S Rethinavelu, Senior President, Tamil Nadu Chamber of Commerce and Industry, allays fears over the GST regime as unwarranted. Excerpts from an interview:
Despite hailing the tax reform, there seems to be a lot of anxiety and negativity about this impending regime. What’s your take on this?
The fear is baseless because people have not understood the provisions of the Act properly. The government has failed to enlighten the public about the various provisions of the Act. In my view, GST is a business reform. We have to undo what we have been doing till now and change the manner in which we do business. We have to plan our transition.
More than 16 tax laws have been subsumed under GST. At present, more time is spent on filing of returns and complying with these various taxes. All this will become very simple.
What about rate-fitment under GST. Your Chamber has been making representations seeking reduction on various product categories.
We hail the reduction of tax rate on 66 items, particularly on exercise books and note books from 18 to 12 per cent. The GST Council has considered some of our demands and reduced the rate. However, I would like to reiterate that there should be a knowledgeable trade representative in the GST Council . The Council is a committee of officials representing various sectors such as banking, insurance, chemical and so on.
We have, for instance, been requesting enhancement of turnover limit for composition levy of tax to ₹1 crore. There is provision in the GST Act for increasing the limit to ₹1 crore, but the Council has, in response to our repeated requests, increased the limit from ₹50 lakh to ₹75 lakh. Our request is basically to ensure that the SSI sector is safeguarded and not deprived of the ₹1.5 crore exemption limit currently allowed. When a trade representative explains such issues to the Council, there is scope for quicker redressal.
Dealers in white goods are now offering pre-GST sale offers and this is happening before Aadi sale. The advertisements also state that the price of the white goods could go up after GST implementation.
White goods are subject to VAT at 14.5 per cent now. Dealers can get input tax credit to this extent. Under GST, these goods will be subject to 28 per cent tax, but there will be no VAT or excise duty levy of 12.5 per cent. At present, VAT and excise duty takes the total to 27 per cent (14.5 + 12.5). And if it is an inter-state sale, it will be subject to 2 per cent CST, taking the total tax to 29 per cent.
Traders can get tax credit in GST too. There is no need for such panic selling. But the trader will have to prove the payment of tax with bills and that invoice should not be dated prior to 12 months. Further, if the excise duty payment is not reflected in the invoice, the trader can sell the goods under GST by levying 28 per cent tax, 50 per cent of which will go to the Centre (CGST) and the balance to the state. The trader can claim 60 per cent input tax credit on CGST in lieu of excise duty. But this sale should be made within six months of the GST rollout.
MSMEs find the whole system complicated.
They should understand that the GSTN portal will be the tax officer henceforth. So all filings, right from registration, returns, tax payment and refund, show cause notices and reply, appeal and judgement would all be through this portal. All assessees should register and get the TIN (Tax Identification Number).
This portal will maintain two ledgers and one register for every assessee. All input tax credit will be registered in the electronic credit ledger and remittances in cash and bank transfers in the cash ledger. Taxation liability will be reflected in the liability register. At present, there is no way to check if the seller has made the tax remittances to the government, and bills are raised only for passing the check post. In the GST regime, as everything is through the GSTN portal, if remittances are not made within three months of sale, the seller will not be able to file any other return. Likewise, if the buyer fails to pay for the value of the goods and tax within 180 days, the seller can enter the same on the portal.
GST will help collect money. It will be a boon for tax payers and bane for tax evaders.
What about return filing?
There is a wrong propaganda that under GST, one will have to submit three returns every month and one annual return, taking the total to 37. No return other than the annual one needs to be filed by the assessee, and submission of one statement every month is in vogue even now (under VAT) and this is only for validation.