A GST good and simple: 

A GST good and simple: 

Context

• There is lots work to be done if the landmark reform GST is not to become a tryst with disaster.

Steps that should be taken to make GST good and simple

• e-way bills — The implementation of e-way bills should be postponed for at least a year. The existing electronic system is woefully inadequate to capture every movement of goods requires access to a portal for generation of an e-way bill. Further, most transport operators have only a few trucks and it will be cruel to inflict this torturous system on them when the Centre and states are ill prepared
• monthly returns –The proposed system of filing GSTR-1, GSTR-2 and GSTR-3 — three returns per month — proved to be unworkable and necessitated the GSTR-3B return which is a monthly summary. This monthly return should be continued for a year till the electronic infrastructure is improved. It is also worth reconsidering the need to file 36 monthly returns per year per state. These provisions are ill-advised and need to be dropped.
• matching of invoices — This system does not exist anywhere in the world and there is not a single logical reason why this should be implemented in India. It will place an intolerable burden on the electronic infrastructure and entail huge compliance costs for the small and medium sectors.
• Exports — Under the earlier system, non excise exporters, merchant exporters and service exporters could simply export goods and services. In the GST regime, an exporter has to execute a letter of undertaking subject to eligibility or a bond with bank guarantee just to export. The government promised instant refunds but this has not happened. had the system functioned and all these input taxes were immediately and automatically refunded, the position would have been tolerable. But serious glitches in the electronic system have adversely affected the refund system resulting in serious working capital pressure on exporters. Unless the earlier system is restored, Indian exports will be seriously affected.
• Interstate purchase/sale –The composition scheme, applicable to traders up to Rs 75 lakh, is a non-starter because it does not permit any inter-state purchase/sale.
• Flat tax rate –It is necessary to seriously consider a flat-tax GST rate of, say, 10 per cent, on all businesses with a turnover of upto Rs 2 crore regardless of the product or service. The GST paid thereon should also be eligible for input credit. Such a reduction will be a terrific boost to the growth of goods and services, while eliminating huge paper work and electronic overload.
• Amendments –It is necessary to stop making changes in procedure and adding new requirements. Seven amendments to the CGST rules in a span of less than three months and multiple amendments to notifications have only increased the confusion.
• Multiple tax rates –The multiple rates of taxation and an elaborate classification system are bound to lead to classification disputes. It is imperative that classification is shrunk to three or four categories with not more than three applicable rates. A lower rate of GST will stimulate demand and spur economic growth because high taxes are always counter-productive.
• Shared administration — The proposed system of shared administration will also lead to serious difficulties. It is better that the states are given exclusive jurisdiction to deal with assessees upto a turnover of Rs 10 crore or even Rs 25 crore so that the Centre can only deal with assessees with higher revenue.

Conclusion

• The present GST system, like socialism, sounds wonderful in theory but is completely unworkable in practice. It is dangerous to proceed with the hope that things will eventually settle down.
• Immediate steps are necessary to ensure that India’s second tryst with destiny does not become a tryst with disaster.