Everyone in authority continues to maintain that GST in India is set for a July 1 arangetram . Everyone paying indirect taxes in India would be eagerly awaiting the outcome of the next meeting of the GST Council, scheduled to be held on May 18 and 19 in Srinagar. The meeting, to be headed by Finance Minister Arun Jaitley, is scheduled to finalise the rates of different commodities and services.
The Council has already approved most of the rules that are required for rolling out GST such as registration of entities, filing of returns, payment of tax and refund, invoicing and debit and credit notes that are in consonance with the GST law approved by Parliament.
Assuming that the rates of taxes are frozen and announced after the meeting, tax payers would be left with 40-odd days to move over to a law which, though not entirely new, has already raised quite a few questions. The time-frame is certainly insufficient considering the fact that tax payers have to get technologically ready and mentally conditioned to transition to GST. It is apparent that the GST Council does not want to announce a date later than July because everyone would take their foot off the pedal.
It is imperative that the May meeting fixes rates of different goods and services. More importantly, the Council needs to announce a negative list. Due to the threshold limit of ₹20 lakh, the population of indirect tax payers is expected to increase in the GST era due to which the Council also needs to announce on which goods and services there would be a reverse charge. Amidst all this, the Council has to take a concrete decision on the treatment of agriculture when GST is upon us. The Service tax department had to issue a plethora of Circulars to state their position on taxation of agricultural services. An early decision in this regard could prevent an encore under GST. The Rules that have been drafted are in too preliminary a stage to warrant a critical examination — the GST Council may want to take a re-look at the vast range of forms that needs to be filed on the common portal.
With so much to do on both sides, a July implementation is bound to create mayhem. Once the rates, negative list and reverse charge mechanisms are done and dusted, the GST Council should ensure that all taxpayers (existing as well as the new ones) get their GSTN number without much hassle. On completion of this, the GST Council should do a dry run by permitting taxpayers to get a look and feel of the common portal for the months of July and August. Users should upload and match their invoices and supplies, get the intimation for the invoices that don’t match and rectify them.
They can also file their returns, pay a token amount of taxes and apply for refunds. By doing this, the GST Council can quickly rectify any technical glitches that are bound to arise. The uploads of supplies and invoices would not be considered to be GST invoices and the payment of token taxes can be parked as as Advance GST tax. Once all pending issues have been resolved, GST can be enacted from September 1.
Even if the Government is hell-bent on July 1 as the appointed day, they should mandate a parallel run for the months of July and August — compliances to be done as per present laws as well as GST. Having travelled thus far, the Government should be wary of the pitfalls of a sudden death transition to GST.
The writer is a chartered accountant