GST may add to India Inc's documentation burden

Council to meet on March 31 to discuss rules

Industry is worried it might face increased compliance burden due to rules under the proposed goods and services tax (GST) regime. 

Companies would have to upload three returns every month — by the 10th, 15th and 20th of the month after a sale happens, said M S Mani, senior director, indirect tax, Deloitte. 

According to rules on returns, companies would have to submit details of its supplies or invoices by the 10th of the subsequent month. They have to upload details of purchases of inputs by the 15th of the subsequent month. GST returns, carrying details of taxes paid and input credit taken, have to be filed by the 20th of the next month, said Mani. Besides, by the next year-end, companies would have to upload annual returns as well. 

This would burden industry with too much compliance. Service companies such as Infosys, Tata Consultancy Services (TCS) and Airtel, among others, would be particularly hit. Service providers would have to file 37 returns each a year, said Mani, from two returns — one every six months — now.  Besides, service tax is a central duty. So service providers do not have to file returns in each of the state where they have offices. This will, however, change under the GST regime and they would have to file 37 returns for each state they have an office in, besides the central government. Currently, goods companies, on their part, have to file returns every month for value-added tax (VAT) and excise duties. 

The GST Council is to discuss pending rules and changes to the already approved norms this month-end. The Council will work out rules on composition, valuation, input tax credit and transitions on March 31. It has already approved rules on refunds, invoices, returns, payments and registration. The government had made public rules on five categories before taking these to the Council. But it would not do so in case of pending rules, said officials. 

Industry is worried that online marketplace players such as Flipkart and Amazon will have to pay up to one per cent tax collected at source (TCS) — rules for which have not yet come — on behalf of vendors and this would add too much procedural work.

S S Gupta of Taxmann said these marketplaces have thousands of vendors and to exactly match TCS of each would be extremely difficult. If anything goes wrong while matching, the input credit would go to another and the vendor would be asked to pay more, he said. 

If a customer returns a product purchased via an online marketplace, it will take time to reach the supplier. By then, TCS might have been paid by the online company. If that vendor does not supply to the online company again, the marketplace would have to bear the burden, explained Gupta. Though a cap on TCS has been reduced from two per cent in draft GST Bills to one per cent in the revised drafts approved by the Council, the tax is not aimed at revenue generation but to keep a track of vendors by the tax authorities. The government’s logic has been that as it can’t go after every vendor, it would ask the marketplace to deduct TCS. Keeping track of the vendors and not revenues was the concern here, said the expert with Taxmann. 

Mani said the government was basically burdening industry with compliance, even in areas where the authorities should take the responsibility.  

The other issue relates to input tax credit, rules on which are yet to come. However, rules would not contradict the Bills. A buyer would not get input tax credit unless the supplier concerned paid tax. In state-level VAT, input tax credit would be given as soon as the invoice was uploaded, he added.

Archit Gupta, founder & chief executive officer of ClearTax.com, said there might be issues around pre-existing VAT credit in the earlier regime when these goods are exempted in GST. “So we hope this is covered under the inputs credit and transition rules.” 

For a truly unified structure, he said, the government must focus on greater fungibility of credit. “Exempted excise manufacturers and exempted VAT manufactures may have to face GST rates and taxes, and most of these are state-specific exemptions. So it needs to be seen how these concerns can be uniformly addressed,” added Gupta.

The Council has cleared all GST Bills and most of these will go to the Cabinet and be tabled in Parliament. Similarly, state GST Bills will be moved to the respective state Cabinets and Assemblies. Only rules and item-wise rates have to be decided.