With both the Houses of Parliament finally clearing the GST Constitution Amendment Bill, the goods and services tax (GST) is expected to be a reality soon. But, are we all prepared for it? Let's have a look at the challenges in implementation.
The first challenge would be to make the GST Net, the technology that will make GST fully operational. The GST Net will operate a common portal for taxpayers to interact with taxmen for the purpose of three basic functions - registration, payment of tax and filing of returns. It is essential for the government to have a few pilot runs of GST Net a few months before its implementation. That will give confidence to both taxpayers and taxmen, given that there is a gap in the information technology (IT) ability of both groups. Further, the operational details of the GST Net will need to be put in the public domain soon. Users will have to customise their IT systems for integrating with the front-end of the GST Net portal.
For meeting the aforesaid challenge, it will be imperative to finalise soon all the technical issues relating to the structure and functioning of the GST. First is the threshold for taxability that will decide, among other things, how much of the small business the government wants to bring within GST. Experts have felt that small businesses should be kept outside GST simply because taxing these is cumbersome, prone to breed corruption and not at all cost-effective. The states have demanded a threshold of Rs 10 lakh; the Centre wants it at Rs 25 lakh, and the chief economic advisor has advised Rs 40 lakh. The next issue is finalisation of the list of exemptions that will have to be common for the Centre and the states. Currently, there are more than 250 exemptions in central excise and 98 in state VAT. Threshold and the number of exemptions will have a bearing on the tax base, and the GST Net should know the final numbers soon.
On the administrative side, the major challenge will be reorganising and restructuring both the central and state indirect tax administrations in light of the upcoming changed jurisdiction, changed workload and changed concepts of taxation. Besides, a major disagreement has arisen recently between the Centre and the states over the dual nature of GST. States have demanded exclusive single control in a dual GST model over assessees having a turnover less than Rs 1.5 crore.
The Central Board of Excise and Customs has pointed out the pitfalls in single control. In the background of heavy load of compensation to be given to the states, it questioned the wisdom of outsourcing the Centre's tax collection work in GST regime to states that have no experience in dealing with taxation of services. It argued that the interest of small business can be taken care of by higher threshold, simplified procedures and simpler compliance and requirements for them.
Some of the more critical preparatory challenges will be as follows - the government should ensure extensive mass awareness programmes through print, electronic and the audio-visual media. For the small business in particular, it would be necessary to organise industry-specific hand-holding programmes. A self-learning, interactive GST kit will have to be developed and distributed.
While the government has started capacity building of officials, corporates and other taxpayers are lagging. Training of the employees at all levels, both on technical issues and IT ability, will have to be geared up. Further, it will be necessary for them to create a dedicated programme management team for migration to the GST regime. The current business processes will have to be analysed and reviewed keeping the GST regime in mind. Enterprise resource planning will have to be overhauled.
Last but not the least, it will be necessary for the government to set up GST monitoring cells at different levels for implementation of GST. Further, it will have to be ensured that the tax relief in the GST regime is duly passed on to the consumers, leading to a commensurate fall in prices. In order to tackle the problem of undue profiteering, there will be the need for some sort of price control and anti-profiteering Act, as was introduced in Malaysia recently.
The writer is former chairman, Central Board of Excise & Customs
