GST: Steady progress despite hiccups
The implementation of GST completed a year yesterday. The tax reveals a surprising percolation to all segments of industry, reports Shoma Patnaik
The Goods and Services Tax (GST) shook up businessmen and industrialists after it was introduced uniformly across all states on July 1 2017. It was not a sudden implementation since the tax was in waiting for several years and the date for launch was set back several times.
There were misgivings on the implementation GST and constant demand from trade for a phased execution. But the move towards GST remained relentless as the government adjusted the tax rates, offered relaxations and improved the online payment system to make the tax easier on the people.
Presently with GST completing a milestone on Sunday, the anniversary celebrations are looking better than anticipated. To be sure the criticisms continue but ground check reveals that acceptance of the tax is inevitable. Among traders, commercial establishments and industrial units the realization is that there is no going back to the old system and GST is here to stay.
Meanwhile, in Goa, from the small shop keeper in the market to the grocery store owner nearly everybody is clued on to the existence of the uniform tax. The latest trend among local shop keepers and traders these days is to acquire a GSTN number. Even among the small store owner and unorganized units that are outside the threshold limit the race is on for GST registration.
According to information gathered from the commercial tax department, the number of tax payers logged onto the GST portal is increasing by the day. In May 2018 there were 33,450 assesses in the state and officials reveal that number is up and rising.
On the other hand of the 33,450 tax payers, about 30 per cent are non-payers and of the remaining, about 5,600 tax payers are under the compensation scheme. It means that, the effective tax payers in the state number are around 18,000 assesses.
GST was introduced to bring about uniformity in tax rates between products and regions, to improve compliance among tax payers and increase tax revenues. Against its objectives, its performance is mixed.
Goa’s tax revenues during 2017-18, the first year of implementation, stood at Rs 3,256 crore compared to Rs 3,199.6 crore, revealing an increase of 1.6 per cent. It is a marginal increase but there are states which post- GST gave fared worse in collections. Further, in the first quarter of the current financial year, as on June 28 the revenue tax collection stood lower at Rs 746 crore as against Rs 845 crore during the April- June period of the previous year.
But as officials point out, the state’s pattern of tax collection is distinct from other states. About 65 per cent of the revenue is in the October – March period while, the first half of the year is considered as traditionally lean months.
Deepak Bandekar, commissioner of tax is optimistic on the future of GST. He says that, GST launch was marked by ups and downs but considering the newness things are settling down well. “During the year to come we expect the tax to settle down completely.” He adds that, there were several changes in terms of rules, rate of tariff, dates of filing of returns, etc. “We have to admit there were some glitches in the IT system. But as of now the glitches are resolved and only some minor hitches remain.”
Bandekar adds that considering the radical nature of GST, Goans have adapted to it very well. “Earlier we used to get a return filing of hardly 60 per cent. Today the percentage of tax payers who file returns have gone up to 83 per cent,” he says.
On the tax collection front, he explains that, in the 2017-18 the collection was slow because tax rates were reduced several times. However in 2018-19 and future, the collection is likely to improve due to the introduction of the e-way bill that will plug the gaps and result in better compliance.
At the ground level, although traders and dealers have reconciled with GST, there are irritations as all transactions have to be fed into the online system. There are several large grocery stores and pharmacies that casually sell products without bothering with the inconvenience of GST. And most store owners who previously dealt in cash and never bothered to maintain accounts are annoyed when demand with a GST invoice. They are angry that their sale transactions are being recorded online and can be used to detect tax evasion.
For consumers, GST is actually worked out well. The restaurants and hotel industry is a major beneficiaries as the tax rate is lower by about six per cent. The casino industry too is gained out of GST as previously they were taxed at about 15 per cent while the current rate of taxes works out to 14.5 per cent.
“GST success in future will be determined by a few things, says Sandip Bhandare, president GCCI. He says that in the coming months, the GST council will have to work on simplification of the return filing system, reduce the number of rates on commodities and bring down the highest slab rate currently ruling at 28 per cent. “If these issues are addressed GST will actually become a landmark tax as it was projected to be,” says Bhandare.
GST came into effect on July 1 2017. The unified tax was planned with one tax rate for all commodities but currently there are multiple rates in at least three slabs. GST subsumed about five local levies, such as VAT, entry tax, luxury tax, entertainment tax and sales tax. Currently petrol and alcohol is out of GST realm. The introduction of e-way (electronic way) bill from June 1 is a shift from the earlier departmental policing model to a self-declaration model. The bill envisages one e-way bill for movement of the goods throughout the country and is expected to cut down on tax evasion.
Industry, I feel, has adapted much better to GST than expected considering the fears that were raised against it. Couple of things that emerged good is the responsiveness from the government to address any lacuna in the system. Over the year there have been several changes, amendments, relaxations, and the net impact of all these tweaking is that the whole process of paying tax is got smoother. Another positive fallout is the GST link with income tax. Through the online payment system the revenue leakage can be controlled. As a chartered accountant I can see the difference with more of my clients filing tax returns on time.”
Sandip Bhandare, president, GCCI
We faced some teething troubles but it was manageable. I think under GST it is the first time that an industrial tax payer is getting benefitted. Because for every overhead incurred, we receive reimbursement by way of tax credit. The present online mode of tax payment is also less cumbersome than the old system. We have to deal with just one department. There is less of form filling and no C form filling to be done.”
Blaise Costabir, Zarhak Moulders, Verna industrial estate
Return filing under GST is become easier for our industry. And on the customer side, our patrons are happy because the tax rate is decreased. Previously the tax rate was VAT 12.5 per cent plus six per cent of service tax which came up to 18.5 per cent. The GST rate now is flat five per cent. It is actually a huge gain for customers and reflected in more people eating out. The only drawback is for restaurants that operate out of rented premises as they cannot claim input tax credit on rent. On balance however, the pluses outnumber the minus.”
Sachin Pai Bir, owner,
No complaints on GST except for the fact that it has made the cost of homes higher for buyers by about three- four per cent. GST in real estate is applicable for under construction projects where the tax rate is 12 per cent and on which the builder receives an input tax credit of about nine per cent. So for builder, the cost of the project is down marginally after GST but for the home buyer there is no commensurate benefit. The buyer actually ends up paying higher after the stamp duty and the registration fee. The GST system is slightly complicated for the real estate industry than it is for other sectors.”
Nilesh Salkar, builder, Nilesh Salkar Associates