To make GST a roaring success, need for ease in compliance & MSMEs adopting digital: Experts

As GST celebrates its fourth anniversary in a webinar on Friday spoke to B.V. Murali Krishna, Additional Commissioner of Commercial Taxes (E-governance), Government of Karnataka, B.T.Manohar, Chairman State GST Committee FKCCI, and Ridhima Mehta, Indirect Tax Manager of a Big 4 audit firm, discuss how GST has evolved and the way forward for the industry

Good Service Tax (GST) concept with finanical elements.

Representing the trade, industry, and commerce sector Manohar opined, from 1957 until 2005, the state was under the Sales Tax regime, and then from 2005 to 2017, it was under the VAT regime for a period of 12 years. Additionally, the state VAT only applied to production, not to services. Though India implemented GST in the last four years around 170 countries across the world have already implemented it. He went on to remark that GST has simplified indirect taxes for both state and central governments in terms of compliance and revenue. According to latest figures, there are 1.30 crores registered in the country today, with 90 percent of them being small dealers (with a turnover of less than 5 crores), as evidenced by the amnesty scheme and In Karnataka, 9.5 lakh people are registered, with 70% of them coming from the small business sector.

He was full of admiration for the GSTN committee, which is working to meet their primary requests. He explained that knowing and complying with the law when small businesses are struggling for existence is a challenging task, which causes delays in the filing of essential paperwork because his business expertise exceeds compliance as a result, stiff penalties are imposed. He added fines are OK, but they should not surpass profit and should be reasonable and inexpensive, citing ‘dandam dashagunam bhavet’ from the Arthashastra.

Highlighting a few challenges he stated filing returns is termed as complicated as it requires filing details of supply in R1 under Quarterly Return Payment and Monthly Payment of Taxes (QRMP) scheme and if the supplier does not pay the tax which otherwise is collected from the source the source does not the benefit of input (ITC). It is not the source fault even though an amendment to rule 36(4) is made but my ITC is blocked which results in blockage of working capital

Highlighting a few challenges he stated filing returns is complicated because it necessitates entering supply details in R1 under the Quarterly Return Payment and Monthly Payment of Taxes (QRMP) scheme, and if the supplier does not pay the tax that would otherwise be collected from the source, the source does not receive the benefit of input (ITC). Despite an adjustment to rule 36(4), it is not the source’s responsibility that my ITC is denied, resulting in a blockage of working capital.

According to him, if a source from service industry pays tax on advances received and the service is not delivered for some reason, the source is obligated to pay tax again, resulting in a working capital blockage.

Comparison of input and output – Composition of Taxes for businesses having a turnover of < 1.5 crores for manufacturing and trade the tax applicable is 1%, for restaurant it is 5% and for exclusive service providers it is 6% (< 50 lakhs).

He said it was based on FKCCI’s appeal to the Government of Karnataka (GoK) to explain our situation to the centre for submission of pending returns from 2017 to April 2021 without late fees, comparable to GoK’s ‘Kar Samadhana’ programme or the central excise department’s ‘vivaad se vishwas’ scheme.

Thanking all taxpayers, officials, stakeholders and SMEs for the unprecedented success of the GST implementation during the previous four years in the history of indirect taxes, Dr Murali Krishna stated that as of Thursday, they could see Rs. 200 crores in e-way invoices as a result of the 2018 implementation. He also mentioned the role played by the Government of Karnataka , the Commercial Tax Department, and the National Informatics Centre (NIC) Karnataka in the implementation of e-way bills and EOI invoices across the country beginning October 2020.

He urged everyone not to be afraid of taxes, comparing them to birth and death, and said that since nothing is in our control, we must accept and go with it. We must also comprehend the simplicity of the process. He equated marriage and childbearing, saying that once a firm is established, it is a natural process, and that SMEs must take care of their registration. The government has made numerous concessions, and it is now up to them to return them. We had 60 lakhs tax payers when the GST journey began, and that number has already risen to 130 lakhs. These new additions may not make the state richer, but they will benefit from the input taxes credit.

He urged all firms to register and pay the monthly payment on time, noting that even enterprises with no revenue can file through SMS before 20th of each month. Smaller taxpayers (turnover < 5 cr.), on the other hand, have the option of paying their taxes on the 22nd or 24th of each month, depending on the state which they operate from.  He went on to say that filing composition taxes as a SME or MSME is not a smart idea because the recipients/beneficiaries may not be supportive because he won’t be able to claim any input credits and requested them to pay the regular taxes.

He also stressed the significance of using an e-way bill when transporting products from one location to another, as failing to do so could result in the goods being seized and penalties being imposed. 

He Spoke on the Karnataka government’s launch of the “Kar Samadhana plan,” which allows people to finish their assessments before August and pay till October.

He remarked that every product should have an HSN number, which will be easier to identify in the GST nomenclature, while touching about the Harmonized System of Nomenclature (HSN) categorization. Because SMBs only produce one or two goods, it would be easy to try and remember their HSN code, and consumers can visit in to their support desks or 138 locations across the state, with roughly 500 offices in the centre, for any inquiries. He ended the conversation that the Vijayanagara empire was not constructed in a day similarly we all have challenges and that while it would take time, it would be beneficial to all.

Ridhima highlighted technological impediments, stating that MSME’s have not embraced technology, despite the fact that there are numerous free tools available on the government website, which MSMEs are ignorant of. She asked that taxpayers be informed about the program’s availability and how tax professionals may assist them. Every industry, including banks, has embraced technology and moved away from analogue books and records, particularly in the last year. Similarly, MSMEs should modernise and begin using digital for filing returns and complying with tax regulations. She mentioned the Invoice Furnishing Facility (IFF) in relation to the QRMP plan, be used by SMEs to input invoices on a monthly basis and urged MSMEs to focus on this in order to compete both locally and worldwide.

She stated that the use of GST data has made it easier and more streamlined for the sector to comprehend their own style of operating. Concerning the Government of India’s Atmanirbhar initiatives, she remarked that many sectors within MSMEs are not covered by the PLI scheme, and she urged the government to develop dedicated schemes or policies for MSMEs.

Manohar brought up the issues with the HSN code and requested a representation to the GST council for quarterly tax payments. Manohar brought up the issues with the HSN code and requested a representation to the GST council for quarterly tax payments. Dr. Murali Krishna suggested a different approach to phrase the same request which along with the complete webinar can be viewed along with the complete open and interesting conversation appended alongside.