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In the two-year period that the GST has been in force, it has clearly been seen that this fiscal reform took a mature form with time, benefitting both the government in terms of revenue collection and the taxpayers in terms of its approach towards them.
But even with its massive benefits, time has also exposed shortfalls which exist in some important areas. If these issues are given immediate attention, we might see much better compliance, along with an increase in the ease of doing business. The below mentioned issues need immediate remedy by the government-
Case - A business needs to pass on the benefits to the customers in case it makes a profit out of a change in rates of taxes. Numerous investigations regarding any misappropriations in this regard are going on and many businesses have been found guilty of not transferring the rightful benefits to the consumer.
Solution - The government should clarify the methodology which they use for computing the benefits made from change in tax rates.
Case - Businesses can obtain advanced guidelines from the state government authorities regarding a transaction which is to be made in the future. But different state appellate authorities of advance rulings (AAAR) have given different rulings regarding similar transactions.
Solution - It is being considered to establish a national AAAR, which should also comprise of judicial members where such issues can be resolved.
Case - A single entity is given the status of different legal entities by the Head Office (HO) and the Branch Office (BO) if they are present in different states. There’s a thing called ‘deemed supply of services', where the transaction flows from the HO to the BO when the HO provides support to the BO. In this particular scenario, the HO charges GST to the BO. The GST, in those cases, needs to be classified as input credit. But in some cases, that does not happen resulting in the direct taxation of certain tax-exempt sectors.
Solution - This cross-charging of exempt sectors is a consequence not intended, so the government needs to do away with cross-charging of exempt sectors.
Case - The interest on delayed GST payment is calculated on monthly tax liability. But according to a December ruling by the GST council, this amount is to be calculated only on delayed cash payments. This ruling has not been implemented.
Solution - Not implementing this ruling is resulting in a loss of revenue to the government and a loss of working capital to businesses. The government needs to focus on implementing this provision.
Case - This portal helps implement the GST across the nation by helping facilitate filing of GST returns. However, the effect of certain legal rulings cannot be seen on the portal, which becomes a hurdle in GST filing. It might also result in legal proceedings by tax authorities. Also, the portal is seen as incapable of handling large filings by taxpayers.
Solution - Steps to tackle the issues on the GSTN portal are immediately needed.
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