This is an editorial published by The Hindu. The high handed manner by which Modi government implemented GST will lead to misery to small/medium traders and manufacturers, not to speak about hardship to common man. The net effect of GST fumble will be wiping out of thousands of small/medium businesses.
In the short term, this will severely contract manufacturing and trading activity. In the long term, this will lead to taking over of markets by large corporates at the cost of small players. (Or informal sector will thrive using extra legal methods increasing to more corruption and mafia groups).
Highlights from the editorial
- It is clear that the network had not been fully tested for chinks before July. For a country that takes pride in its IT edge, this is a strange impasse.
- as much as ₹65,000 crore of working capital will get blocked, cramping exporers ability to ramp up capacity and raw material procurement in time for festive season orders from around the world
- in contrast to the ₹95,000-crore GST collections recorded so far for July, about ₹65,000 crore has been claimed as transitional credit
For a reform that was cracked up to be India’s biggest tax overhaul since Independence, the roll-out of the goods and services tax is off to a less-than-desirable start.
Over 80 days after its introduction, the GST Network, its online backbone, is struggling to keep pace with the millions of invoices and returns being filed electronically by businesses across the country. The government has extended the deadline for filing GST returns for July, the first month of the GST era, twice.
And Finance Minister Arun Jaitley has reiterated an appeal to taxpayers to not wait till the last day, to avoid burdening the GSTN. But even those filing returns well before the last date have struggled. It is clear that the network had not been fully tested for chinks before July.
A ministerial group formed by the GST Council to resolve the GSTN’s glitches gave an assurance last Saturday that 80% of the problems would be fixed by the end of October. For a country that takes pride in its IT edge, this is a strange impasse.
Critically, for an economy that is slowing down for multiple reasons, even more troublesome is the implication of these implementation stumbles for 85 lakh taxpayers now registered for GST.
Exporters, for instance, have already alerted the Centre that the delayed timelines for filing GST returns (the last of which must be sent in by November 10) will mean that no refunds can be expected before mid-November on input taxes paid in advance and the integrated GST levied on goods they imported. By their reckoning,as much as ₹65,000 crore of working capital will get blocked, cramping their ability to ramp up capacity and raw material procurement in time for festive season orders from around the world. Terming these as ‘wild’ estimates, the government has asserted that many exporters’ funds were blocked for five-six months even before the GST, even as it said a solution to speed up refunds is being worked out.
Those producing only for the domestic market are no better off. Therefore, expectations of a rebound in manufacturing activity may be misplaced.
Moreover, in contrast to the ₹95,000-crore GST collections recorded so far for July, about ₹65,000 crore has been claimed as transitional credit (that is, taxes paid on stock purchased before the GST). On Friday, the government clarified this is not ‘incredibly high’ as firms had outstanding credits of ₹1.27 lakh crore for central excise and service tax levies on June 30.
Though the deadline to file the relevant return has been extended to October 31, initially only those who filed by September 28 were to be allowed to revise their credit claims. While revisions will be enabled from mid-October, the tax department is already examining some of these credit claims, triggering unease among firms.
Several revisions in deadlines, tax and cess rates, rules, clarifications and tweaks later, the GST regime is turning out to be neither simple nor friendly for taxpayers.
Courtesy : The Hindu