As the nation eagerly waits for 1st July when the Goods and Services Tax (GST) will come into force across the entire country, businessmen of Guwahati and the rest of the country are trying their best to understand how the tax reform will help or affect businesses. As the BJP ruled states of the country - Assam being one of them - are claiming that the GST implementation will help one and all, the opposition Congress and some other political parties have decided to boycott the central government’s special midnight June 30 meeting on GST calling it a gimmick. As far as Guwahati goes, G Plus talked to people from various sectors to know how prepared they are for the biggest tax reform in the last several years. Was the government able to spread the requisite awareness among Guwahatians regarding the tax reform? Is the GST just old wine in a new bottle or it is something novel? Who will gain or lose from the reform and what are the changed rates? G Plus tries to analyse the entire GST scenario.
One tax
According to a city based tax consultant, there were around 18 types of taxes previously but he said that with the introduction of GST there will be only one tax across the country and traders and consumers will not be taxed at different points. GST will put an end to multiple taxations at various source and transportation levels. Assam government is abolishing five taxes including VAT, entry tax etc and the centre will have to abolish seven taxes for the purpose. So basically, GST will be levied on goods and services. It will replace all the various taxes and bring them under one umbrella to make compliance easier. It will replace the following taxes:
Taxes currently levied and collected by the Centre:
Central Excise duty, Additional Duties of Customs (commonly known as CVD), Special Additional Duty of Customs (SAD), Service Tax
Taxes currently levied and collected by the State:
State VAT, Central Sales Tax, Entertainment and Amusement Tax (except when levied by the local bodies), Taxes on lotteries, betting and gambling
The functioning
According to a city based tax consultant, Brijesh Sharma, businesses are the backbone of Indian economy. But for various reasons many businesses in the city are unorganised and irregular in paying taxes. He said that GST is a comprehensive indirect tax system which is set to subsume a host of existing indirect taxes and with its implementation compliance will become a key factor for the success credibility of any business. He said that GST will work on a self-monitoring mechanism, matching the concept of invoice between supplier and recipient of goods and services. Only after matching of invoices and payment of tax by the supplier, the input tax credit will be available to the recipient. Thus a customer will always want to do business with vendors who are compliant, which changes the relationship between supplier and recipient. He said it used to be customer-cum-emotional relationship but now it will be compliance relationship.
A city-based chartered accountant, Manoj Nahata, talking to G Plus said that every month there are some important dates which any businessman has to keep in mind.
10th of subsequent month – Form GSTR 1
According to Nahata, on the 10th of every month the businesses have to declare the details of all the outward supplies of goods and/or services effected during the previous month. Invoice-wise details of outward supplies made to registered dealer and aggregate taxable value of supplies made to consumer are required to be declared.
11th of subsequent month – Form GSTR 2 A
Nahata said that on 11th the visibility of inward supplies will be made available to the recipient in the auto populated GSTR – 2A. This is generated based on the outward supplies declared by your supplier in form GSTR – 1. The period from 11th to 15th will be provided for any corrections (additions, modifications, deletion) in Form GSTR – 2 A.
15th of subsequent month – Form GSTR 2
The CA said that after reconciling, any additional claim or correction as per Form GSTR – 2A needs to be incorporated and submitted in Form GSTR – 2 by 15th of subsequent month. Based on the claim report in form GSTR 2, ITC (Income Tax Credit) will be credited to the e-credit ledger on provisional basis and post matching of invoice, it will be finalised.
16th of subsequent month – Form GSTR 1A
The corrections reported in Form GSTR – 2 will be made available to the supplier in form GSTR 1A. The supplier has to accept or reject the adjustments made by the customer by verifying with suppliers’ outward supply register.
20th of subsequent month – Form GSTR 3
On the 20th, based on the Form GSTR 1 and Form GSTR 2, an auto populated return GSTR – 3 will be available for submission along with the payment.
Input tax credit in Form GST MIS -1
The CA said that after the due date of filing the monthly return in Form GSTR 3, the inward supplies will be matched with the outward supplies furnished by the supplier, and then the final acceptance of input tax credit will be communicated in Form GST MIS -1. Details like GSTIN of the supplier, GSTIN of the recipient, invoice or debit note number, invoice or debit note date, taxable value and tax amount will be considered in the matching of invoices. The CA said that technology will play an important role for businesses under GST as GST is a highly transaction-based compliance system. The CA said that for the first two months there will be some relaxation in return filing dates. So the businesses have to be very accurate with the calculations now. But are Guwahatians aware?
Awareness level
Fancy Bazar businessman and councillor of Ward No. 9 Rajkumar Tewari, talking to G Plus said that people in Fancy Bazar area will be badly affected as people are still not prepared. He said, “The tax department has not taken any initiative to spread awareness about GST anywhere in the city. They might have had some meetings with some business tycoons but if you go to any shop in Fancy Bazar whose yearly turnover is more than Rs 10 lakhs, they are confused about the entire tax reform system.” He said that he is a wholesale dealer of steel utensils, so he wanted to purchase some items from a manufacturer. The manufacturer did not sell as the scrap material for steel utensils is taxed at 18% under GST and the finished product is taxed at 12%. He said that the manufacturer was confused how much tax should be charged to the customers. Similarly, Tewari said that there are some groceries dealers in Fancy Bazar who do business the whole day but are not technically sound. So how will they manage the GST updation process as they do not have time to learn and then update the details in the portal? He said that also the state tax department did not take any initiative to spread awareness whereas they should have gone to every ward and booth and then organised meetings.
A city-based builder, Amit Agarwal, talking to G Plus said that GST is nothing but a legal form of goondagiri by the government. He said that as a builder, while construction, the raw materials like sand, stone chips, bricks etc are mostly bought on credit and in maximum incidents the seller does not provide any formal (pucca) receipts. Now if something is bought on credit, unless the construction is completed and the flats are sold, the money is not raised to clear the bills. So how will the builders pay the tax on a monthly basis when the purchase is made on credit? It will be a reverse charge as the purchase will be made from an unregistered dealer.
The chaos
Tax consultant and lawyer Brijesh Sharma said that the government is not prepared fully to implement GST now, as there is no pin-pointed solution. He said that the portal is not yet ready as people are facing problems in getting provisional ID, the digital signatures are not working for most of the people, the jurisdiction is not clear as people are confused about filling central or state while filling up the form, and moreover people are not aware. He said that initially the process will be a total chaos and in next two years, if it does not work, the entire system will collapse. He also said that over all GST is just over hyped as it is old wine in a new bottle. Like previous taxes even now there are huge taxes levied on various products. He asked us to visit the sales tax office at Kar Bhawan and see how businessmen are totally worried about the system.
G Plus team visited Kar Bhawan and tried to talk to the commissioner of taxes who was in a meeting. The G Plus team was informed that there is a GST cell which could provide all the information. When the team visited the cell the commissioner was inside and sounded very busy. He asked the G Plus team to visit after 2nd July post the GST implementation. When he was told that people are confused and we required some information, he said that they had conducted over 100 camps and it is the media who is confusing the people. The G Plus team told him that most of the businessmen in the city are not aware, but he insisted that we visit after 2nd July. Effectively, while the tax is being implemented from 1st July the tax commissioner can be free to talk to the media only after 2nd July.
The survey
As the businesses with a turnover up to Rs 10 lakhs are exempted from GST in northeast, G Plus visited 100 business establishments having turnover more than Rs 10 lakhs across the city to know if they are aware about the GST procedures. 55 business establishments said they are confused on the GST procedures, 10 establishments said they are aware about the procedures, and the rest of the establishments said that they are clueless and hoping that with the commencement of the reform things will be clearer. A grocery shop owner at Lal Ganesh whose yearly turnover is around Rs 50 lakhs is very worried as he said that he is technically illiterate and does not know how to use the computer. He said that all these days he just did business and now he has to keep track of the sales and purchase through technology which is proving to be a nightmare to him. He is also unaware about which product is getting cheaper and which will be costlier.
Liquor
Many city boozers are also confused over whether after 1st July the liquor rates will be increased or decreased. Excise PRO Shailendra Pandey said, “As of now liquor is outside the purview of GST. Therefore, the rates will remain same and it is the state government who decides the rates of liquor.” So liquor price is to remain same. Also all the petroleum products are also outside the purview of GST.
Whatever may be the new tax reform the government doesn’t seem fully prepared for the change and in turn is keeping people totally confused.
