An industrialist getting assistance at the helpline centre opened by the Central Excise department for migrating to GST at Noida Entrepreneurs Association office.(Virendra Singh Gosain/HT PHOTO)
An industrialist getting assistance at the helpline centre opened by the Central Excise department for migrating to GST at Noida Entrepreneurs Association office.(Virendra Singh Gosain/HT PHOTO)

Businessman or professional? Here’s what you need to do to be GST-compliant

As India gears up to launch the Goods and Services Tax from July 1, we look at what a taxpayer has to do to ensure compliance with the new indirect tax.
By Suchetana Ray | New Delhi, Hindustan Times
UPDATED ON MAY 01, 2017 06:24 PM IST

The Goods and Services Tax (GST), the country’s biggest tax reform, is scheduled to be rolled out from July 1 but India might be running against time to finalise the technology needed to implement it.

The success of this complex tax reform will depend on the glitch-free running of the GST-network or GSTN, the technology backbone for the new tax. The flawless GSTN, will capture every sale, purchase, stock pile of every registered business in India, once set in motion, this network will end any possibility of evasion or multiple taxation.

But the main problem is implementation, which politicians and experts say, will not be smooth taxpayers, both businessmen and professionals, will have to file as many as 37 forms in a year, said chartered accountants.

Though revenue secretary Hasmukh Adhia has gone on record to say that the number of forms will be little more than a dozen.

Compliance cost will increase, as smaller units will have to buy software and hire professionals to compile the transaction details. For those businesses at remote places, filing returns online will be a challenge in the absence of internet connections.

“As compliance to GST is portal based, there are bound to be teething issues, given the level of internet penetration as well as familiarity with online tax payment in India,” said Priyajit Ghosh, partner, indirect tax in KPMG India.

One of the main architects of the GST and former prime minister, Manmohan Singh, has warned that the new indirect tax regime could be a “game-changer” but fraught with “difficulties”.

Congress leader Veerappa Moily has cautioned the government that the rushed GST rollout from July will make it a “technological nightmare” for businesses.

While a team of experts are working to ensure that the GSTN is up and running in time for the July implementation of the new indirect tax, the onus is also on taxpayers to learn the new system and ensure compliance. The only relief is that businesses with annual turnover of below Rs 20 lakh are exempt from paying GST. In north-eastern and hill states the threshold is Rs 10 lakh.

Registration

All businesses will have to convert their tax registration into GST registration. For example, if a shop owner in Delhi has a VAT registration then it has to be converted to GST. And a professional will have to transfer her service tax registration to GST.

This be done on the GST system portal run by respective states.

GSTR

The tax returns under GST will be 37 in a year for a company; GSTR-1, GSTR-2 and GSTR-3—for each month, and one annual return. For a company with operations in 20 states, it means 740 annual returns.

The finance ministry officials said they are trying to further simplify the process so that small businesses are not overburdened with filing returns.

Experts point out the huge reporting requirement under GST that has be handled and understood by taxpayers, be it businessmen or professionals. This is in contrast to the half-yearly returns mandated under the present service tax regime.

Tracking transactions:

A businessman registered under GST, will have to upload all sales and stock transfer details on the GSTN. Every transaction will also have to invoiced.

Compliance:

Those paying tax under GST, will have to make investments to ensure compliance. Taxpayers will have to raise invoices and bills in the correct format laid down by the GSTN. E-way bills will have to be generated for every stock movement. Debit and credit notes will also have to be maintained along with books of accounts in the approved format.

Caveat:

GST evasion entails harsh punishment. While many have objected to the provisions of arrest for fraud arguing that many new firms will be using the GSTN system for the first time and are bound to make genuine mistakes.

Although finance minister Arun Jaitley has assured that small businesses will not be covered by the harsh provisions, every offence of tax evasion will be compoundable.

There will be no arrest for frauds up to Rs 2 crore. For offences between Rs 2 crore and Rs 5 crore, it is bailable. For offences over Rs 5 crore is non-bailable.

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