GST not el dorado
By Shivaji Sarkar
The goods and service tax (GST) or ‘one nation one tax’ is not the kind of El Dorado the country had promised to itself. The players are all unhappy – the States, traders, manufacturers, chartered accountants and possibly even the Centre as it is burdened with all the problems along with the collection and sharing of the revenue and too much non-cash digitisation. In the trader circle it has earned the nickname of BST – burdensome tax.
No wonder the Confederation of All India Traders (CAIT) the umbrella body of over 8 crore traders belonging to more than 40,000 trade associations across the country, leads the country to a strike – ‘Bharat Vyapar Bandh’ to protest against what they sum up as the “draconian, arbitrary and critical” amendments made recently in GST rules. The All India Transporters Welfare Association (AIWA) also joins the strike on issues of “un-practicable” e-way bill and unviable pricing policy of diesel, because of high taxes on fuel.
The States are in a quandary. They agreed to the one-nation tax subsuming their sovereignty to the GST Council as also did the centre in 2017. The tax collection now has become complex. The Centre collects GST to distribute to the States. But there are host of VAT and other taxes that States and the Centre also levy on fuel and liquor. It does not prevent States from collecting other kinds of charges either. State specific taxes thus still continue.
The larger share of the taxes, that were earlier the domain of the States, however, is collected by the Centre. The Centre owes Rs 2.06 lakh crore to the States, which is one-third of the total GST collected across the country since July 2017, the Union Finance Ministry data reveal. The pending dues are in addition to Rs 84,000 crore, which was recently released by the Centre as compensation under a special borrowing window. Since October 2020 average monthly collections are around Rs 1 lakh crore and in January 2021 Rs 1.20 lakh crore collections surpassed the January 2020 collections of Rs 1.19 lakh crore.
Between July 2017 and February 2021, the Centre has accumulated ¹ 5.43 lakh crore in GST, which should have been paid to the States. Of this amount, two-third has been paid as of February 2021, says Finance Ministry data presented to Parliament. The States have been collectively given ¹ 3.37 lakh crore while an amount of ¹ 2.06 lakh crore is still pending for the period April to November 2020. It means that post-lockdown States have not been paid their share. The Centre insists that they survive on borrowings.
The interest burden would be borne by the States. Most State governments were aware of the anti-federal nature of the law, but the carrot of a guaranteed 14 per cent revenue growth bought their acquiescence. It is just not during the COVID-19 that payments to States are delayed. Since August-September 2019, records show that the compensation to States has never been released on time.
There is a bigger problem with opaque GST. It is stated to be skewed against the unorganised sector, and is thus annihilating jobs. It has always been an open secret that small, unorganised manufacturers and service providers in India, survive because they don’t pay their full share of taxes.
So it is becoming an all-problem tax. The tax return filing is becoming a complicated and oppressive issue as the rules of the game are changed without any discussion – since 2017 the rules changed 950 times and compliance is in oppressive mode. The GST return (GSTR 3B) is a monthly self-declaration to be filed by a registered dealer along with GSTR 1 and 2 forms for declaring summary tax liabilities. One has to file GSTR 3B even if there is business activity or nil return during a particular period. Non-filing attracts oppressive complex penalty. In reality, it is not one tax. There are three variants – CGST (Central tax), SGST (State tax) and IGST (inter-state transaction tax). There are instances where for failure of filing return of less than Rs 500 transaction in a month one had to pay over Rs 50,000 as penalty.
So there are complaints that the penalty sometimes equals or exceeds the value of the goods. If a truck reaches late by a day, it can be penalized up to 108 per cent as under e-way bill rules. A transporter Gati Kintetsu was fined Rs 1.32 crore for technical glitches of non-filing of certain details in 2018 in Madhya Pradesh. The bare minimum e-way penalty is Rs 10,000, often the freight charged for short distances. If there is a mistake, a penalty of 200 per cent of the tax amount is levied to be paid from the electronic cash ledger and if one does not have it the goods can be seized. An appeal is possible after paying 25 percent of the penalty but the goods will remain confiscated till the resolution of the case.
For a wrong entry on input credit the bank accounts can be seized. Even normally the input credit is paid after a long delay. Classifications of products vary in different states. The National Advance ruling Authority that was to clarify the aberrations has yet not been set up nor has the appellate tribunals. The high arbitrariness is smothering businesses, the CAIT and AIWA allege.
Overall despite some moderation, the rates are high and causing inflation. The Assocham has suggested 25percent rate cut for all slabs. It says that it would encourage businesses to pay more GST.
There are many infirmities in the tax proposals. The variants of IGST, CGST and SGST are considered new acronyms of central excise, VAT, CST and service tax. As such there is nothing new except the collection by the centre. The bandh is a mere attention seeking measure but the country has to discuss how there could be a tax system that would not be oppressive and add to growth. Multiple taxes and, cess on goods, fuel, liquor, and tolls on city entries and highways are stymieing growth and initiatives apart creating an extortive system.
Prime Minister Narendra Modi should look into the complex taxation. With digitization, cash transactions are equally needed for fast growth and ease of business. — INFA