods and Service Accounting Code (SAC) for Services for each sale to arrive at the right rate to be applied. In addition, the tax return also needs information about all interstate B2C sales in excess of 0.25 million. All this data required in a format requires the services of the accountant as well as the software to prepare it. Under GST, the majority of dealers will need to adopt two-, four-, or eight-digit HSN / SAC codes for their commodities, based on their turnover in the previous year.

a. Dealers with a turnover of less than Rs 1.5 crores shall not be needed to adopt HSN codes for their goods.

b. Dealers with a turnover between Rs 1.5 crores and Rs 5 crores are needed to use two-digit HSN codes for their goods.

c. Dealers with a turnover of Rs 5 crores and above shall be needed to use four-digit HSN codes for their goods.

d. In the case of imports/exports, eight-digit HSN codes are mandatory as GST must be compatible with global norms and procedures.

4. Issues in uploading of tax returns- The restrictive data requirements in the tax return are placing further heavy demands on businesses as well as on the GSTN to upload them to the server. It is necessary to file tax returns every month requiring additional accounting help. Additional costs on accountants, particularly for small and medium-sized enterprises, are non-trivial.

5. Issues in the return filing process- For return filing, B2B invoices on both sides of the transaction must be matched and a second return is produced in case of any inconsistencies in the invoices. The final return will be submitted if the malfunctions are fixed. However, companies are facing issues when both parties do not conclude the transaction by generating discrepancies during the month. Some sellers often verify that after more than a month, the customer may not agree on the agreed price after shipment. It is possible for the customer to verify the sale.

6. Issue in refunds for exporters and others- Ideally, refunds should be made mainly for exporters and for long gestation projects where products are supplied long after inputs have been acquired. However, refunds may also occur owing to the multi-rate layout of the GST. If companies make sales at a reduced rate but pay tax on inputs at a greater rate, the natural course of the company can lead to refunds. Exporters have been severely affected by the requirement to pay import tax at an early stage resulting in cash flow issues, unlike in the past they have benefited from tax exemptions on their inputs. This has placed a lot of pressure on the demands of their working capital.

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7. Potential issue in introduction of the e-way bills- The government had delayed the implementation of the e-way bill scheme (to October) by which each transportation of goods needed the creation of a GSTN electronic waybill providing information of the parties to the transaction and the products being transferred.

This will probably contribute to the burden on companies and carriers. Due to the implementation of a GST that could be undermined by an electronic bill, carriers have reported on the highway decreased time.

8. PERFORMANCE OF THE GST – COMPLIANCE AND REVENUE COLLECTION 8.1 GST Revenue Collection

The total gross GST income gathered in July 2019 is approximately 102,083 crore, of which CGST is approximately 17,912 crore, SGST is approximately 25,008 crore, IGST is approximately 50,612 crore (including 24,246 crore gathered on imports) and Cess is approximately 8,551 crore (including 797 crore gathered on imports). The total amount of GSTR 3B returns submitted up to 31 July 2019 for the month of June is 75.79 lakh.

Revenue in July 2018 was approximately 96,483 crore, and income in July 2019 is a 5.80 percent increase over income last year in the same month. The domestic component grew by 9.2% in April-July 2019 compared to 2018, while the GST on imports fall by 0.2%

and the total collection grew by 6.83%. For the months of April-May 2019, Rs. 17,789 crore was published to the countries as GST compensation.

The chart shows trends in revenue during the current year.

Based on this information, it appears that if one includes tax gathered on fuel outside the GST, the state will fulfil its income target for indirect taxes.

8.2 GST Registration

More than 1,03 crore companies have enrolled under the Goods and Services Tax (GST) system and the execution of the largest indirect tax reform has so far been smooth, Parliament was notified on 1 July 2019. As of March 2, a total of 1,03,99,305 taxpayers are enrolled under GST, which includes 64,42 lakh taxpayers who migrated from the former tax regimes and 39.56 lakhs who took up fresh registration under GST, Finance Minister Shiv Pratap Shukla said.

9. CONCLUSION

The GST system is essentially designed to simplify India's existing Indirect Tax system. A well-designed GST is an attractive way to get rid of the compression of the existing multiple taxation process, and the government has also promised that GST will reduce the burden of compliance at present there will be no distinction between imported and Indian goods and

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they will be taxed at the same rate. Many Indirect Taxes like Sales Tax, VAT, etc. are going to be finished because there is going to be a single tax system.

GST, which will decrease the current burden of compliance. By offering companies with a longer transition period, the government could decrease the burden. After its implementation, GST will face many difficulties, likely to result in many advantages.

Overall, we conclude through this research that GST plays a vibrant role in our country's growth and development. All difficulties in the implementation of GST as mentioned in the report above.

REFERENCES

1. https://pib.gov.in/newsite/PrintRelease.aspx?relid=192443 2. https://economictimes.indiatimes.com

3. https://cleartax.in

4. Adukia (2015) The Impact and Implementation Strategy of GST in India.

5. T.Venkataramana and T.Mahvdeva Reddy (2017), Goods and Services Tax (GST) - Benefits and Challenges of Implementation in India, International Journal of Economics and Business Management.

6. Subhamoy Banik, Advocate Arundhuti Das (2017), The GST in India: Impact and Challenges, IOSR Journal of Business and Management.

7. Dr. Jadhav Bhika Lala, Dr. TA Rajput (2017) The Challenges and problems of GST in India, International Journal of Multidisciplinary Research and Development.

8. Aparajit Pandey (2017) The Implementation Issues in India’s GST, Observer Research Foundation.

9. Dr. Habiba Abbasi, (2018) The GST: Impact and Challenges Faced by Indian Economy, International Journal on Recent and Innovation Trends in Computing and Communication.