Goods and Services Tax (GST) was launched in India on 1st of July 2017. It created all kinds of noises, both good and bad, and finally, amidst a lot of dilemmas, this historic step was taken. It has been 3 months since GST came into effect but if you ask around, you will discover there is still a lot of confusion surrounding the new tax regime.
Let’s understand the reasons why people still lack clarity on GST.
GST was introduced to simplify the tax structure in India. Unlike other countries where only one GST tax slab is applicable for all goods, in India there are 5 tax slabs- 0%, 5%, 12%, 18% and 28%. These multiple slabs alone derail the motto ‘one nation, one tax’. Both customers and businesses are finding it difficult to find the applicability of these slabs on various goods and services. While customers feel they are paying a higher price than before, businesses are struggling to update GST slabs in their books of accounts.
Factoring not accounted
The basic purpose of GST is to bring down a load of cascading taxes on the final consumer. However, most companies do not know how to factor the difference between GST and non – GST prices, and thereby, forward the benefit to the consumer. So, in effect till now the end-consumer is not reaping the benefits of GST.
Confusion about tax filing
There are too many tax forms that need to be filled by businessmen. They need to fill as many as 37 forms in one year, including the annual return filing. With GST, there has been an additional burden of filing three more forms every month for Central Goods and Services Taxes (CGST), Integrated Goods and Services Tax (IGST) and State Goods and Services Taxes (SGST). They need to understand the applicability of GST for each state where there are running their operations. Such multiplicity and duplication are making the compliance difficult, especially for startups and SMEs.
Incorrect Information being circulated
People having limited understanding about GST is giving rise to rumors about the rules and processes. For example, rumors of car prices shooting up post-launch of GST had gained prominence and the same had been used by car sellers to sell their existing lots like hot cakes. However, in reality, the car prices have actually come down post introduction of GST. Even the public sector telephone service provider BSNL had also requested its subscribers to pay their bills 10 days before due date. The e-commerce as well physical retails also leveraged GST rumors to sell their good on the pretext of non-GST rates.
A KPMG report has stated that frequent changes in GST rates could affect India’s global advantage of ease of doing business. It gives an impression of uncertainty.
Every new initiative needs a settling period and has short-term recursions. It is the long-term impact which matters. With time, people can hope that the clouds of confusion will vanish.