One Month in, a Pan-India Look at How the GST Regime Has Fared

As India successfully rolls past the 1-month mark, it brings us to the question - Was the country prepared for GST?

India completed the first month of implementing the Goods and Services Tax (GST) on Monday with the entire globe closely monitoring its developments. As expected, the 360-degree shift ushered in various queries and concerns; equally for the underprepared as well as the geared-up participants from trade and industry.

While legislative provisions were framed before 1 July, various enabling and implementation procedures and clarifications are being introduced along with the onset of GST. This has kept assessees on their toes for tracking regular updates on various aspects with respect to GST.

One cannot deny that an unimaginable number of initiatives have been taken by government offices for supporting assessees through this transition to the GST regime. These include sectoral FAQs, Twitter support, educational fliers, training, seminars, etc. However, despite these initiatives, the coming 2-3 months will require great efforts from the assessee’s end to be updated and compliant under this new tax law.

To elucidate, as per the prescribed due dates approximately 6-8 returns (for the months of July 2017 and August 2017 combined) will be due in the month of September 2017 for each Goods and Services Tax Identification Number (GSTIN) which an assessee holds.

The advantage of the two-month relaxation of filing GST returns and introduction of summary returns in Form GSTR-3B may be diluted in coming months. 

We saw some major developments after 1 July.

Jammu & Kashmir Welcomed GST

The state of Jammu & Kashmir passed the State GST Bill, 2017 on 5 July, and became the last state of the country to join the new tax regime. The Jammu and Kashmir Goods and Services Tax Bill, 2017 was adopted through a presidential order amidst all the apprehension of comprising its special status. Intrastate and interstate transactions from and to Jammu & Kashmir were down significantly due to the delay in implementation of GST.

Issuance of Procedures for Exporting Goods Without Taxes

There was huge chaos with regard to export procedures notified with the onset of GST. Several amendments and clarifications to these procedures added to woes of exporter under the new tax regime.

Clarification on Migration and Registration Issues

Even one month down, several assessees are yet to migrate and receive their GSTIN. Ambiguity on continuity of business transactions for assessees who have not migrated has prevailed even in the GST regime. While various states like Uttar Pradesh and Maharashtra took measures to ensure continuity of business for such businesses, delayed clarifications and intimations from the Centre (such as extension of migration date, facility for new registration open to assessee’s registered under the erstwhile regime, etc.) created a lot of tensions amongst trade and industry.

Changes in Invoice Rules

Amendments to invoice rules as made recently as last week resulted in challenges for various assessees to issue their invoices. The configuration of new changes in enterprise resource planning (ERP) systems has added to the cost of upgrading technology for the GST regime.

Amendments for MRP Regulations

Implementation of GST required amendments to various other regulations to be in line with new tax regime – which included the maximum retail price rules. The industry faced various challenges as these regulations were amended after 1 July.

Clarification on the Implementation of the E-Way Bill

Before the commencement of GST, the government intimated that the e-way bill provisions would be notified at a later stage – the right for states to continue with the existing waybill procedure was left with the respective state. This created a multitude of challenges in the transportation of goods post 1 July – as some states continued with the existing VAT waybill forms, while some discontinued.

Some of these developments required changes to the already configured ERP systems of various assessees, creating transitional and operational inconvenience.  

Over the last month, we also witnessed the first judicial precedent of the GST regime which clarified the position on taxability of advocate services. Drawing an analogy from the above, it seems like taxability under GST has just begun to be deliberated at judicial forums. We could see a lot of updates on that front as well. It is the urgent need of the hour that the Authority for Advance Rulings is set up – as issues on classification, taxability, place of supply, etc. have just begun to emerge.

Trade bodies and industry have requested the government to provide various penal relaxations in coming 2-3 months for non-compliance, but such intention on the government's part has not been officially communicated so far. Further, procedural aspects such as execution of a letter of undertaking for exports without payment of integrated GST, resolution for migration issues, etc. vary at jurisdictional offices. Thus, there is a requirement for clarifications, to achieve ground-level uniformity in the implementation of GST.

In a nutshell, the coming 2-3 months will entail major business decisions to be taken in light of emerging updates, compliances to be adhered to, and liaisoning with government offices for clarity.

This brings us to the question... Was India ready for the GST rollout on 1 July 2017? 

While better implementation planning would have been possible if the rollout was scheduled for 1 September, the authorities can revisit some issues, steps could still be taken to salvage the situation. Better late than never.

On a positive note, it is worth noting that jurisdictional offices of the indirect tax department are geared up with resolution/help desks to address assessee queries. Also, news reports showed that the collection of IGST from imports crossed Rs 20,000 crore in the first month of GST implementation, indicating a major jump in government revenues. Total customs revenues in July 2017 stood at Rs 26,500 crore as against Rs 16,625 crore collected in July 2016.

These are positive signs which suggest that the economy is progressing towards faster growth. Now, what needs to be seen is how the GST benefit will trickle down to consumers.

As on date, an Indian consumer who sensitive to growing commodity prices has not been able to appreciate the implementation of GST. Traders and industry are still engaged in complying and updating their systems with the new law. Hopefully, with the efforts of the government on the formation of a selection committee to address the complaints under the anti-profiteering provisions – we could expect some progress on this as well in the coming weeks.

(Jigar Doshi is an indirect tax partner at consulting firm SKP Group. Rebecca Pinto is Manager - Indirect Taxation, at SKP Business Consulting.)

(This article was originally published in BloombergQuint, and has been republished here with permission. The views expressed here are those of the author’s and do not necessarily represent the views of The Quint or its editorial team.)

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