By Subramaniam R Iyer
The goods and services tax (GST) law has been in place for a little over two years. The returns and other operational aspects of the GST website are indicative of the shift to/dependence on technology. The availability of an electronic cash ledger and credit ledger in each entity’s GST account makes it simple for assessees to verify and reconcile figures.
One of the objectives of the government is to bring all entities and people who ‘qualify’ within the tax net. This has useful effects, such as reduction in ‘off the books’ transactions and the consequent financial discipline in businesses. Needless to say, the objective is not merely statistical in nature, but, importantly, seeks to maximise tax revenues.
The GST law prescribes a format of invoicing, which includes the GSTIN (GST Identification Number) of the person or entity on whom the invoice is being raised. The monthly or quarterly returns filed by each taxpayer give details of the persons on whom invoices have been raised.
The details of tax paid are mentioned in these returns. Tax is paid either in cash (bank) or by adjusting input credits. Input credits can be availed for the GST paid on all inputs in the furtherance of business. Technology used on the GST website is feeding in all the input credits in an assessee’s account, and it is possible for assessess to check which input credit has not been received by them because of action or inaction of their suppliers. This is akin to Statement 26AS on the income-tax website that gives the details of income tax deducted and deposited from payment to the assessees.
Goods and services are classified under codes of HSN (harmonised system of nomenclature). This is mentioned in each outward supply invoice as also the applicable rate of tax.
The annual return for the period July 2017 to March 2018 requires assessees to fill in annual summaries of HSN-wise supplies and input credits. The assessees may be geared up to give the former from the invoice software used by them. Even then it is a huge effort.
But it is impossible for an organisation to furnish HSN-wise summary of input credits unless they re-enter all input bills HSN-wise in their accounting software. This would be a mammoth exercise for even a small enterprise. One shudders to imagine the workload to accomplish this for a multi-product company with large-scale national and international operations. Many companies attempting this exercise have incurred expenses of millions of rupees without still being able to complete this effort. Figures need to be reconciled with financial ledgers, and monthly and quarterly return filed. It is a gargantuan effort that is maybe giving some professionals a new avenue of work and livelihood, but appears to be of little or no utility or value-add to the GST assessees or the government.
Finally, every exercise must have an endgame or an objective. One must think what possible benefit could HSN-wise summary of input credit tax from thousands of assessees across the country have for the finance ministry?
Financial year 2017-18 was the year of transition from VAT, excise duty and service tax to the GST. Many claims relate to the trans-credit of this year where assessees claim tax credit under erstwhile laws in GST payments. Many assessees may not have filed returns under these laws or paid due taxes. Therefore, the data in the forms relating to trans-credit availed may not match, leading to demands on other assessees for no fault of theirs. The time-limit for the filing of the annual return has been extended three times—the last being in August 2019. I would request the GST Council and all the concerned bodies to review and revise the format of information sought very objectively and as they deem fit in their collective wisdom, with the objective of making the GST a ‘good and simple tax’ instead of a ‘great stress tax’.
(The author is a Delhi-based chartered accountant)